Equinix
Annual Report 2002

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-31293 EQUINIX, INC.(Exact name of registrant as specified in its charter) Delaware 77-0487526(State of incorporation) (IRS Employer Identification No.) 301 Velocity Way, Fifth Floor, Foster City, California 94404(Address of principal executive offices, including ZIP code) (650) 513-7000(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. x Yes ¨ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. x Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). ¨ Yes x No The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the commonstock was last sold, or the average bid and asked price of such common stock, as of the last business day of the registrant’s most recently completed secondfiscal quarter was approximately $27.5 million. As of February 28, 2003, a total of 8,500,040 shares of the registrant’s common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Part III—Portions of the registrant’s definitive Proxy Statement to be issued in conjunction with the registrant’s 2003 Annual Meeting of Stockholders,which is expected to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2002. Except as expressly incorporated by reference,the registrant’s Proxy Statement shall not be deemed to be a part of this report on Form 10-K. Table of ContentsEQUINIX, INC. FORM 10-K DECEMBER 31, 2002 TABLE OF CONTENTS Item Page No. PART I 1. Business 32. Properties 113. Legal Proceedings 114. Submission of Matters to a Vote of Security Holders 11 PART II 5. Market for Registrant’s Common Equity and Related Stockholder Matters 126. Selected Financial Data 157. Management’s Discussion and Analysis of Financial Condition and Results of Operations 177A. Quantitative and Qualitative Disclosures About Market Risk 418. Financial Statements and Supplementary Data 439. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 43 PART III 10. Directors and Executive Officers of the Registrant 4411. Executive Compensation 4412. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 4413. Certain Relationships and Related Transactions 4414. Controls and Procedures 44 PART IV 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 45 Signatures 50 Certification of Chief Executive Officer 52 Certification of Chief Financial Officer 53 2Table of ContentsPART I ITEM 1. BUSINESS The words “Equinix”, “we”, “our”, “ours”, “us” and the “Company” refer to Equinix, Inc. All statements in this discussion that are nothistorical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statementsregarding Equinix’s “expectations”, “beliefs”, “hopes”, “intentions”, “strategies” or the like. Such statements are based on management’s currentexpectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in theforward-looking statements. Equinix cautions investors that there can be no assurance that actual results or business conditions will not differmaterially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the riskfactors discussed in this Annual Report on Form 10-K. Equinix expressly disclaims any obligation or undertaking to release publicly any updates orrevisions to any forward-looking statements contained herein to reflect any change in Equinix’s expectations with regard thereto or any change inevents, conditions, or circumstances on which any such statements are based. Overview Equinix designs, builds and operates Internet Business Exchange (“IBX”) hubs where Internet businesses place their equipment and their networkfacilities in order to interconnect with each other to improve Internet performance. We currently operate fifteen IBX hubs located in six countries in the UnitedStates and Asia-Pacific that allow critical Internet networks, global enterprises, content providers and other infrastructure providers to connect their networksto manage and grow their network and Internet operations for significant cost savings and increased performance and reliability. We have successfully unitedthe major companies that make up the Internet under one roof, which provides our customers the opportunity to directly connect to networks and managedservice partners in order to increase performance and lower their costs of operations. The world’s top tier Internet service providers, the majority of the mostimportant access networks and second tier carriers, many international carriers and 5 of the top 7 web properties have all located at our IBX hubs to directlyconnect with each other and their customers. We provide a wide range of network-neutral colocation, traffic exchange, connectivity and managed IT infrastructure services to our customers. Webuild and manage premier colocation hubs, which offer state of the art design and security for customers’ colocation needs. The colocation products includecabinets, power, cross connections and professional services for installation and maintenance of our customers’ colocation products. Traffic exchangeservices allow customers to trade network traffic with each other simply and easily. More than 100 major bandwidth providers and Internet service providershave placed their operations at our IBX hubs in order to interconnect with each other and with business users of network services. These customers include theworld’s top networks such as AT&T, WorldCom/UUNET, Sprint, KDDI, British Telecom, Cable&Wireless, Qwest, and Level 3. We are a neutral or“open” IBX environment because we do not operate our own network. As a result, we are able to offer direct interconnection to the largest aggregation ofbandwidth providers and Internet service providers. This aggregation of providers attracts customers such as Electronic Arts, Electronic Data Systems,Goldman Sachs, Google, IBM, Kyocera, MSN, Washingtonpost.Newsweek Interactive and Yahoo!. Direct interconnection to our aggregation of networks,which serve more than 90% of the world’s Internet routes, allows our customers to significantly reduce costs, including the costs of purchasing circuits toreach partners in multiple locations, and significantly enhances the speed and reliability of their operations. The wide variety of networks and business partners is an important reason why customers choose us, and customers look to Equinix to help managethis choice in order to simplify their operations. We also offer a suite of managed IT infrastructure services and will continue to provide new services to helpcustomers maximize the advantage of multiple bandwidth and Internet service providers. These services include the management of multiple carriers, disasterrecovery and other outsourcing services. For example, we offer customers connectivity 3Table of Contentsto bandwidth from multiple carriers and provide all of the necessary management and routing technology to ensure each customer is getting the maximumbenefits of carrier redundancy. We also provide customers monitoring and site management services so that customers have direct insight into how theiroperations are performing. Disaster recovery services include remote backup and recovery, standby operations facilities and data storage services. In addition,a wider suite of managed services such as messaging services is offered in select Asia-Pacific locations. All of these services provide customers with one simplepoint of contact for contracting and ongoing support and maintenance. We will continue to introduce new services that customers can use to improve the overallperformance of their operations. In December 2002, Equinix merged with two of the leading network-neutral colocation providers in Asia to expand our footprint into the fast growingAsia-Pacific market. We now have fifteen IBX hubs, consisting of more than one million square feet, which operate in key United States and Asia-PacificInternet intersection points. In the US, Equinix has an IBX hub in Washington, D.C., Dallas, Chicago, Honolulu, Silicon Valley and two each in Los Angelesand the New York area. In Asia-Pacific, Equinix has an IBX hub in Hong Kong, Tokyo, Sydney, Bangkok and two IBX hubs in Singapore. In addition, wehave a strategic partnership established in Europe to serve our customers’ needs. Industry Background The Internet is a collection of numerous independent networks interconnected with each other to form a network of networks. Users on differentnetworks are able to communicate with each other through interconnection between these networks. For example, when a user of the Internet sends an email toanother user, assuming that each person uses a different network provider, the email must pass from one network to the other in order to get to the finaldestination. In order to accommodate the rapid growth of Internet traffic, an organized approach for network interconnection was needed. The exchange of trafficbetween these networks became known as peering. Peering is when networks trade traffic at relatively equal amounts and set up agreements to trade traffic forfree. At first, government and non-profit organizations established places where these networks could exchange traffic, or peer, with each other—these pointswere known as network access points, or NAPs. Over time, many NAPs became a natural extension of carrier services and were run by such companies asMFS (later known as WorldCom/UUNET), Sprint, Ameritech and Pacific Bell (both later known as SBC). Ultimately, these NAPs were unable to scale with the growth of the Internet and the lack of “neutrality” by the carrier owners of these NAPs created aconflict of interest with the participants. This created a market need for network-neutral interconnection points that could accommodate the rapidly growingneed to increase performance for enterprise and consumer users of the Internet, especially with the rise of important content providers such as Microsoft,Yahoo!, America Online and others. In addition, the providers, as well as a growing number of enterprises required a more secure, reliable solution for directconnection to a variety of telecommunications networks as the importance of the Internet continued to grow. To accommodate Internet traffic growth, the largest of these networks left the NAPs and began trading traffic by placing private circuits between eachother. Peering which once occurred at the NAP locations were moved to these private circuits. Over the years, these circuits became expensive to expand andcould not be built fast enough to accommodate the growth in traffic. This led to a need by the large carriers to find a more efficient way to trade traffic or peer.Customers have chosen Equinix for their peering operations because they are now able to reach all of the networks they peer with all in one location, withsimple direct connections. Their ability to peer across the room, instead of across a metro area has increased the scalability of their operations while decreasingcost by upwards of 50%. Our IBX hubs are the next-generation exchange points. They are designed to handle the scalability issues that exist between both large and smallnetworks, as well as the interconnection between the emerging companies who have become critical to the Internet. We have been successful in uniting the majorcompanies that make up 4Table of Contentsthe Internet infrastructure including AT&T, Cable & Wireless, Level 3, Qwest, Sprint and UUNET/Worldcom. These companies, which constitute theworld’s largest top Internet service providers, together with most of the major access networks, including SBC, Shaw Communications, CoxCommunications, Comcast Corporation, America Online and MSN, second tier backbones such as Williams, Global Crossing, and Verio, top internationaltelecommunications carriers, including British Telecom, Deutsche Telecom, France Telecom, KDDI, Singapore Telecom, StarHub, Japan Telecom,Hutchison, Bell Canada, Telia and Telstra, and almost every fiber, sonet, Ethernet and competitive local exchange company, including OnFiberCommunications, Yipes, Looking Glass Networks and Cogent Communications, and incumbent local exchange company, including Verizon, SBC andAmeritech, are our customers and use us to interconnect with each other and their customers. Additionally, we provide an important industry leadership role inthe area of exchange points and are consistently looked to as an industry expert and key influence in this subject matter. Large and small content providers and enterprises can now control their own network performance and destiny by choosing the various serviceproviders they wish to work with and by establishing direct connections or by contracting through Equinix for this connectivity. For our customers, thisrepresents significant cost savings and increased performance. Our Solution Our IBX hubs provide the environment and services to meet the networking and IT operations challenges facing enterprises, networks and Internetbusinesses today. As a result, we are able to provide the following key benefits to our customers: Performance. Because we provide direct access to the providers that serve more than 90% of the world’s Internet networks and users, customers canquickly, efficiently, cost-effectively and reliably exchange traffic with their network services providers for higher performance operations. Access to the morethan 100 networks ensures high-quality interconnection. With the mass of networks present, global enterprises are increasingly looking at ways to providenetwork diversity and increase performance of their operations, and are utilizing our IBX hubs to ensure their IT infrastructures are operating at the core of theInternet. By using multiple networks, customers are able to insure their operations in the event that one of their network service providers has a serviceinterruption or restructuring in the business. The network service providers and geographic diversity we offer provides customers with the flexibility to enablethe highest performing Internet operations. Improved Economics. Our U.S. services such as Equinix GigE Exchange and Equinix Internet Core Exchange facilitate peering and dramaticallyreduce costs for critical transit, peering and traffic exchange operations by eliminating the costs of private peering or local loops. Networks such as SBC andShaw Communications and content providers such as Yahoo!, MSN and Google can save between 20% to 40% of bandwidth costs through the trafficexchange services we offer. In addition, in both the U.S. and Asia-Pacific, content companies and enterprises can save significant bandwidth costs because thenumber of networks housed within Equinix competing for the traffic of these companies results in lowers prices while increasing performance. Access to International Markets. Equinix offers it’s network, content and enterprise customers a one-stop solution for their outsourced ITinfrastructure needs in the U.S. and Asia-Pacific. This is especially important for U.S. enterprises who want to expand into Asia-Pacific, where a myriad ofcomplexities for doing business in each country remains challenging. Equinix offers a consistent standard of quality, a single contract and a single point ofsupport for all our locations throughout the U.S. and Asia-Pacific. 5Table of Contents Our Strategy Our objective is to become the premier hub for critical Internet players to locate their operations in order to gain maximum benefits from the choice ofnetworks and partners in the most simple and efficient manner. To accomplish this objective we employ the following strategies: Leverage the Network Effect. We have assembled a “critical mass” of premier network providers and content companies and have become one of thecore hubs of the Internet. This critical mass is a key selling point since content companies want to connect with a diverse set of networks to provide the bestconnectivity to their end-customers, and network companies want to sell bandwidth to content customers and interconnect with other networks in the mostefficient manner. In addition, as these companies locate in our IBX hubs, they often require their suppliers and business partners to do so as well so that thefull economic and performance benefits of direct interconnection can occur. These partners, in turn, pull in their business partners, thus creating a “networkeffect” of customer adoption. For example, a large content provider or network may require that their networking partners, with whom they need to trade trafficwith, locate in the same IBX hub. Similarly, a large financial site that chooses to locate in one of our IBX hubs may encourage a bandwidth provider, a sitemanagement company or another content partner, like a financial news service, to locate in the same IBX hub. In turn, these bandwidth providers or contentpartners will bring their business partners to the IBX hub. We have over 100 unique networks, including all of the top tier networks, allowing our customersto directly interconnect with providers that serve more than 90% of global Internet routes. Leverage IBX Hubs for New Products and Services. The leading networks that we have assembled uniquely positions our IBX hubs as the placeto be for critical Internet companies in the U.S. and Asia-Pacific. We intend to leverage this position and offer additional traffic exchange and managed ITinfrastructure services that are important to traffic exchange and the ability for enterprise companies to utilize multiple networks. Promote our IBX hubs as the Highest Performance Points on the Internet. With all of the major U.S. carriers, many of the key internationalnetworks, five of the top seven web properties, and the more than 100 total networks as customers, our IBX hubs operate as the highest performance points onthe Internet for network and Internet operations. We plan to leverage our position as the industry standard for the highest quality Internet exchange hubs toattract more networks including additional international networks, access and cable networks, as well as additional leading content and global enterprisecompanies. We have established a strong brand following in the networking community and through industry education and promotion, we intend to build onour strong following among all top networks, managed services providers, enterprises and content providers. Customers Customers typically sign renewable contracts of one or more years in length, often with options on additional space and services. Our single largestcustomer, IBM, represented approximately 20% and 15% of total revenues for the twelve months ended December 31, 2002 and 2001, respectively. No othersingle customer accounted for more than 10% of revenues for the twelve months ended December 31, 2002 or 2001. We consider the following companies to be the core of our customer base and we offer each customer a choice of business partners and solutions that aredesigned to meet their unique and changing needs: • Bandwidth providers (telecommunications carriers) and Internet service providers, or ISPs; • Enterprises, content providers and e-commerce companies supplying information, education or entertainment content and conducting the sale ofgoods and services; and • Systems Integrators and hosting companies that integrate and manage a customer’s end-to-end web presence and performance. Products and Services Our products and services are comprised of four types: Colocation, Connectivity, Traffic Exchange and Managed IT Infrastructure services. 6Table of Contents Colocation Services The Equinix IBX provides our customers with secure, reliable and fault-tolerant environments that are necessary for optimum Internet commerceinterconnection. Our IBX hubs include multiple layers of physical security, scalable cabinet space availability, on-site trained staff 24 hours per day, 365days per year, dedicated areas for customer care and equipment staging, redundant AC/DC power systems and multiple other redundant, fault-tolerantinfrastructure systems. Some specifications or services provided may differ in our Asian-Pacific locations in order to properly meet the local needs ofcustomers in those locations. Within our IBX hubs, customers can place their equipment and interconnect with a choice of Internet companies. We also provide customized solutionsfor customers looking to package our IBX space as part of their complete, one-stop shop solution. Our colocation products and services include: Cabinets. Customers have several choices for colocating their networking and server equipment. They can place the equipment in one of our shared orprivate cages or customize their space to build their own data hub within an IBX hub. Cable trays support cables between and among cabinets. As acustomer’s colocation requirements increase, they can expand within their original cage or upgrade into a cage that meets their expanded requirements. Cabinetsare priced with an initial installation fee and an ongoing recurring monthly charge. Shared Cages. A shared cage environment is designed for customers needing less than five full cabinets to house their equipment. Each cabinet in ashared cage is individually secured with an advanced electronic locking system. Private Cages. Customers that contract for a minimum of five full cabinets can use a private cage to house their equipment. Private cages are alsoavailable in larger full cabinet sizes. Each private cage is individually secured with the biometric hand-geometry system or other appropriate security. IBXflex. This service allows customers to deploy mission-critical operations personnel and equipment on-site at IBX hubs. Because of the closeproximity to their end-users, IBXflex customers can offer a faster response and quicker troubleshooting solution than available in traditional colocationfacilities. This space can also be used as a secure disaster recovery point for customers’ business and operations personnel. This service is priced with aninitial installation fee and an ongoing recurring monthly charge. Physical Cross-Connect/Direct Interconnections. Customers needing to directly and privately connect to another IBX customer can do so throughsingle or multi-mode fiber. These cross connections are customized and terminated per customer instructions and may be implemented within 24 hours ofrequest. Cross-connect services are priced with an initial installation fee and an ongoing monthly recurring charge. Professional Services. Our IBX hubs are staffed with Internet and telecommunications specialists who are on-site and available 24 hours per day,365 days per year. These professionals are trained to perform installations of customer equipment and cabling. Professional services are custom-priceddepending on customer requirements. “Smart Hands” Services. Our customers can take advantage of our professional “Smart Hands” service, which gives customers access to our IBXstaff for a variety of tasks, when their own staff is not on site. These tasks may include equipment rebooting, power cycling, card swapping, and performingemergency equipment replacement. Services are available on-demand or by customer contract and are priced on an hourly basis. Connectivity Services Internet Connectivity Services. Customers who are installing in our IBX hubs generally require IP connectivity or bandwidth services. Equinixoffers customers the ability to contract for these services directly with the carrier or through Equinix. Customers who wish to receive a single bill and a singlepoint of support for all of their services contract through Equinix for their bandwidth needs. In order to maintain our network neutrality, Equinix hasrelationships with the top network carriers to provide these services. Equinix provides 7Table of Contentsthese services on a retail basis with each individual carrier and customer and does not aggregate this traffic or run a network. Customers get the benefit ofoperating directly with branded carriers with the convenience of a single bill and support. Internet Connectivity Services are priced with an initial installationfee and an ongoing monthly recurring charge based on amount of bandwidth committed or used. Traffic Exchange Services Our traffic exchange services, currently available in Equinix U.S. locations, enable scalable, reliable and cost-effective interconnection, service andtraffic exchange between bandwidth providers, Internet service providers and large content companies. In addition, we also provide an important industryleadership role by acting as the relationship broker between parties who would like to interconnect within our IBX hubs. Our staff has held significantpositions in the leading industry groups such as the North American Network Operators’ Group, or NANOG, and the Internet Engineering Task Force, orIETF, and bring a tremendous amount of intellectual knowledge to this market. Our staff have published industry-recognized white papers and strategydocuments in the areas of peering and interconnection, many of which are used by leading institutions worldwide in furthering the education and promotion ofthis important network arena. We will continue to develop additional services in the area of traffic exchange that will allow customers to leverage the criticalmass of networks now available in the IBX hubs. The current exchange services are comprised of the following: Equinix Internet Core Exchange. This Internet exchange service enables direct interconnection for peering between major backbone networks andproviders. Equinix Internet Core Exchange is a pre-provisioned interconnection package that enables major backbones to connect their networks directly in acentralized, neutral environment for peering and transit. The service includes pre-provisioned interconnections, premium service levels and specializedcustomer service features to support the quality and support levels required by the largest Internet providers in the world. Internet Core Exchange services arepriced with an initial installation fee and an ongoing monthly recurring charge. Equinix GigE Exchange. Customers may choose to connect to our exchange central switching fabric rather than purchase a direct physical crossconnection. With a connection to this switch, a customer can aggregate multiple interconnects over one physical connection instead of purchasing individualphysical cross connects. The GigE Exchange service is offered as a bundled service that includes a cabinet, power, cross connects and port charges. Theservice is priced with an initial installation fee and an ongoing monthly recurring charge. Managed IT Infrastructure Services With the continued growth in Internet use, networks, service providers, enterprises and content providers are challenged to deliver fast and reliableservice, while lowering costs. With over 100 ISPs and carriers located in our IBX hubs, we leverage the value of network choice with our set of multi-networkmanagement and other outsourced IT services. Equinix Performance Packages. With Equinix Performance Packages, enterprises and content companies can outsource the complications ofnetwork integration to us in order to gain the performance and redundancy benefits of connecting to multiple networks. These services address a wide range ofcustomer needs ranging from the basics of configuring traffic to efficiently traverse multiple networks to sophisticated applications that allow customers totune their networks to balance price and performance priorities by routing traffic across the lowest-priced path. These services are priced with an initialinstallation fee and an ongoing recurring monthly charge. Equinix Command Center. Through managed software architecture, Equinix Command Center allows customers to self-monitor, manage andcontrol applications, network devices, systems resources and user transactions. This service provides our customers with direct control over infrastructureperformance and service level agreements. The service features network monitoring and management, aggregated information across multiple IBX hubs,browser-based access to detailed monitoring, and a single point of contact for support and billing. The service is priced based upon the number of items acustomer monitors and is billed monthly. 8Table of Contents Equinix Backup and Recovery. The Equinix Backup & Recovery service is a business continuity solution that provides an enterprise-class, fullymanaged and monitored tape backup solution in the IBX Center. The service ensures end-customer data is always secure and available whenever the customerneeds to restore data to a production system, including an option to maintain copies of data outside the IBX Center. Equinix Backup & Recovery can supportmultiple end-customer applications, operating systems and database management systems across an extensive variety of server makes and models. Theservice is priced with an initial installation fee and an ongoing monthly recurring charge. Equinix Storage Services. Equinix Storage Services provide outsourced data solutions for storage area networks, network-attached storage andbackup & recovery. Services are available with different classes of redundancy, clustering, monitoring and failover functionality, meeting customer needs forboth uniform and varying system environments. This functionality provides customers with a robust, easily managed, and cost effective shared storagesolution. Equinix Storage Services are only available in select Asia-Pacific locations. Equinix Mail Service. Equinix’s enterprise messaging service is a complete outsourced solution, primarily based mainly on the Lotus Notes andMicrosoft Exchange platform, which enterprises entrust the operation and support of their messaging application. This service is currently only available inthe Equinix Singapore location and the service is priced with an initial installation fee and an ongoing monthly recurring charge. Managed Platform Solutions. Managed Platform Solutions delivers pre-qualified, pre-installed, pre-hardened and fully managed systems platformsupon which customers can host their co-located applications. These platforms are available in different configuration to meet the needs of the customer. Eachconfiguration includes the server(s), operating system, network connectivity, and system administration management as well as options for database andnetwork administration. This service is only available in the Equinix Singapore location and the service is priced with an initial installation fee and an ongoingmonthly recurring charge. Sales and Marketing Sales. We use a direct sales force and channel marketing program to market our services to network, content provider, enterprise and Internetinfrastructure businesses. We organize our sales force by customer segments as well as by establishing a sales presence in diverse geographic regions, whichenables efficient servicing of the customer base from a network of regional offices. In addition to our worldwide headquarters office in Silicon Valley, we haveestablished an Asian-Pacific regional headquarters location in Singapore. Our U.S. sales offices are located in New York; Reston, Virginia; Los Angeles;Honolulu; Dallas; Chicago and Silicon Valley. Our Asia-Pacific sales offices are located in Bangkok, Hong Kong, Tokyo, Singapore and Sydney. Our sales team works closely with each customer to foster the natural network effect of our IBX model, resulting in access to a wider potential customerbase via our existing customers. As a result of the IBX interconnection model, IBX hub participants encourage their customers, suppliers and businesspartners to come into the IBX hubs. These customers, suppliers and business partners, in turn, encourage their business partners to locate in IBX hubsresulting in additional customer growth. This network effect significantly reduces our new customer acquisition costs. Marketing. To support our sales effort and to actively promote our brand in the U.S. and Asia-Pacific, we conduct comprehensive marketingprograms. Our marketing strategies include an active public relations campaign, strategic partnerships and on-going customer communications programs. Ourmarketing effort is focused on major business and trade publications, online media outlets, industry events and sponsored activities. Our staff holdsleadership positions in key networking organizations and we participate in a variety of Internet, computer and financial industry conferences and place ourofficers and employees in keynote speaking engagements at these conferences. In addition to these activities, we build recognition through sponsoring or leadingindustry technical forums and participating in Internet industry standard-setting bodies. We continue to develop and host the industry’s most successfuleducational forums focused on peering technologies and peering practices for ISPs and content providers. 9Table of Contents Competition Our current and potential competition includes: • Internet data centers operated by established U.S. and Asian-Pacific communications carriers such as AT&T, Qwest, NTT andSingTel. Unlike the major network providers, who constructed data centers primarily to help sell bandwidth, we have aggregated multiplenetworks in one location, providing superior diversity, pricing and performance. Carrier data centers only provide one choice of carriers andgenerally require capacity minimums as part of their pricing structures. Locating in our IBX hubs provides access to top tier networks and allowscustomers to negotiate the best prices with a number of carriers resulting in better economics and redundancy. • U.S. Network access points (“NAPs”) such as Palo Alto Internet Exchange and carrier operated NAPs. NAPs, generally operated bycarriers, are typically older facilities and lack the incentive to upgrade the infrastructure in order to scale with traffic growth. In contrast, we providestate-of-the-art, secure facilities and geographic diversity with round the clock support and a full range of network and content provider offerings. • Vertically integrated web site hosting, colocation and ISP companies such as AboveNet/MFN, Digex/WorldCom andCable&Wireless/Exodus. Most managed service providers require that customers purchase their entire network and managed services directlyfrom them. We are a network and service provider aggregator and allow customers the ability to contract directly with the networks and web-hostingpartner best for their business. By locating in an IBX center, hosting companies add more value to our business proposition—by bringing in morepartners and customers and thus creating a network effect. Unlike other providers whose core business are bandwidth or managed services, we focus on neutral hubs for networks, content providers and globalenterprises. As a result, we are free of the channel conflict common at other hosting/colocation companies. We compete based on the quality of our facilities,our ability to provide a one-stop solution for U.S. and Asia-Pacific locations, the superior performance and diversity of our network neutral strategy, and theeconomic benefits of the aggregation of top networks and Internet businesses under one roof. Specifically, we have established relationships with a number ofleading hosting companies such as IBM (our largest customer) and EDS. We expect to continue to benefit from several industry trends including theconsolidation of supply in the colocation market, the need for contracting with multiple networks due to the uncertainty in the telecommunications market andthe continued strong growth of the large and stable systems integrators. Employees As of December 31, 2002, we had 475 employees. We had 169 employees based at our corporate headquarters in Mountain View, California (ourcorporate headquarters moved to Foster City, California in March 2003) and our regional sales offices. Of those employees, 73 were in engineering andoperations, 55 were in sales and marketing and 41 were in management and finance. We had 96 employees based at our Washington, D.C., New York, NewYork, Dallas, Texas, Chicago, Illinois, Los Angeles, California and Silicon Valley area IBX hubs. In addition, as a result of the combination with i-STT andPihana, we added 210 employees throughout Asia-Pacific, as well as locations in Honolulu, Hawaii and Los Angeles, California. Of these employees, 24 werein engineering and operations, 61 were in sales and marketing and 44 were in management and finance. The remaining 81 employees were based at ourSingapore, Tokyo, Hong Kong, Sydney and Bangkok IBX hubs in the Asia-Pacific region, as well as in the two additional U.S. IBX hubs in Los Angelesand Honolulu. Corporate Information We were incorporated in Delaware in June 1998. We are required to file reports under the Exchange Act with the SEC. You may read and copy ourmaterials on file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You may obtain information regardingthe SEC’s Public 10Table of ContentsReference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at http://www.sec.gov that contains reports, proxy andinformation statements and other information. You may also obtain copies of our annual report on Form 10-K, our quarterly reports on Form 10-Q and ourcurrent reports on Form 8-K by visiting the investor relations page on our website, www.equinix.com. ITEM 2. PROPERTIES Our executive offices are located in Foster City, California (we moved our corporate headquarters from Mountain View, California in March 2003). Wehave entered into leases for IBX hubs in Ashburn, Virginia; Newark and Secaucus, New Jersey; San Jose and Los Angeles, California; Chicago, Illinois;Dallas, Texas; Honolulu, Hawaii; Tokyo, Japan; Hong Kong and Shanghai, China; Sydney, Australia; Bangkok, Thailand and Singapore. We also hold aground leasehold interest in certain unimproved real property in San Jose, California, consisting of approximately 40 acres. We are currently looking to exit from our lease in Shanghai, China, which is an undeveloped property with no IBX hub operations. Additionally, theCompany is currently negotiating the exit of a small lease in Ashburn, Virginia, which is also an undeveloped property with no current IBX hub operations. ITEM 3. LEGAL PROCEEDINGS On July 30, 2001 and August 8, 2001, putative shareholder class action lawsuits were filed against us, certain of our officers and directors, and severalinvestment banks that were underwriters of our initial public offering. The cases were filed in the United States District Court for the Southern District of NewYork, purportedly on behalf of investors who purchased our stock between August 10, 2000 and December 6, 2000. The suits allege that the underwriterdefendants agreed to allocate stock in our initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements bythose investors to make additional purchases in the aftermarket at pre-determined prices. The plaintiffs allege that the prospectus for our initial public offeringwas false and misleading and in violation of the securities laws because it did not disclose these arrangements. It is possible that additional similar complaintsmay also be filed. We and our officers and directors intend to defend the actions vigorously. On October 9, 2002, as part of an agreement with the plaintiffs insuch lawsuits, all claims against our officers and directors were dismissed without prejudice. Under our terminated loan agreement with Wells Fargo, the Company was required to maintain a minimum cash balance at all times or post a letter ofcredit. As of June 30, 2002, the Company was not in compliance with this requirement. Wells Fargo filed a lawsuit against the company seeking to force theCompany to obtain a letter of credit. As part of an agreement with Wells Fargo entered into in January 2003, Equinix made a payment to Wells Fargo ofapproximately $1.7 million in full satisfaction of all amounts owed to Wells Fargo under the loan agreement. As part of the same agreement, the lawsuit hasbeen dismissed and the loan agreement has been terminated. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On December 30, 2002, a special meeting of the stockholders of Equinix was held in New York, New York, asking our stockholders to vote for twospecial proposals. The table below, which is presented on a pre-reverse stock split basis, presents the results of these votes based on 98,892,711 sharesoutstanding on November 22, 2002, the record date for our special meeting: Affirmative Votes VotesAgainst Abstentions Broker’sNon-VotesProposal 1—The issuance of shares in connection with thecombination, the financing and the senior note exchange 54,051,215 569,823 82,606 0Proposal 2—The charter merger 54,038,260 548,426 116,958 0 11Table of ContentsPART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is traded on the Nasdaq National Market System under the symbol of EQIX. Our common stock began trading in August 2000.The following table sets forth, for the periods indicated, the low and high bid prices per share for our common stock as reported by the Nasdaq NationalMarket during the last two years. On December 31, 2002, we completed a 32 for 1 reverse stock split of our common stock in order to comply with Nasdaqinitial listing requirements. The per share information presented below reflects this reverse stock split. Low HighFiscal 2002: Fourth Fiscal Quarter $5.70 $11.52Third Fiscal Quarter 6.72 18.56Second Fiscal Quarter 11.20 36.80First Fiscal Quarter 33.92 108.16Fiscal 2001: Fourth Fiscal Quarter 12.48 107.84Third Fiscal Quarter 12.16 45.76Second Fiscal Quarter 19.00 55.36First Fiscal Quarter 40.00 224.00 As of December 31, 2002, we had issued 8,448,683 shares of our common stock held by approximately 257 stockholders of record. No dividends have been paid on the common stock. We currently intend to retain all future earnings, if any, for use in our business and do notanticipate paying any cash dividends on our common stock in the foreseeable future. Other than restrictions that are a part of our various debt instruments,there are no contractual legal restrictions on paying dividends. The effective date of the Registration Statement for our initial public offering, filed on Form S-1 under the Securities Act of 1933 (File No. 333-93749),was August 10, 2000. The class of securities registered was common stock. There has been no change to the disclosure contained in the Company’s report onForm 10-Q for the quarter ended September 30, 2000 regarding the use of proceeds generated by the Company’s initial public offering of its common stock. During the quarter ended December 31, 2002, we issued and sold the following securities: 1. In October 2002, we amended and restated warrants previously issued to the lenders under the Venture Leasing Loan Agreement in August 1999,as well as issuing new warrants to the lenders, in return for the lenders agreeing to amend the terms of this debt facility. The amended and restatedwarrants, representing the right to purchase 8,438 shares of our common stock, were repriced from an original per share exercise price of $96.00to a per share exercise price of $0.32. The new warrants allow for the purchase of an additional 32,188 shares of our common stock with anexercise price of $0.32 per share. 2. In December 2002, we issued a warrant to purchase 965,674 of our Series A or Series A-1 preferred stock with an exercise price of $0.01 pershare to STT Communications Ltd. in conjunction with the issuance of a $30.0 million 14% convertible secured note (the “Convertible SecuredNote”), with interest payable in kind in the form of additional convertible secured notes (the “PIK Notes”). Both the Convertible Secured Note, aswell as the PIK Notes, are convertible into shares of our Series A preferred stock, Series A-1 preferred stock or common stock. On this same date,we also issued to 12Table of Contents STT Communications Ltd. a Change of Control Warrant, a Series A Cash Trigger Warrant and a Series B Cash Trigger Warrant (collectively,the “Contingently Exercisable Warrants”). The Contingently Exercisable Warrants allow the holder to purchase shares of our common stock inthe event of (i) a change of control for the Change of Control Warrant or (ii) a default under our Credit Facility, as amended, for the Series ACash Trigger Warrant and Series B Cash Trigger Warrant. The number of shares exercisable under the Contingently Exercisable Warrants arebased on formulas contained in each of the individual warrant agreements. 3. In December 2002, we issued 1,084,686 shares of our common stock and 1,868,667 of our Series A preferred stock in consideration for theacquisition of i-STT Pte Ltd, a wholly-owned subsidiary of STT Communications Ltd. 4. In December 2002, we issued 2,416,379 shares of our common stock in consideration for the acquisition of Pihana Pacific, Inc. (“Pihana”). Inaddition, we issued warrants to purchase 133,442 shares of our common stock with an exercise price of $191.81 per share to certain stockholdersof Pihana. 5. In December 2002, we issued 1,857,436 shares of our common stock and $15.2 million of cash in exchange for the retirement of $116.8 millionof our 13% senior notes due in 2007. The issuance of these shares was deemed to be exempt from registration under Section 3(a)(9) of theSecurities Act. Unless otherwise noted, the sale of the above securities was determined to be exempt from registration under Section 4(2) of the Securities Act astransactions by an issuer not involving any public offering. In addition, the recipients of securities in each such transaction represented their intentions toacquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed tothe share certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. 2001 Supplemental Stock Plan The Equinix 2001 Supplemental Stock Plan was adopted by the board of directors effective September 26, 2001. The Company has reserved1,493,961 shares of common stock for issuance under the 2001 Supplemental Stock Plan. Nonstatutory options and restricted stock awards may be grantedunder the 2001 Supplemental Stock Plan to employees of the Company (or any parent or subsidiary corporation) who are neither officers nor Board membersat the time of grant or to consultants. All option grants will have an exercise price per share equal to not less than 85% of the fair market value per share ofcommon stock on the grant date. Each option will vest in installments over the optionee’s period of service with the Company. The purchase price for newlyissued restricted shares awarded under the 2001 Supplemental Stock Plan may be paid in cash, by promissory note or by the rendering of past or futureservices. As of February 28, 2003, options covering 104,835 shares of common stock were outstanding under the 2001 Supplemental Stock Plan, 1,381,210shares remained available for future option grants, and options covering 7,916 shares had been exercised. The options will vest on an accelerated basis in theevent the Company is acquired and those options are not assumed or replaced by the acquiring entity. An option or award will become fully exercisable or fullyvested if the holder’s employment or service is involuntarily terminated within 18 months following the acquisition. The Board may amend or terminate the2001 Supplemental Stock Plan at any time. The 2001 Supplemental Stock Plan will continue in effect indefinitely unless the board decides to terminate theplan earlier. 13Table of Contents Equity Compensation Plan Information The following information is as of December 31, 2002. (a) (b) (c) Plan category Number of securities to be issuedupon exercise of outstanding optionsand rights Weighted-average exerciseprice ofoutstandingoptions andrights Number of securities remainingavailable for future issuance underequity compensation plans (excludingsecurities reflected in column (a)) Equity compensation plans approved by security holders 620,986 $74.51 3,407,262*Equity compensation plans not approved by security holders 104,835 $12.17 1,381,210 Totals 725,821 $65.51 4,788,472 * Includes 35,634 shares from the Employee Stock Purchase Plan. 14Table of Contents ITEM 6. SELECTED FINANCIAL DATA The following statement of operations data for the years ended December 31, 2002, 2001, 2000 and 1999, and for the period from our inception on June22, 1998 to December 31, 1998, and the balance sheet data as of December 31, 2002, 2001, 2000, 1999 and 1998 have been derived from our auditedconsolidated financial statements and the related notes to the financial statements. Our historical results are not necessarily indicative of the results to beexpected for future periods. The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and therelated notes to the consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includedelsewhere in this Annual Report on Form 10-K. Years ended December 31, Period from June 22,1998 (inception) toDecember 31,1998 2002 2001 2000 1999 (dollars in thousands, except per share data) Statement of Operations Data: Revenues $77,188 $63,414 $13,016 $37 $— Costs and operating expenses: Cost of revenues (includes stock-based compensation of $266,$426, $766, $177 and none for the periods ended December 31,2002, 2001, 2000, 1999 and 1998, respectively) 104,073 94,889 43,401 3,268 — Sales and marketing (includes stock-based compensation of$952, $2,830, $6,318, $1,631 and $13 for the periods endedDecember 31, 2002, 2001, 2000, 1999 and 1998, respectively) 15,247 16,935 20,139 3,949 47 General and administrative (includes stock-based compensation of$5,660, $15,788, $22,809, $4,819 and $151 for the periodsended December 31, 2002, 2001, 2000, 1999 and 1998,respectively) 30,659 58,286 56,585 12,603 902 Restructuring charges 28,885 48,565 — — — Total costs and operating expenses 178,864 218,675 120,125 19,820 949 Loss from operations (101,676) (155,261) (107,109) (19,783) (949)Interest income 998 10,656 16,430 2,138 150 Interest expense (35,098) (43,810) (29,111) (3,146) (220)Gain on debt extinguishment 114,158 — — — — Net loss $(21,618) $(188,415) $(119,790) $(20,791) $(1,019) Net loss per share: Basic and diluted $(7.23) $(76.62) $(111.23) $(159.93) $(46.32) Weighted average shares 2,990 2,459 1,077 130 22 15Table of Contents As of December 31, 2002 2001 2000 1999 1998 (dollars in thousands) Balance Sheet Data: Cash, cash equivalents and short-term investments $41,216 $87,721 $207,210 $222,974 $9,165 Accounts receivable, net 9,152 6,909 4,925 178 — Restricted cash and short-term investments 1,981 28,044 36,855 38,609 — Property and equipment, net 390,048 325,226 315,380 28,444 482 Construction in progress — 103,691 94,894 18,312 31 Total assets 492,003 575,054 683,485 319,946 10,001 Debt facilities and capital lease obligations, excluding current portion 3,633 6,344 6,506 8,808 — Credit facility, excluding current portion 89,529 105,000 — — — Senior notes 28,908 187,882 185,908 183,955 — Redeemable convertible preferred stock — — — 97,227 10,436 Total stockholders’ equity (deficit) 284,194 203,521 375,116 8,472 (846)Other Financial Data: Net cash used in operating activities (27,509) (68,854) (68,073) (9,908) (796)Net cash used in investing activities (7,528) (153,014) (302,158) (86,270) (5,265)Net cash provided by financing activities 16,294 107,799 339,847 295,178 10,226 16Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following commentary should be read in conjunction with the financial statements and related notes contained elsewhere in this AnnualReport on Form 10-K. The discussion contains forward-looking statements that involve risks and uncertainties. These statements relate to futureevents or our future financial performance. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,”“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intend” or “continue,” or the negative of suchterms and other comparable terminology. These statements are only predictions. Our actual results may differ materially from those anticipated inthese forward-looking statements as a result of a variety of factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere inthis Annual Report on Form 10-K. Overview Equinix designs, builds and operates IBX hubs where Internet businesses place their equipment and their network facilities in order to interconnect witheach other to improve Internet performance. Our IBX hubs and Internet exchange services enable network service providers, enterprises, content providers,managed service providers and other Internet infrastructure companies to directly connect with each other for increased performance. As of December 31, 2002,we had IBX hubs totaling an aggregate of more than one million gross square feet in the Washington, D.C., New York, Dallas, Chicago, Los Angeles,Honolulu and Silicon Valley areas in the United States and in Singapore, Tokyo, Hong Kong, Bangkok and Sydney in the Asia-Pacific region. Recent Developments. In September 2002, we exercised an option we had purchased in May 2002 and reduced our obligation under our San Joseground lease by approximately one-half. In connection with the exercise of this option, we permitted the landlord to unconditionally draw down on the full$25.0 million in letters of credit that had been posted as security for our San Jose ground lease and had been classified as restricted cash and short-terminvestments on the accompanying balance sheet as of December 31, 2001. The Company recorded a restructuring charge of $19.0 million and the remainingportion of the letters of credit, representing approximately $6.0 million, was recorded as prepaid rent, representing the fair value of the lease payments for the15-month period commencing October 1, 2002 to December 31, 2003. The prepaid rent represents the total payments that would have otherwise been paidduring this period for the remaining one-half of the lease. The prepaid rent will be amortized ratably over this 15-month period. In October 2002, we entered into agreements to consummate a series of related acquisition and financing transactions. These transactions closed onDecember 31, 2002. Under the terms of these agreements, we combined our business with two similar businesses, that of i-STT Pte Ltd (“i-STT”) and PihanaPacific, Inc. (“Pihana”). i-STT’s business is based in Singapore, with operations in Singapore and Thailand. Pihana’s business is based in Hawaii, withoperations in Hawaii, Los Angeles, Hong Kong, Singapore, Tokyo and Sydney, Australia. In connection with acquisition of i-STT and Pihana, we issuedapproximately 3.5 million shares of our common stock and approximately 1.9 million shares of our Series A preferred stock. We refer to this transaction asthe “combination”. In conjunction with the combination, we issued to i-STT’s former parent company, STT Communications Ltd. (“STTCommunications”), a $30.0 million convertible secured note in exchange for cash. We refer to this transaction as the “financing”. i-STT’s operations are, and are expected to continue to be, essentially break-even from operating activities. Although Pihana’s centers are expected tooperate at a loss for approximately 24 months from the closing of the combination, Pihana contributed $33.3 million of cash at closing (approximately $21.7million, net of working capital), which we believe will be sufficient cash to offset its IBX hubs’ projected loss from operations for this period. In addition, by combining Equinix’s, i-STT’s and Pihana’s businesses, we expect to be able to reduce the annual operating expenses of the combinedcompany by approximately $13.0 million. This will be done through 17Table of Contentsthe elimination of duplicate corporate overhead costs, specifically including the closing of Pihana’s corporate headquarters, and a reduction in headcount of thecombined companies of nearly 20%, primarily in the general and administrative areas. Furthermore, by using a portion of the cash raised in the transactions toreduce approximately $125.3 million of our debt, we have reduced the annual cash interest expense of the company by approximately $15.8 million. As of December 31, 2002, we had $41.2 million of cash and cash equivalents. We believe that this cash, together with anticipated positive cash flowfrom operations commencing by the end of 2003 and projected cost-savings in connection with the combination, will be sufficient to meet our working capital,debt service and corporate overhead requirements associated with our operations for the next twelve months. Although we believe we have sufficient cash toreach cash flow break-even from operating, investing and financing activities, we will continue to look for opportunities to raise additional capital to providethe company with greater operating flexibility. In connection with the combination and financing, we amended the terms of the indenture governing our senior notes and extinguished $116.8 million ofour senior notes in exchange for a combination of 1.9 million shares of our common stock and $15.2 million of cash. We refer to this transaction as the“senior note exchange”. Because we extinguished the debt in the senior note exchange at a significant discount, we recognized a substantial gain on debtextinguishment during the fourth quarter of 2002. In connection with the combination, financing and the senior note exchange, we amended our credit facility. The most significant terms and conditionsof this amendment were: • we were granted a full waiver of previous covenant breaches and were granted consent to use cash in connection with the senior note exchange; • future revenue and EBITDA covenants were eliminated and the remaining minimum cash balance and maximum capital expenditure covenants andother ratios were reset consistent with expected future performance of the combined company for the remaining term of the loan; • we permanently repaid $8.5 million of the then currently outstanding $100.0 million balance, bringing our total amount owed under this facility to$91.5 million as of December 31, 2002; and • the amortization schedule for our credit facility was amended such that the minimum amortization due in 2003-2004 was significantly reduced. Furthermore, in conjunction with the combination, financing, senior note exchange and amendment of our credit facility, on December 31, 2002, wecompleted a 32 for 1 reverse stock split of our common stock in order to comply with Nasdaq initial listing requirements. Unless otherwise noted, all shareand per share amounts in this Annual Report on Form 10-K have been adjusted to give effect to the reverse stock split. Risks and Uncertainties. Since inception, we have experienced operating losses and negative cash flow. As of December 31, 2002 we had anaccumulated deficit of $351.6 million and accumulated cash used in operating and construction activities of $691.5 million. Given our limited operatinghistory, we may not generate sufficient revenue to achieve desired profitability. We therefore believe that we will continue to experience operating losses for theforeseeable future, particularly from our newly-acquired operations in the Asia-Pacific region. See “Risk Factors”. Under the terms of the amended credit facility, we must meet certain financial and non-financial covenants. While these covenants were reset consistentwith our expected future performance as a combined company, if we do not achieve the intended growth required or are unable to reduce costs to a level tocomply with these covenants, we may be required to repay the $91.5 million currently outstanding under this facility. Since we do not have sufficient cashreserves to pay this if an event of default occurs, we may be required to renegotiate with the debt issuers for forbearance, make other financial arrangements ortake other actions in order to pay down the 18Table of Contentsloan. There can be no assurance that such revised covenants will be met, or that we will be able to obtain a forbearance or that replacement financing will beavailable. In addition, a default in the credit facility will trigger cross-default provisions in our other debt facilities. If the cash flows from operations are notsufficient to support the Company’s cash requirements, cost reductions implemented as a result of this could adversely affect the business and our ability toachieve our business objectives. Critical Accounting Policies and Estimates The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses duringthe reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historicalexperience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgmentsabout the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparationof its consolidated financial statements: • Revenue recognition and allowance for doubtful accounts; • Restructuring charges; • Accounting for income taxes; • Contingent liabilities; • Accounting for property and equipment; • Impairment of long-lived assets; and • Consolidation. Revenue Recognition and Allowance for Doubtful Accounts. We derive our revenues from (a) recurring revenue streams, such as from theleasing of cabinet space, power and interconnection services and bandwidth and (b) non-recurring revenue streams, such as from the recognized portion ofdeferred installation revenues, professional services and resale of equipment. Revenues from recurring revenue streams are billed monthly and recognizedratably over the term of the contract, generally one to three years. Non-recurring installation fees are deferred and recognized ratably over the term of the relatedcontract. Professional service fees are recognized in the period in which the services were provided and represent the culmination of the earnings process. Feesfor the provision of e-business services are recognized progressively as the services are rendered in accordance with the contract terms, except where the futurecosts cannot be estimated reliably, in which case fees are recognized upon the completion of services. We generally guarantee service levels, such as uptime, asoutlined in individual customer contracts. To the extent that these service levels are not achieved, we reduce revenue for any credits given to the customer as aresult. The Company has the ability to determine such service level credits prior to the associated revenue being recognized, and historically, these service levelcredits have not been significant. Revenue is recognized as service is provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection ofthe receivable is reasonably assured. It is our customary business practice to obtain a signed master sales agreement and sales order prior to recognizingrevenue in an arrangement. We assess collection based on a number of factors, including past transaction history with the customer and the credit-worthinessof the customer. We do not request collateral from our customers. If we determine that collection of a fee is not reasonably assured, we defer the fee andrecognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. In addition, we also maintain an 19Table of Contentsallowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of ourcustomers were to deteriorate or if they become insolvent, resulting in an impairment of their ability to make payments, allowances for doubtful accounts maybe required for revenue we had previously expected to collect. Management specifically analyzes accounts receivable and analyzes current economic news andtrends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenuerecognition and the adequacy of our allowances. Our customer base has historically been composed of businesses throughout the U.S. Commencing in fiscal 2003, our revenues will include revenuesfrom our newly-acquired Asia-Pacific operations. We expect that revenues commencing in 2003 will be split approximately 85% in the U.S. and 15% in Asia-Pacific. We perform ongoing credit evaluations of our customers. As of December 31, 2002, one customer, IBM, accounted for 20% of annual revenues and15% of accounts receivable. As of December 31, 2001, one customer, IBM, accounted for 15% of annual revenues and another customer, SiteSmith,accounted for 10% of accounts receivable. As of December 31, 2000, two customers, IBM and Loudcloud (now known as Opsware), accounted for 12% and11% of annual revenues, respectively, and two customers, IBM and UUNET, accounted for 19% and 14% of accounts receivable, respectively. No othersingle customer accounted for greater than 10% of accounts receivable or annual revenues for the periods presented. During the year ended December 31, 2001, we recognized approximately $200,000 of revenue in relation to equipment received from customers in lieu ofcash. This equipment is being used in our operations and was valued based on management’s assessment of the fair value of the equipment in relation toexternal prices for similar equipment. In February and March 2002, we entered into arrangements with numerous vendors to resell bandwidth, as well as equipment. We began to offer suchservices in an effort to provide our customers a more fully-integrated services solution. Under the terms of the reseller agreements, we sell the vendors’ servicesor products to our customers and we will contract with the vendor to provide the related services or products. We recognize revenue from such arrangements ona gross basis in accordance with Emerging Issues Task Force (“EITF”) Abstract No. 99-19, “Recording Revenue as a Principal versus Net as an Agent”. Weact as the principal in the transaction as our customer services agreement identifies us as the party responsible for the fulfillment of product/ services to ourcustomers and have full pricing discretion. In the case of products sold under such arrangements, we take title to the products and bear the inventory risk aswe have made minimum purchase commitments to various vendors. We have credit risk, as we are responsible for collecting the sales price from a customer,but must pay the amount owed to our suppliers after the suppliers perform, regardless of whether the sales price is fully collected. In addition, we will oftendetermine the required equipment configuration and recommend bandwidth providers from numerous potential suppliers. While we do not anticipate significant future equipment sales, as noted above, we entered into arrangements with numerous vendors to resell equipmentin 2002. For the year ended December 31, 2002, we recognized gross revenue of $2.9 million in connection with these reseller agreements as we acted as theprimary obligor in these transactions. Restructuring Charges. During the third quarter of 2001 and the second, third and fourth quarters of 2002, we recorded restructuring charges,primarily due to our revised European services strategy and exit costs related to excess leaseholds. These restructuring charges were comprised primarily ofwrite-downs and write-offs of assets and accrued unfavorable lease commitments and related lease exit costs. The amount of the restructuring charges werecorded was based on our estimates of how long it would take to successfully negotiate lease terminations for the leaseholds we desired to exit and the relatedexit costs. In addition, we may incur additional restructuring charges if, in the future, we decide to modify our Asia-Pacific strategy in one or more of thecountries we now operate in within the Asia-Pacific region. Should the actual lease exit costs and other accrued restructuring charges exceed the amountaccrued, or a new restructuring activity is identified, additional 20Table of Contentsrestructuring charges may be required, which would decrease net income in the period such determination was made. Conversely, if actual lease exit and otherrestructuring charges are less than the amount accrued, an adjustment to accrued restructuring charges would be required, which would increase income in theperiod such determination was made. See Recent Accounting Pronouncements for a discussion of “Accounting for Costs Associated with Exit or DisposalActivities.” Accounting for Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognizedfor the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective taxbases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxableincome 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 intax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to theamounts expected to be realized. We currently have provided for a full valuation allowance against our net deferred tax assets. We have considered future taxable income and ongoingprudent and feasible tax planning strategies in assessing the need for the valuation allowance. Based on the available objective evidence, management does notbelieve that the net deferred tax assets will be fully realizable. Should we determine that we would be able to realize our deferred tax assets in the foreseeablefuture, an adjustment to the deferred tax assets would increase income in the period such determination was made. Contingent Liabilities. Management estimates exposure on contingent liabilities, such as litigation, based on the best information available at the timeof determination. For litigation claims, when management can reasonably estimate the range of loss and when an unfavorable outcome is probable, a contingentliability is recorded. For current legal proceedings, management believes that it has adequate legal defenses and that the ultimate outcome of these actions willnot have a material effect on the Company’s financial position, results of operations and cashflows. Furthermore, because of the uncertainties as to theoutcome of these proceedings and since no range of loss can be estimated at this time, management has determined that no accrual is needed. As additionalinformation becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Revisions in our estimates of thepotential liability could materially impact our results of operation and financial position. Accounting for Property and Equipment. Property and equipment are stated at original cost. Depreciation is computed using the straight-linemethod over the estimated useful lives of the respective assets, generally two to five years for non-IBX hub equipment and seven to ten years for IBX hubequipment. Leasehold improvements and assets acquired under capital lease are amortized over the shorter of the lease term or the estimated useful life of theasset or improvement. In addition, we have capitalized certain interest costs during the construction phase. Once an IBX hub becomes operational, thesecapitalized costs are depreciated at the appropriate rate consistent with the estimated useful life of the underlying asset. We have issued numerous warrants tocertain fiber carriers and our primary contractor responsible for the construction of many of our IBX hubs. We use the Black-Scholes option-pricing model tovalue these warrants. The value attributed to these warrants are included in our property and equipment and classified as a leasehold improvement.Amortization of such warrants is included in depreciation expense. Should management determine that the actual useful lives of our property and equipment placed into service is less than originally anticipated, or if anyof our property and equipment was deemed to have incurred an impairment, additional depreciation, an impairment charge would be required, which woulddecrease net income in the period such determination was made. Conversely, should management determine that the actual useful lives of its property andequipment placed into service was greater than originally anticipated, less depreciation may be required, which would increase net income in the period suchdetermination was made. 21Table of Contents Impairment of Long-Lived Assets. We account for the impairment of long-lived assets in accordance with Statement of Financial AccountingStandard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which we adopted in fiscal 2002. We evaluate the carryingvalue of our long-lived assets, consisting primarily of our IBX hubs, whenever certain events or changes in circumstances indicate that the carrying amount ofthese assets may not be recoverable. Such events or circumstances include, but are not limited to, a prolonged industry downturn, a significant decline in ourmarket value, or significant reductions in projected future cash flows. We prepare this analysis by assessing the future net cash flows generated by each IBXhub over their respectful useful lives and comparing this against the carrying value of that IBX hub. Our revenue and cost assumptions used in this analysisare based on numerous factors, including the current revenue and cost performance of each IBX hub, historical growth rates, the remaining space to fill eachIBX hub to full capacity relative to the market demand in each of the individual geographic markets of each IBX hub, expected inflation rates and any otheravailable economic indicators and factors that we feel are relevant. If the total of the undiscounted future cash flows is less than the carrying amount of theassets, we write down such assets based on the excess of the carrying amount over the fair value of the assets. Fair value is generally determined by calculatingthe discounted future cash flows using a discount rate based upon our weighted average cost of capital. Significant judgments and assumptions are required inthe forecast of future operating results used in the preparation of the estimated future cash flows, including profit margins, long-term forecasts of the amountsand timing of overall market growth and our percentage of that market, groupings of assets, discount rates and terminal growth rates. In addition, significantestimates and assumptions are required in the determination of the fair value of our tangible long-lived assets, including replacement cost, economicobsolescence, and the value that could be realized in orderly liquidation. Changes in these estimates could have a material adverse effect on the assessment ofour long-lived assets, thereby requiring us to write down the assets. Our long-lived assets at December 31, 2002, including property and equipment andgoodwill and identifiable intangible assets, totaled $389.9 million and $22.9 million, respectively. Consolidation. We follow the provisions of SFAS No. 94, “Consolidation of All Majority-Owned Subsidiaries” and EITF Abstract No. 96-16,“Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have CertainApproval or Veto Rights”. As a result, all majority-owned subsidiaries are consolidated unless: (1) control is likely to be temporary, or (2) we do not havecontrol. Evidence of such a lack of effective control includes our inability to direct or cause the direction of the management and policies of a person, whetherthrough the ownership of voting shares, by contract, or otherwise. As a result of the combination, we acquired a 60% interest in i-STT Nation Limited, an IBX hub operation in Thailand. However, as a result of certainsubstantive participating rights granted to minority shareholders, i-STT Nation Limited is not considered a controlled subsidiary and accordingly, it is notconsolidated. Accordingly, we account for i-STT Nation Limited as an equity investment using the equity method of accounting. Under the preliminarypurchase price allocation, we attributed no value to this investment as i-STT Nation Limited is in the early stages of operations and is not able to generatepositive operating cashflow for the foreseeable future. We are continuing to review our strategic alternatives related to i-STT Nation Limited. Results of Operations Years Ended December 31, 2002 and 2001 Revenues. We recognized revenues of $77.2 million for the year ended December 31, 2002, as compared to revenues of $63.4 million for the yearended December 31, 2001. Revenues consisted of recurring revenues of $65.3 million and $57.6 million, respectively, for the year ended December 31, 2002and 2001, primarily from the leasing of cabinet space, power and cross connects. Non-recurring revenues were $11.9 million and $5.8 million, respectively,for the year ended December 31, 2002 and 2001, primarily related to the recognized portion of deferred installation revenue and custom service revenues andone-time settlement fees associated with certain customer right-sizing or contract terminations. One-time settlement fees recognized during the year ended 22Table of ContentsDecember 31, 2002 totaled approximately $4.5 million, including a $2.8 million one-time settlement with Qwest received in the third quarter of 2002, andapproximately $562,000 for the corresponding period in 2001. Installation and service fees are recognized ratably over the term of the contract. Custom servicerevenues are recognized upon completion of the services. One-time settlement fees are recognized upon contract termination. In February and March 2002, weentered into equipment reseller agreements with two related party companies. Included within the $11.9 million of non-recurring revenues for the year endedDecember 31, 2002, were $2.9 million of equipment sales resulting from these two equipment reseller agreements. There were no equipment sales in the yearended December 31, 2001. Excluding equipment sales, we recognized revenues of $74.2 million for the year ended December 31, 2002 as compared to revenuesof $63.4 million for the year ended December 31, 2001, a 17% increase. The period over period growth in revenues was primarily the result of an increase in orders from existing customers and growth in our customer basefrom 218 customers as of December 31, 2001 to 303 customers as of December 31, 2002 on a pre-merger basis and one-time settlement fees associated withcertain customer right-sizing or contract terminations. However, this growth in our customer base is partially offset by a number of our larger customersreducing the size of their contractual commitments to us. We refer to this effort as the “right-sizing” of our larger customer contracts. During the past year, wehave proactively worked with certain of our larger customers to right-size their contractual commitments to help them better react to a slowdown in customerdemand as a result of weaker economic conditions. Although these right-sizing efforts often result in a reduction in the number of cabinets these customers areobligated to pay for, many of these right-sizing efforts have resulted in the customer extending the term for the remaining cabinets. As a result, although theshort-term recurring revenues from such customers are reduced, the overall contract value at times remains intact and the relationship with the customer ispreserved, if not improved. As of December 31, 2002, we had successfully completed the right-sizing of most of our customers that had more than 100cabinets booked, a booking level that represents our larger customers. These right-sizing efforts have, over the past several quarters, been netted out againstour new customer cabinet bookings, limiting our overall revenue growth during the past five quarters. Commencing in fiscal 2003, our revenues will include revenues from our newly-acquired Asia-Pacific operations. We expect that revenues commencingin 2003 will be split approximately 85% in the U.S. and 15% in Asia-Pacific. Cost of Revenues. Cost of revenues increased to $104.1 million for the year ended December 31, 2002 from $94.9 million for the year endedDecember 31, 2001. These amounts included $47.8 million and $40.0 million, respectively, of depreciation expense and $266,000 and $426,000,respectively, of stock-based compensation expense. In addition to depreciation and stock-based compensation, cost of revenues consists primarily of rentalpayments for our leased IBX hubs, site employees’ salaries and benefits, utility costs, power and redundancy system engineering support services and relatedcosts and security services. Furthermore, cost of revenues for the year ended December 31, 2002 included the costs associated with $2.9 million in equipmentsales we recorded, which was approximately $2.8 million. Excluding depreciation, stock-based compensation expense and the costs of equipment sales, cashcost of revenues decreased slightly period over period to $53.1 million for the year ended December 31, 2002 from $54.4 million for the year ended December31, 2001, a 2% decrease. Cash cost of revenues for the year ended December 31, 2001 included $5.0 million in costs related to our European expansion plans. Due to therestructuring charge that we recorded in the third quarter of 2001, these costs were not in our cash cost of revenues for the year ended December 31, 2002;however, these savings were partially offset by the additional costs incurred of $3.7 million from (a) our newest and largest IBX hub opened during the firstquarter of 2002 in the New York metropolitan area and (b) the costs associated with the ramp-up of our existing IBX hubs. In September 2002, we exercised anoption to reduce the monthly operating costs under the San Jose ground lease by approximately one-half commencing October 2002, which resulted in savingsof approximately $1.1 million as compared to the prior year. We anticipate that the costs associated with the continued ramp-up of our IBX hubs and theadditional costs associated with some of our new services, such as 23Table of Contentsbandwidth, will continue to increase in the foreseeable future; however, the cost savings resulting from the elimination of approximately half of the San Joseground lease costs, which commenced in October 2002, should offset most of these increases for the foreseeable future in the U.S. However, commencing infiscal 2003, our cost of revenues will include the cost of revenues associated with our Asia-Pacific operations. We expect that these additional costs will besubstantial and will result in a significant increase in our total cost of revenues. Sales and Marketing. Sales and marketing expenses decreased to $15.2 million for the year ended December 31, 2002 from $16.9 million for theyear ended December 31, 2001. These amounts included $952,000 and $2.8 million, respectively, of stock-based compensation expense. In addition, werecorded $2.3 million in bad debt expense for the year ended December 31, 2002, as compared to $477,000 recorded in the prior year. This substantial increasein bad debt expense was primarily the result of full provisions against aged receivables associated with two customers, Teleglobe and WorldCom, both ofwhich filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in 2002. Excluding stock-based compensation and bad debt expense,cash sales and marketing costs decreased to $12.0 million for the year ended December 31, 2002 from $13.6 million for the year ended December 31, 2001, a12% decrease. Cash sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, sales commissions,marketing programs, public relations, promotional materials and travel. The decrease in sales and marketing expenses is the result of several cost savinginitiatives that we undertook, including staff reductions of approximately 25% during 2001 that resulted in approximately $2.6 million in annual savings insales and marketing costs and an overall decrease in discretionary spending. We continue to closely monitor our spending in all areas as a result of the currentmarket conditions. However, commencing in fiscal 2003, our sales and marketing expenses will include the sales and marketing expenses associated with ourAsia-Pacific operations. We expect that these additional costs will be substantial and result in a significant increase in our sales and marketing expenses. General and Administrative. General and administrative expenses decreased to $30.7 million for the year ended December 31, 2002 from $58.3million for the year ended December 31, 2001. These amounts included $5.7 million and $15.8 million, respectively, of stock-based compensation expenseand $6.2 million and $9.6 million, respectively, of depreciation expense, resulting in $14.1 million or 43% decrease in period over period cash spending.Cash general and administrative expenses consist primarily of salaries and related expenses, accounting, legal and administrative expenses, professionalservice fees and other general corporate expenses. The significant decrease in general and administrative expenses was primarily the result of several costsaving initiatives that we undertook, including staff reductions of approximately 25% during 2001 that resulted in approximately $4.9 million in annualsavings in general and administrative costs and an overall decrease in discretionary spending. We continue to closely monitor our spending as a result of thecurrent market conditions. However, commencing in fiscal 2003, our general and administrative expenses will include the general and administrative expensesassociated with our Asia-Pacific operations. We expect that these additional costs will be substantial and result in a significant increase in our general andadministrative expenses. Restructuring Charges. During the year ended December 31, 2002, we recorded restructuring charges of $28.9 million. The restructuring chargesconsisted of (a) a $5.0 million option fee paid in May 2002 related to the amendment of our approximately 80 acre ground lease in San Jose, California fromwhich we subsequently elected to exercise the option to permanently exclude 40 acres commencing October 1, 2002; (b) a write-off of property and equipmentof $2.6 million, primarily leasehold improvements and some equipment, located in two unnecessary U.S. IBX expansion and headquarter office spaceoperating leaseholds we had decided to exit and that do not currently provide any ongoing benefit; (c) a write-off of one U.S. letters of credit totaling$250,000 related to one U.S. operating leasehold we had committed to exit; (d) an accrual of $1.0 million related to the remaining estimated European exitcosts; (e) an accrual of $925,000 in severance charges related to a less than 10% reduction in workforce in an effort to reduce the cost structure of ourcorporate headquarter function that will result in approximately $2.8 million in annual savings; (f) an accrual of $115,000 related to additional U.S. leaseholdexit costs and (g) a partial write-off of two letters of credit totaling $19.0 million associated with the exercise in September 2002 of our option to permanentlyterminate approximately one-half of our lease obligations under the San Jose ground lease. 24Table of Contents During the quarter ended September 30, 2001, the Company took a restructuring charge of $48.6 million consisting of $45.3 million related to a revisedEuropean services strategy, $2.0 million for certain anticipated excess U.S. leasehold exit costs and $1.3 million related to a reduction in workforce, primarilyin selling, general and administrative functions at the Company’s headquarters. During third quarter 2001, the Company decided to partner with anotherInternet exchange company in Europe rather than build and operate its own centers outside of the U.S. As a result, the Company i) recorded a write-down of itsEuropean construction in progress assets to their net realizable value and recorded a charge totaling $29.3 million, ii) accrued certain leasehold exit costs for itsEuropean leasehold interests in the amount of $6.4 million, iii) wrote-off its European letters of credit that secured the European leasehold interests in theamount of $8.6 million and iv) accrued various legal, storage and other costs totaling $1.0 million to facilitate this change in strategy. In addition, theCompany incurred a $2.0 million restructuring charge for leasehold exit costs associated with certain excess U.S. leases and a $1.3 million restructuringcharge related to an approximate 15% reduction in workforce in an effort to streamline and reduce the cost structure of the Company’s headquarter function. As of December 31, 2002, a total restructuring reserve of $1.7 million remained outstanding for all of the above accrued but unpaid restructuringcharges. We began to realize the cost savings benefits resulting from the partial San Jose ground lease termination in cost of revenues during October 2002. Interest Income. Interest income decreased to $998,000 from $10.7 million for the year ended December 31, 2002 and 2001, respectively. Interestincome decreased due to lower cash, cash equivalent and short-term investment balances held in interest bearing accounts and lower interest rates received onthose invested balances. Interest Expense. Interest expense decreased to $35.1 million from $43.8 million for the year ended December 31, 2002 and 2001, respectively. Thedecrease in interest expense was attributable to the retirement of $52.8 million of our 13% senior notes during the first half of 2002 and to the decline in boththe principal due and the interest rates associated with our credit facility. Gain on Debt Extinguishment. During the first half of 2002, we retired $52.8 million of our senior notes in exchange for approximately 500,000shares of our common stock and approximately $2.5 million of cash. On December 31, 2002, we retired an additional $116.8 million of our senior notes inexchange for approximately 1.9 million shares of our common stock and approximately $15.2 million of cash. As a result of these transactions, we recognizeda $114.2 million net gain on debt extinguishment during 2002, after deducting transaction costs, interest waived and allocation of unamortized debt issuancecosts and debt discount. Years ended December 31, 2001 and December 31, 2000 Revenues. Revenues increased from $13.0 million for the year ended December 31, 2000 to $63.4 million for the year ended December 31, 2001.Revenues consist of recurring revenues of $57.6 million for 2001, versus $11.6 million for 2000, primarily from the leasing of cabinet space, and non-recurring revenues of $5.8 million for 2001, versus $1.4 million for 2000, related to the recognized portion of deferred installation revenue and custom servicerevenues. Installation fees are recognized ratably over the term of the contract. Custom service revenues are recognized upon completion of the services.Revenues increased year over year because we had more IBX hubs open and operational during 2001 than we had during 2000. We expect revenues to continueto increase as our customer base continues to grow and as a result of opening our newest and largest IBX hub in the New York metropolitan area during thefirst quarter of 2002. Cost of Revenues. Cost of revenues increased from $43.4 million for the year ended December 31, 2000 to $94.9 million for the year ended December31, 2001. These amounts include depreciation and amortization expense of $11.5 million and $40.0 million, respectively. In addition to depreciation andamortization, cost of revenues consists primarily of rental payments for our leased IBX hubs, site employees’ salaries and benefits, utility costs, power andredundancy system engineering support services and related costs and security services. 25Table of ContentsThe increase in cost of revenues was due to additional leases and increased expenses related to our opening of additional IBX hubs. During the quarter endedSeptember 30, 2001, we revised our European services strategy that included exiting our European leases and various U.S. leaseholds. These actions reducedthe cost of revenues commencing in fourth quarter 2001; however, these savings have been offset in part by increased cost of revenues associated with theopening of the New York metropolitan IBX hub during the first quarter of 2002, including related depreciation and amortization expense, and additional costof revenues related to our existing IBX hubs as our installed base of customers grows. Sales and Marketing. Sales and marketing expenses decreased from $20.1 million for the year ended December 31, 2000 to $16.9 million for theyear ended December 31, 2001; however, these amounts include stock-based compensation expense of $6.3 million and $2.8 million, respectively, resulting ina 2% increase in period over period cash spending. Sales and marketing expenses consist primarily of compensation and related costs for the sales andmarketing personnel, sales commissions, marketing programs, public relations, promotional materials and travel. The increase in sales and marketingexpense resulted from the addition of personnel in our sales and marketing organizations during the first half of 2001, reflecting our increased selling effort andour initiatives to develop market awareness. During the quarter ended September 30, 2001, we incurred a $1.3 million restructuring charge related to areduction in workforce that included some sales and marketing staff. In addition, we are closely monitoring our discretionary marketing costs as the result ofcurrent market conditions. General and Administrative. General and administrative expenses increased from $56.6 million for the year ended December 31, 2000 to $58.3million for the year ended December 31, 2001. These amounts include stock-based compensation expense of $22.8 million and $15.8 million, respectively,and depreciation and amortization expense of $3.3 million and $9.6 million, respectively, resulting in an 8% increase in period over period cash spending.General and administrative expenses consist primarily of salaries and related expenses, accounting, legal and administrative expenses, professional service feesand other general corporate expenses. The increase in general and administrative expenses was primarily the result of increased expenses associated withadditional hiring of personnel in management, finance and administration, as well as other related costs associated with supporting our expansion, particularlyduring the first quarter of 2001. During the second and third quarters of 2001, we implemented several cost-savings initiatives, including some staffreductions and an overall decrease in discretionary spending. Restructuring Charge. During the quarter ended September 30, 2001, we took a restructuring charge of $48.6 million consisting of $45.3 millionrelated to its revised European services strategy, $2.0 million for certain anticipated excess U.S. leasehold exit costs and $1.3 million related to a reduction inworkforce, primarily in selling, general and administrative functions at our corporate headquarters. During third quarter 2001, we decided to partner withother Internet exchange companies in Europe rather than build and operate our own centers outside of the U.S. As a result, we (a) recorded a write-down of ourEuropean construction in progress assets to their net realizable value and recorded a charge totaling $29.3 million, (b) accrued certain leasehold exit costs forour European leasehold interests in the amount of $6.4 million, (c) wrote-off our European letters of credit that secured the European leasehold interests in theamount of $8.6 million and (d) accrued various legal, storage and other costs totaling $1.0 million to facilitate this change in strategy. We experienced somecost savings benefits from this restructuring charge during the fourth quarter of 2001, particularly in cost of revenues; however, these cost-savings werepartially offset by the increased operating costs of the New York metropolitan area IBX hub beginning in the first quarter of 2002. In addition, we incurred a$2.0 million restructuring charge for leasehold exit costs associated with certain excess U.S. leases and a $1.3 million restructuring charge related to anapproximate 15% reduction in workforce in an effort to reduce the cost structure of our corporate headquarter functions. We began to realize the cost savingsbenefits of the $2.0 million U.S. lease restructuring charge and $1.3 million workforce reduction restructuring charge commencing in the fourth quarter of2001. Interest Income. Interest income decreased from $16.4 million for the year ended December 31, 2000 to $10.7 million for the year ended December31, 2001 as a result of a decline in short-term interest rates and reduced cash, cash equivalent and short-term investments. 26Table of Contents Interest Expense. Interest expense increased from $29.1 million for the year ended December 31, 2000 to $43.8 million for the year ended December31, 2001. The increase in interest expense was attributed to interest related to an increase in our debt facilities and capital lease obligations, including the creditfacility, and amortization of the credit facility and other debt facilities and capital lease obligations debt issuance costs and discounts. Liquidity and Capital Resources Since inception, we have financed our operations and capital requirements primarily through the issuance of senior notes, the private sale of preferredstock, our initial public offering, our credit facility, which was later amended, our convertible secured notes, our combination with i-STT and Pihana andvarious types of debt facilities and capital lease obligations, for aggregate gross proceeds of approximately $909.2 million. As of December 31, 2001, our totalindebtedness from senior notes, our credit facility and other debt facilities and capital lease obligations was $319.2 million. As of December 31, 2002, thisamount was reduced to $161.6 million, including our $30.0 million convertible secured notes issued in December 2002 that do not require cash interestpayments. As of December 31, 2002, our principal source of liquidity was approximately $41.2 million in cash and cash equivalents. Uses of Cash Net cash used in our operating activities was $27.5 million, $68.9 million and $68.1 million for the years ended December 31, 2002, 2001 and 2000,respectively. We used cash primarily to fund our net loss, including cash interest payments on senior notes and our credit facility. Net cash used in investing activities was $7.5 million, $153.0 million and $302.2 million for the years ended December 31, 2002, 2001 and 2000,respectively. Net cash used in investing activities was primarily attributable to the construction of our IBX hubs and the purchase of restricted cash and short-term investments. The amount of cash used in investing activities has decreased substantially as we have now completed our IBX hub rollout plan. Net cash generated by financing activities was $16.9 million, $107.8 million and $339.8 million for the years ended December 31, 2002, 2001 and2000, respectively. Net cash generated by financing activities during the year ended December 31, 2002 was primarily attributable to the cash acquired in theacquisitions of i-STT and Pihana and proceeds from our $30.0 million convertible secured notes, offset by payments of $17.7 million used to retireapproximately $169.5 million of our senior notes and the costs associated with the exchange of the senior notes and repayments under our credit facility of$13.5 million. Net cash generated by financing activities during the year ended December 31, 2001 was primarily attributable to the net $105.0 million drawdown under our credit facility. Net cash generated by financing activities during the year ended December 31, 2000 was primarily attributable to the proceedsfrom the initial public offering of our common stock and the issuance of Series C redeemable convertible preferred stock. 27Table of Contents Debt Obligations As of December 31, 2002, our total indebtedness from our senior notes, credit facility, convertible secured notes and debt facilities and capital leaseobligations was $161.6 million, as follows: Senior Notes. In December 1999, we issued $200.0 million aggregate principal amount of 13% senior notes. Our aggregate net proceeds of thisoffering were $193.4 million, net of offering expenses. During the first half of 2002, we retired $52.8 million of the senior notes in exchange for approximately500,000 shares of common stock and approximately $2.5 million of cash. On December 31, 2002, we retired an additional $116.8 million of the senior notesin exchange for approximately 1.9 million shares of our common stock and approximately $15.2 million of cash. As of December 31, 2002, a total of $30.5million of senior note principal remains outstanding. Credit Facility. In December 2000, we entered into the credit facility with a syndicate of lenders under which, subject to our compliance with anumber of financial ratios and covenants, we were permitted to borrow up to $150.0 million. As of September 30, 2001, we had borrowed the entire $150.0million under this facility. In October 2001, in conjunction with the repayment of $50.0 million, we amended the credit facility to decrease total borrowingallowed to $125.0 million and to reset certain financial covenants to more accurately reflect market conditions. As of September 30, 2002, a total of $100.0million was outstanding under the credit facility. The credit facility required us to maintain specific financial ratios and comply with quarterly, and in somecircumstances, monthly covenants requiring us to, among other things, achieve specific revenue targets at levels significantly above historical revenues,maintain certain minimum cash balances and limit our EBITDA losses. As of September 30, 2002, we were not in compliance with several of theseprovisions, including the revenue covenant. In August and November 2002, the senior lenders provided us with various waivers and further amended thecredit facility. Under the August 2002 amendment, we agreed to prepay $5.0 million and agreed to a reduction in the total borrowing allowed under the creditfacility to $100.0 million (permanently eliminating the $20.0 million which was previously available for borrowing). The November 2002 amendmentprimarily provided the company with some additional time and flexibility in order to complete the senior note exchange. In connection with the combination,financing and completed senior note exchange, we entered into a further amendment to the credit facility. The most significant terms and conditions of thisamendment were: • we were granted a full waiver of previous covenant breaches and were granted consent to use cash to retire our senior notes in connection with thesenior note exchange; • future revenue and EBITDA covenants were eliminated and the remaining covenants and ratios were reset consistent with expected futureperformance of the combined company for the remaining term of the loan; • we permanently repaid $8.5 million of the then currently outstanding $100.0 million balance, bringing our total amount owed under this facility to$91.5 million as of December 31, 2002; and • the amortization schedule for the credit facility was amended such that the minimum amortization due in 2003–2004 was significantly reduced. Convertible Secured Note. In December 2002, in conjunction with the combination, STT Communications made a $30.0 million strategicinvestment in the company in the form of a 14% convertible secured note with an initial term of five years. The interest on the convertible secured note ispayable in kind in the form of additional convertible secured notes. Other Debt Facilities and Capital Lease Obligations. In May 1999, we entered into a master lease agreement with Comdisco in the amount of $1.0million. 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% andis repayable over 42 months in equal monthly payments with a final interest payment equal to 15% of the advance amounts due on maturity. As of December31, 2002, these capital lease financings were fully drawn and $1.9 million remained outstanding. 28Table of Contents In August 1999, we entered into a loan agreement with Venture Lending and Leasing in the amount of $10.0 million and fully drew down on thisamount. This loan agreement bears interest at 8.5% and was repayable over 42 months in equal monthly payments with a final interest payment equal to 15%of the advance amounts due on maturity. In October 2002, we amended the loan agreement to secure certain short-term cash deferment benefits. Under theterms of this amendment, we extended the maturity of the loan by 24 months and amortized the remaining principal balance and related balloon interestpayment over this amended period ending March 1, 2005; and in exchange, the Company issued new warrants and re-priced their original warrants. As ofDecember 31, 2002, principal of $1.3 million remained outstanding. In March 2001, we entered into a loan agreement with Wells Fargo in the amount of $3.0 million and fully drew down on this amount. This loanagreement bears interest at 13.15% and is repayable over 36 months. As of June 30, 2002, we were not in compliance with one of the requirements of this loan.As a result, we have reflected the full amount outstanding under this facility totaling $1.6 million as a current obligation on the accompanying balance sheetas of December 31, 2002. In January 2003, we reached an agreement with Wells Fargo and made a payment to Wells Fargo of approximately $1.7 million infull satisfaction of all amounts owed to Wells Fargo under the loan agreement. In June 2001, we entered into a loan agreement with Heller Financial Leasing in the amount of $5.0 million and fully drew down on this amount. Thisloan agreement bears interest at 13.0% and is repayable over 36 months. In August 2002, we amended this loan to secure certain short-term cash deferment.Under the amended terms of this loan agreement, we extended the maturity of the loan by nine months. Commencing September 2002, we began to benefit fromthe reduction in monthly payments over the following 14 months thereby deferring approximately $1.2 million of principal payments. Commencing November2003, the deferred principal payments will be repaid over the remaining 17 months of the loan ending March 2005. As of December 31, 2002, principal of$3.3 million remained outstanding. In December 2002, in conjunction with our merger with Pihana, we acquired multiple capital leases with Orix. The original amount financed wasapproximately $3.5 million. These capital lease arrangements bear interest at an average rate of 6.4% per annum and are repayable over 30 months. As ofDecember 31, 2002, principal of $1.5 million remained outstanding. Debt Maturities and Operating Lease Commitments We lease our IBX hubs and certain equipment under non-cancelable operating lease agreements expiring through 2020. The following represents theminimum future operating lease payments for these commitments, as well as the combined aggregate maturities for all of our debt as of December 31, 2002 (inthousands): Debt facilities & capital leaseobligations Creditfacility Seniornotes Convertible securednotes Operatingleases Total2003 $5,852 $1,981 $— $— $20,913 $28,7462004 3,019 6,981 — — 23,075 33,0752005 729 82,548 — — 26,134 109,4112006 — — — — 27,189 27,1892007 — — 30,475 30,000 28,050 88,5252008 and thereafter — — — — 206,840 206,840 $9,600 $91,510 $30,475 $30,000 $332,201 $493,786 We believe that our cash on hand, together with anticipated positive cash flow from operations commencing by the end of 2003 and projected cost-savings in connection with the combination, will be sufficient to meet our working capital, debt service and corporate overhead requirements associated withour operations for the next twelve months. Although we believe we have sufficient cash to reach cash flow break-even from operating, investing and financingactivities, we will continue to look for opportunities to raise additional capital to provide the company with greater operating flexibility. 29Table of ContentsRISK FACTORS In addition to the other information in this report, the following risk factors should be considered carefully in evaluating our business and us: Risks Related to Our Business Equinix, i-STT and Pihana have limited operating histories and the market for each company’s services is still in its early stages. We were founded in June 1998 and did not recognize any revenue until November 1999. i-STT was founded in January 2000 and did not recognizeany revenue until May 2000. Pihana was founded in June 1999 and did not recognize any revenue until June 2000. We expect that we will encounter challengesand difficulties frequently experienced by early-stage companies in new and rapidly evolving international markets, such as our ability to generate cash flow,hire, train and retain sufficient operational and technical talent, and implement our plan with minimal delays. We may not successfully address any or all ofthese challenges and our failure to do so would seriously harm our business plan and operating results, and affect our ability to raise additional funds. If we are unable to meet these challenges and generate higher revenues while reducing costs, we may not be able to comply with the covenants in the creditfacility. If we breach our credit facility, the banks could require repayment of all amounts previously drawn down and we will not have sufficient cashreserves to repay such amounts. Equinix, i-STT and Pihana have each incurred substantial losses in the past, may continue to incur additional losses in the future and will not beprofitable until the combined company reverses this trend. Equinix incurred losses of approximately $21.6 million for 2002 ($135.8 million, excluding the gain on debt extinguishment), i-STT incurred losses ofapproximately $8.0 million for 2002 and Pihana incurred losses of approximately $148.5 million for the same period. In recent periods, Equinix, i-STT andPihana have not generated cash from operations. Even if the combined company achieves profitability, given the competitive and evolving nature of theindustry in which it operates, the combined company may not be able to sustain or increase profitability on a quarterly or annual basis. The combination will delay, and may prevent, our profitability as a result of factors including: • significant operating losses and lower gross margins generated by Pihana’s IBX hubs; • costs associated with integrating the three businesses; and • fees and costs associated with completing these transactions, including professional fees. As a result of these increased expenses, the combined company will need to increase revenues in order to reach profitability. If we are unable tosufficiently grow revenues while reducing costs, we may not be able to comply with the covenants in our credit facility. If we breach the credit facility, thebanks could require repayment of all amounts previously drawn down and we do not have sufficient cash reserves to repay such amounts. We expect our operating results to fluctuate. Equinix, i-STT and Pihana have each experienced fluctuations in their respective results of operations on a quarterly and annual basis. The fluctuationin their operating results may cause the market price of our common stock to decline. We expect to experience significant fluctuations in our operating results inthe foreseeable future due to a variety of factors, including: • changes in general economic conditions and specific market conditions in the telecommunications and Internet industries; 30Table of Contents • growth or decline of Internet use; • customer insolvency; • the ability of our customers to obtain financing or to fund their capital expenditures; • demand for space and services at our IBX hubs; • our pricing policies and the pricing policies of our competitors; • the timing of customer installations and related payments; • customer retention and satisfaction; • the provision of customer discounts and credits; • the mix of current and proposed products and services and the gross margins associated with our products and services; • competition in the markets; • conditions related to international operations; • the timing and magnitude of capital expenditures and expenses related to the expansion of sales, marketing, operations and acquisitions, if any, ofcomplementary businesses and assets; • the cost and availability of adequate public utilities, including power; • ability to obtain, transfer, or maintain licenses required by governmental entities with respect to the combined business; and • compliance with governmental regulation with which we have little experience. • the effects of terrorist activity and armed conflict, such as disruptions in general economic activity, changes in logistics and security arrangements,and reduced customer demand for our services; Any of the foregoing factors, or other factors discussed elsewhere in this report, could have a material adverse effect on our business, results ofoperations, and financial condition. Although Equinix, i-STT and Pihana have experienced growth in revenues in recent quarters, this growth rate is notnecessarily indicative of future operating results. It is possible that the combined company may never achieve profitability on a quarterly or annual basis. Inaddition, a relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation andamortization, and interest expenses. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to priorreporting periods should not be relied upon as indications of the combined company’s future performance. In addition, our operating results in one or morefuture quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we could experience an immediate and significant decline inthe trading price of its stock. If we cannot generate higher revenues, while reducing costs by combining the businesses, we may not be able to comply with the covenants in the creditfacility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn and the combined companywill not have sufficient cash reserves to repay such amounts. If we cannot successfully integrate Pihana’s and i-STT’s respective existing business operations, we may not achieve the anticipated benefits ofthe combination. Integrating i-STT and Pihana into our business operations involves a number of risks, including: • the difficulties and expenses in combining the operations, technology and computer systems and software applications of the three companies; 31Table of Contents • the different geographic locations of the principal operations of us, i-STT and Pihana; • the difficulties in integrating the companies’ key revenue-generating services in a way that would be accepted in the market; • the difficulties in the creation and maintenance of uniform standards, controls, procedures and policies; • the diversion of management’s attention from ongoing operations; • the challenges in keeping and attracting customers; and • the introduction of new or enhanced services. If we are to realize the anticipated benefits of the combination, our operations must be efficiently and effectively integrated with the operation of i-STTand Pihana. There can be no assurance that the integration will be successful or that the anticipated benefits of the combination will be realized. If we cannotgenerate higher revenues, while reducing costs, we may not be able to comply with the covenants in our credit facility. If we breach the credit facility, thebanks could require repayment of all amounts previously drawn down and we do not have sufficient cash reserves to repay such amounts. If we cannot effectively integrate and manage international operations, our revenues may not increase and our business and results of operationswould be harmed. In 2002, our sales outside North America represented less than 1% of our revenues, i-STT’s sales outside North America represented approximately100% of its revenues and Pihana’s sales outside North America represented approximately 45% of its revenues. We anticipate that, for the foreseeable future,approximately 15% of the combined company’s revenues will be derived from sources outside North America. Our management team is comprised primarilyof Equinix executives before the combination, some of whom have had limited or no experience overseeing international operations. To date, the neutrality of the Equinix IBX hubs and the variety of networks available to our customers has often been a competitive advantage for us. Incertain of our recently acquired IBX hubs, in Singapore in particular, the limited number of carriers available diminishes that advantage. As a result, we mayneed to adapt our key revenue-generating services and pricing to be competitive in that market. We may experience gains and losses resulting from fluctuations in foreign currency exchange rates, for which hedging activities may not adequatelyprotect us. Where our prices are denominated in U.S. dollars, our sales could be adversely affected by declines in foreign currencies relative to the U.S. dollar,thereby making our products more expensive in local currencies. Our international operations are generally subject to a number of additional risks, including: • costs of customizing IBX hubs for foreign countries; • protectionist laws and business practices favoring local competition; • greater difficulty or delay in accounts receivable collection; • difficulties in staffing and managing foreign operations; • political and economic instability; • ability to obtain, transfer, or maintain licenses required by governmental entities with respect to the combined business; and • compliance with governmental regulation with which we have little experience. To date, the majority of Equinix’s revenues and costs have been denominated in U.S. dollars; the majority of i-STT’s revenues and costs have beendenominated in Singapore dollars and the majority of Pihana’s revenues and costs have been denominated in U.S. dollars, Japanese yen and Australian andSingapore dollars. However, 32Table of Contentswe expect that in the future an increasing portion of revenues and costs will be denominated in foreign currencies. Although the combined company mayundertake foreign exchange hedging transactions to reduce foreign currency transaction exposure, it does not currently intend to eliminate all foreign currencytransaction exposure. STT Communications holds a substantial portion of our stock and has significant influence over matters requiring stockholder consent. STT Communications currently owns approximately 28% of our outstanding voting stock. Because of the diffuse ownership of our stock, STTCommunications has significant influence over matters requiring our stockholder approval. Following the expiration of restrictions on STT Communicationspreventing it from converting its convertible secured notes and warrants into voting stock if, as a result, STT Communications will own more than 40% ofour voting stock, STT Communications will effectively control the company and the election of directors to our board of directors. Consequently, STTCommunications will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval ofsignificant corporate transactions, which could prevent or delay a third party from acquiring or merging with us. We need to improve and implement financial and managerial controls and improve our reporting systems and procedures. If we are unable to doso successfully, we may not be able to manage growth effectively and our operating results would be harmed. In order to manage the integration of the i-STT and Pihana businesses, we need to continue to improve our financial and managerial controls andreporting systems and procedures. Any inability of our management to integrate additional companies, employees, technology advances and customer serviceinto operations and to eliminate unnecessary duplication may have a materially adverse effect on our business, financial condition and results of operations. We may be forced to take steps, and may be prevented from pursuing certain business opportunities, to ensure compliance with certain tax-related covenants agreed to by us in the combination agreement. We agreed to a covenant in the combination agreement (which we refer to as the FIRPTA covenant) that we would use all commercially reasonable effortsto ensure that at all times from and after the closing of the combination until such time as neither STT Communications nor its affiliates hold our capitalstock or debt securities (or the capital stock received upon conversion of the debt securities) received by STT Communications in connection with theconsummation of the transactions contemplated in the combination agreement, none of our capital stock issued to STT Communications constitute “UnitedStates real property interests” within the meaning of Section 897(c) of the Internal Revenue Code of 1986, which we call the Code. Under Section 897(c) ofthe Code, our capital stock issued to STT Communications would generally constitute “United States real property interests” at such point in time that the fairmarket value of the “United States real property interests” owned by us equals or exceeds 50% of the sum of the aggregate fair market values of (a) our“United States real property interests,” (b) our interests in real property located outside the U.S., and (c) any other assets held by us which are used or held foruse in our trade or business. Given that we currently own significant amounts of “United States real property interests,” we may be limited with respect to thebusiness opportunities we may pursue, particularly if the business opportunities would increase the amounts of “United States real property interests” ownedby us or decrease the amount of other assets owned by us. In addition, pursuant to the FIRPTA covenant we may be forced to take commercially reasonableproactive steps to ensure our compliance with the FIRPTA covenant, including, but not limited to, (a) a sale-leaseback transaction with respect to all realproperty interests, or (b) the formation of a holding company organized under the laws of the Republic of Singapore which would issue shares of its capitalstock in exchange for all of our outstanding stock (this reorganization would require the submission of that transaction to our stockholders for their approvaland the consummation of that exchange). 33Table of Contents Our non-U.S. customers include numerous related parties of i-STT. In the past, a substantial portion of i-STT’s financing, as well as its revenues, has been derived from its affiliates. We continue to have contractual andother business relationships and may engage in material transactions with affiliates of STT Communications. Circumstances may arise in which the interestsof STT Communications’ affiliates may conflict with the interests of our other stockholders. In addition, Singapore Technologies Pte Ltd, an affiliate of STTCommunications, makes investments in various companies; it has invested in the past, and may invest in the future, in entities that compete with us. In thecontext of negotiating commercial arrangements with affiliates, conflicts of interest have arisen in the past and may arise, in this or other contexts, in thefuture. There can be no assurance that any conflicts of interest will be resolved in our favor. Our success is dependent on the retention of our executive officers and key employees. We are substantially dependent upon the continued service of our executive officers. In addition, we are dependent on the retention of key employees ofPihana and i-STT who have knowledge of the applicable local business environment and data center operations. Without these individuals as part of themanagement team, it would be significantly more difficult to efficiently and effectively integrate our critical functions and compete effectively against otherInternet infrastructure companies. We have significant debt and we may not generate sufficient cash flow to meet our debt service obligations. Our total debt consists primarily of the following: • a total of $30.5 million principal amount of senior notes; • a total of $91.5 million principal amount of loans under our credit facility; • a total of $30.0 million of a newly issued convertible secured note; and • approximately $9.6 million of other outstanding debt facilities and capital lease obligations. Under the terms of the combination agreement, we are contractually obligated to use our reasonable best efforts to obtain the release of STTCommunications from a bank guarantee associated with i-STT’s unconsolidated Thailand joint venture. Such efforts may include i-STT assuming suchguarantee if it is commercially reasonable to do so. Currently, we have not assumed such guarantee and accordingly, no liability has been recorded for thispotential liability as of December 31, 2002. This guarantee is for a Thai baht 260,000,000 bank loan (approximately $6,032,000 as translated using effectiveexchange rates at December 31, 2002), of which Thai baht 54,900,000 is currently outstanding as of December 31, 2002 (approximately $1,274,000 astranslated using effective exchange rates at December 31, 2002). The amount of our debt 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 indebtedness, thereby reducing the fundsavailable 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 significantbusiness opportunities that may arise; and • making us more vulnerable if a general economic downturn continues or if its businesses experience difficulties. 34Table of Contents If we cannot generate sufficient additional revenue and recognize sufficient synergy savings by combining the businesses, we may not be able to meetour debt service obligations or repay our debt when due or comply with other covenants in the credit facility. If we breach the credit facility, the banks couldrequire repayment of all amounts previously drawn down, and we do not have sufficient cash reserves to repay such amounts. We may be unable to raise the funds necessary to repay or refinance our indebtedness. We are obligated to make principal and/or interest payments on our credit facility each year until up to 2006 and on our senior notes each year until2007. Additionally, our credit facility matures in 2006 and the convertible secured notes and our senior notes mature in 2007. Each of these obligations requiresignificant amounts of liquidity. We may need additional capital to fund those obligations. Our ability to arrange financing and the cost of this financing willdepend upon many factors, including: • general economic and capital markets conditions generally, and in particular the non-investment grade debt market; • conditions in the Internet infrastructure market; • credit availability from banks or other lenders; • investor confidence in the telecommunications industry generally and our company specifically; • the success of our IBX hubs; and • provisions of tax and securities laws that are conducive to raising capital. If we need additional funds, our inability to raise them will have an adverse effect on our operations. If we decide to raise additional funds by incurringdebt, we may become subject to additional or more restrictive financial covenants and ratios. We are subject to restrictive covenants under the credit facility that limit our flexibility in managing our business. Our credit facility requires that the combined company maintain specific financial ratios and comply with covenants, including a monthly cashcovenant, and contains numerous restrictions on our ability to incur debt, pay dividends or make other restricted payments, sell assets, enter into affiliatetransactions and take other actions. Furthermore, our existing financial arrangements are, and future financing arrangements are likely to be, secured bysubstantially all of our assets. If we are unable to meet the terms of the financial covenants or if we breach any of these covenants, a default could result underone or more of these agreements. A default, if not waived by our lenders, could result in the acceleration of outstanding indebtedness and cause our debt tobecome immediately due and payable. If an acceleration occurs, we will not be able to repay our debt, and it is unlikely that we will be able to borrowsufficient additional funds to refinance our debt. Even if new financing is made available to us, it may not be available on terms acceptable to us. A significant number of shares of our capital stock issued in connection with the combination, the financing and the senior note exchange may besold in the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doingwell. We issued a large number of shares of our capital stock to the former Pihana stockholders, STT Communications, and holders of our senior notes inconnection with the combination, financing and senior note exchange. The shares of common stock issued in the senior note exchange may be sold into thepublic market immediately following the closing of the exchange. The shares of common stock issued in connection with the combination will be registered forresale within six months. Subject to the restrictions described in this proxy statement, the senior notes and warrants issued in connection with the financing areimmediately convertible or exercisable into shares of common stock and the underlying shares of common stock may be registered for resale 35Table of Contentswithin six months of the closing. Sales of a substantial number of shares of our common stock by these parties within any narrow period of time could causeour stock price to fall. In addition, the issuance of the additional shares of our common stock as a result of these transactions will reduce our earnings pershare, if any. This dilution could reduce the market price of our common stock unless and until we achieve revenue growth or cost savings and other businesseconomies sufficient to offset the effect of this issuance. There can be no assurance that we will achieve revenue growth, cost savings or other businesseconomies. Our profitability is affected by the average selling price of our services and our operations efficiency rates. Decreases in the average selling prices of our, i-STT’s, and Pihana’s services have had and will continue to have a material adverse effect on ourprofitability. Historically, the average per square foot selling price of our, i-STT’s and Pihana’s services have declined since the commencement of theirrespective operations. Our ability to achieve profitability will continue to be dependent, in large part, upon our ability to offset any decreases in average persquare foot selling prices by improving operations efficiency, and increasing the value added services provided at our IBX hubs. If we are unable to do so, ourbusiness, financial condition and results of operations could be materially adversely affected. We resell products and services of third parties that may require us to pay for such services even if our customers fail to pay us for the serviceswhich may have a negative impact on our operating results. In order to provide resale services such as bandwidth, managed services, backup and recovery services and other network management services, wewill contract with third party service providers. These services require us to enter into fixed term contracts for services with third party suppliers of productsand services. If we experience the loss of a customer who has purchased a resale product, we will remain obligated to continue paying monies to our suppliersfor the term of the underlying contracts. The payment of these obligations without a corresponding payment from customers will reduce our financial resourcesand may have a material adverse affect on our financial performance and operating results. We may not be able to compete successfully against current and future competitors. Our IBX hubs and other products and services must be able to differentiate themselves from existing providers of space and services fortelecommunications companies, web hosting companies and other colocation providers. In addition to competing with neutral colocation providers, we mustcompete with traditional colocation providers, including local phone companies, long distance phone companies, Internet service providers and web hostingfacilities. Likewise, with respect to our other products and services, including managed services, bandwidth services and security services, we must competewith more established providers of similar services. Most of these companies have longer operating histories and significantly greater financial, technical,marketing and other resources than us. Because of their greater financial resources, some of these companies have the ability to adopt aggressive pricing policies. As a result, in the future, wemay suffer from pricing pressure that would adversely affect our ability to generate revenues and adversely affect our operating results. In addition, thesecompetitors could offer colocation on neutral terms, and may start doing so in the same metropolitan areas where we have IBX hubs. Some of these competitorsmay also provide our target customers with additional benefits, including bundled communication services, and may do so in a manner that is more attractiveto our potential customers than obtaining space in our IBX hubs. We believe our neutrality provides us with an advantage over these competitors. However, ifthese competitors were able to adopt aggressive pricing policies together with offering colocation space, our ability to generate revenues would be materiallyadversely affected. We may also face competition from persons seeking to replicate our IBX concept. Competitors may operate more successfully or form alliances toacquire significant market share. Furthermore, enterprises that have already invested substantial resources in peering arrangements may be reluctant or slow toadopt our approach 36Table of Contentsthat may replace, limit or compete with their existing systems. In addition, other companies may be able to attract the same potential customers that we aretargeting. Once customers are located in competitors’ facilities, it will be extremely difficult to convince them to relocate to our IBX hubs. Because we depend on the development and growth of a balanced customer base, failure to attract and retain this base of customers could harmour business and operating results. Our ability to maximize revenues depends on our ability to develop and grow a balanced customer base, consisting of a variety of companies, includingnetwork service providers, site and performance management companies, and enterprise and content companies. The more balanced the customer base withineach IBX hub, the better we will be able to generate significant interconnection revenues, which in turn increases our overall revenues. Our ability to attractcustomers to our IBX hubs will depend on a variety of factors, including the presence of multiple carriers, the mix of products and services offered by us, theoverall mix of customers, the IBX hub’s operating reliability and security and our ability to effectively market our services. In addition, some of our customersare and will continue to be Internet companies that face many competitive pressures and that may not ultimately be successful. If these customers do notsucceed, they will not continue to use the IBX hubs. This may be disruptive to our business and may adversely affect our business, financial condition andresults of operations. Our products and services have a long sales cycle that may materially adversely affect our business, financial condition and results ofoperations. A customer’s decision to license cabinet space in the IBX hubs and to purchase additional services typically involves a significant commitment ofresources and will be influenced by, among other things, the customer’s confidence in our financial strength. In addition, some customers will be reluctant tocommit to locating in our IBX hubs until they are confident that the IBX hub has adequate carrier connections. As a result, we have a long sales cycle. Delaysdue to the length our sales cycle may materially adversely affect our business, financial condition and results of operations. We depend on a number of third parties to provide Internet connectivity to our IBX hubs; if connectivity is interrupted or terminated, ouroperating results and cash flow will be materially adversely affected. The presence of diverse telecommunications carriers’ fiber networks to our IBX hubs is critical to our ability to attract new customers. We believe thatthe availability of carrier capacity will directly affect our ability to achieve our projected results. We are not a telecommunications carrier, and as such we rely on third parties to provide our customers with carrier services. We rely primarily onrevenue opportunities from their customers to encourage carriers to invest the capital and operating resources required to build facilities from their locations toour IBX hubs. Carriers will likely evaluate the revenue opportunity of an IBX hub based on the assumption that the environment will be highly competitive.There can be no assurance that any carrier will elect to offer its services within our IBX hubs. In addition, there can be no assurance once a carrier has decidedto provide Internet connectivity to our IBX hubs that it will continue to do so for any period of time. The construction required to connect multiple carrier facilities to our IBX hubs is complex and involves factors outside of our control, includingregulatory processes and the availability of construction resources. If the establishment of highly diverse Internet connectivity to our IBX hubs does not occuror is materially delayed or is discontinued, our operating results and cash flow will be adversely affected. Further, many carriers are experiencing businessdifficulties. As a result, some carriers may be forced to terminate connectivity within our IBX hubs. We have service level commitment obligations to certain of our customers. As a result, service interruptions or significant equipment damage in our IBXhubs, whether or not within our control, could result in service level 37Table of Contentscommitments to these customers. Our liability insurance may not be adequate to cover those expenses. In addition, any loss of services, equipment damage orinability to meet our service level commitment obligations, particularly in the early stage of our development, could reduce the confidence of our customers andcould consequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our operatingresults. Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenue and harm ourbusiness reputation and financial results. Our business depends on providing customers with highly reliable service. We must protect customers’ IBX infrastructure and customers’ equipmentlocated in our IBX hubs. 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; • water damage; • power loss; • sabotage and vandalism; and • failure of business partners who provide the combined company’s resale products. Problems at one or more of our IBX hubs, whether or not within our control, could result in service interruptions or significant equipment damage. In thepast, a limited number of our customers have experienced temporary losses of power and failure of our services levels on products such as bandwidthconnectivity. If we incur significant financial commitments to our customers in connection with a loss of power, or our failure to meet other service levelcommitment obligations, our liability insurance may not be adequate to cover those expenses. In addition, any loss of services, equipment damage or inabilityto meet our service level commitment obligations, particularly in the early stage of our development, could reduce the confidence of our customers and couldconsequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our operating results. Furthermore, we will be dependent upon internet service providers, telecommunications carriers and other website operators in the U.S., Asia andelsewhere, some of which may have experienced significant system failures and electrical outages in the past. Users of our services may in the futureexperience difficulties due to system failures unrelated to our systems and services. If for any reason, these providers failed to provide the required services,our business, financial condition and results of operations could be materially adversely impacted. A portion of the managed services business we acquired in the combination involves the processing and storage of confidential customer information.Inappropriate use of those services could jeopardize the security of customers’ confidential information causing losses of data or financially impacting us orour customers. Efforts to alleviate problems caused by computer viruses or other inappropriate uses or security breaches may lead to interruptions, delays orcessation of our managed services. There is no known prevention or defense against denial of service attacks. During a prolonged denial of service attack, the Internet service will not beavailable for several hours, thus impacting hosted customers on-line business transactions. Affected customers might file claims against us under suchcircumstances. To the extent a failure of our physical infrastructure, services, or services provided by service providers results in decreased revenues, we may not beable to comply with covenants in our credit facility. If we are 38Table of Contentsunable to comply with covenants in our credit facility, the banks may require repayment of all outstanding amounts, and we do not have sufficient cashreserves to repay those amounts. Our business could be harmed by prolonged electrical power outages or shortages, increased costs of energy or general availability of electricalresources. Our IBX hubs are susceptible to regional costs of power, electrical power shortages, planned or unplanned power outages caused by these shortages,such as those that occurred in California during 2001, and limitations, especially internationally, of adequate power resources. The overall power shortage inCalifornia has increased the cost of energy, which we may not be able to pass on to our customers. We attempt to limit exposure to system downtime by usingbackup generators and power supplies. Power outages, which last beyond our backup and alternative power arrangements, could harm our customers and ourbusiness. We may experience service interruptions, loss of customers and drain on resources if we are unable to renew our facility leases. We have several short-term leases on our IBX hubs that are located outside of North America. For example, we currently lease approximately 86,100square feet for our facility in Singapore, of which approximately 71,900 square feet expire in July 2003. Upon its expiration, we may not be able to renew ourleases under reasonable terms, if at all and may have to relocate our IBX hubs to other facilities. A relocation of any IBX hub could result in serviceinterruptions and significant additional expenses. In addition, seeking a new facility could divert management’s attention and our resources. We may make acquisitions, which pose integration and other risks that could harm our business. We may seek to acquire complementary businesses, products, services and technologies. As a result of these acquisitions, we may be required to incuradditional debt and expenditures and issue additional shares of our stock to pay for the acquired business, product, service or technology, which will diluteexisting stockholders’ ownership interest in the combined company. In addition, if we fail to successfully integrate and manage acquired businesses,products, services and technologies, our business and financial results would be harmed. We are subject to securities class action litigation, which may harm our business and results of operations. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.During the quarter ended September 30, 2001, putative shareholder class action lawsuits were filed against us, a number of our officers and directors, andseveral investment banks that were underwriters of our initial public offering. The suits allege that the underwriter defendants agreed to allocate stock in ourinitial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additionalpurchases in the aftermarket at pre-determined prices. Plaintiffs allege that the prospectus for our initial public offering was false and misleading and inviolation of the securities laws because it did not disclose these arrangements. The defense of this litigation may increase our expenses and divert management’sattention and resources. An adverse outcome in this litigation could seriously harm our business and results of operations. In addition, we may, in the future,be subject to other securities class action or similar litigation. Risks related to our Industry If the economy does not improve and the use of the Internet and electronic business does not grow, our revenues may not grow. Acceptance and use of the Internet may not continue to develop at historical rates and a sufficiently broad base of consumers may not adopt or continueto use the Internet and other online services as a medium of 39Table of Contentscommerce. Demand for Internet services and products are subject to a high level of uncertainty and are subject to significant pricing pressure, especially inAsia-Pacific. In addition, even if consumers do adopt and continue to use online services, we do not expect a significant increase in revenues until the economybegins to improve generally. As a result, we cannot be certain that a viable market for our IBX hubs will materialize. If the market for our IBX hubs growsmore slowly than we currently anticipate, our revenues will not grow and our operating results will suffer. If we cannot grow revenues while reducing costs, wemay not be able to comply with the covenants in our credit facility. If we breach the credit facility, the banks could require repayment of all amountspreviously drawn down and we do not have sufficient cash reserves to repay such amounts. Government regulation may adversely affect the use of the Internet and our business. Various laws and governmental regulations governing Internet related services, related communications services and information technologies, andelectronic commerce remain largely unsettled, even in areas where there has been some legislative action. This is true both in the U.S. and the various foreigncountries in which we now operate. It may take years to determine whether and how existing laws, such as those governing intellectual property, privacy, libel,telecommunications services, and taxation, apply to the Internet and to related services such as ours. The combined company has little experience with suchinternational regulatory issues and substantial resources of the company may be required to comply with regulations or bring any non-complaint businesspractices into compliance with such regulations. In addition, the development of the market for online commerce and the displacement of traditional telephonyservice by the Internet and related communications services may prompt increased call for more stringent consumer protection laws or other regulation both inthe U.S. and abroad, that may impose additional burdens on companies conducting business online and their services providers. The compliance with,adoption of or modification of laws or regulations relating to the Internet, or interpretations of the existing law, could have a material adverse effect on ourbusiness, financial condition and results of operation. Recent terrorist activity throughout the world and military action to counter terrorism could adversely impact our business. The September 11, 2001 terrorist attacks in the U.S., the ensuing declaration of war on terrorism and the continued threat of terrorist activity and otheracts of war or hostility appear to be having an adverse effect on business, financial and general economic conditions internationally. These effects may, inturn, result in increased costs due to the need to provide enhanced security, which would have a material adverse effect on our business and results ofoperations. These circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation andmaintenance of our IBX hubs. Recent Accounting Pronouncements In May 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, andTechnical Corrections” (“SFAS 145”). SFAS 145 rescinds the automatic treatment of gains or losses from extinguishment of debt as extraordinary unless theymeet the criteria for extraordinary items as outlined in APB Opinion No. 30, “Reporting the Results of Operations, Reporting the Effects of Disposal of aSegment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” In addition, SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and makes various technicalcorrections to existing pronouncements. SFAS 145 is effective for us for all financial statements issued in fiscal 2003; however, as allowed under theprovisions of SFAS 145, we decided to early adopt SFAS 145 in relation to extinguishments of debt for the year ended December 31, 2002. As a result of theearly adoption of SFAS 145, the gains on debt extinguishment that we realized in 2002 from the extinguishment of senior notes during the year were notreported as extraordinary transactions. 40Table of Contents In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 requiresthat a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. SFAS 146 eliminates the definition andrequirement for recognition of exit costs in Emerging Issues Task Force Issue No. 94-3 where a liability for an exit cost was recognized at the date of an entity’scommitment to an exit plan. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company will adopt the provisionsof SFAS 146 during the first quarter of 2003. We do not believe that the adoption of this statement will have a material impact on our results of operations,financial position or cash flows. In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingIndirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires a guarantor to recognize a liability for obligations it has undertaken in relation tothe issuance of a guarantee in addition to providing additional disclosures on such guarantees. The liability would be recorded at fair value on the date theguarantee is issued. The disclosure requirements of FIN 45 are effective for the interim and annual periods ending after December 15, 2002. The recognitionand measurement provisions of FIN 45 are effective after December 31, 2002. As of December 31, 2002, the Company adopted the disclosure requirements ofFIN 45. We are currently evaluating the effects of the liability measurement provisions of FIN 45 on our financial statements commencing in fiscal 2003. In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”(“EITF 00-21”). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, servicesand/or rights to use assets. The provisions of EITF 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Weare currently assessing the impact of the adoption of this pronouncement on our consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure—an Amendment ofSFAS No. 123” (“SFAS 148”). SFAS 148 encourages the adoption of the accounting provisions of SFAS 123 and requires additional disclosure, including ininterim financial statements, for all companies regardless of whether or not they adopt the accounting provisions of SFAS 123. This statement is effective forour fiscal 2002 Annual Report on Form 10-K and the new interim disclosure provisions are effective for the first quarter of 2004. In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No.51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not havethe characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additionalsubordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31,2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual periodbeginning after June 15, 2003. We are currently assessing the impact of the pronouncement on our consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk The following discussion about market risk disclosures involves forward-looking statements. Actual results could differ materially from those projectedin the forward-looking statements. We may be exposed to market risks related to changes in interest rates and foreign currency exchange rates and to a lesserextent we are exposed to fluctuations in the prices of certain commodities, primarily electricity. 41Table of Contents In the past, we have employed foreign currency forward exchange contracts for the purpose of hedging certain specifically identified net currencyexposures. The use of these financial instruments was intended to mitigate some of the risks associated with fluctuations in currency exchange rates, but doesnot eliminate such risks. We may decide to employ such contracts again in the future. We do not use financial instruments for trading or speculative purposes. Interest Rate Risk Our exposure to market risk resulting from changes in interest rates relates primarily to our investment portfolio. Our interest income is impacted bychanges 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 natureof our investments, we do not believe that we are subject to any material market risk exposure. An immediate 10% increase or decrease in current interest rateswould not have a material effect on the fair market value of our investment portfolio. We would not expect our operating results or cash flows to besignificantly affected by a sudden change in market interest rates in our investment portfolio. An immediate 10% increase or decrease in current interest rates would furthermore not have a material impact to our debt obligations due to the fixednature of our long-term debt obligations, except for the interest expense associated with our credit facility, which bears interest at floating rates, plus applicablemargins, based on either the prime rate or LIBOR. As of December 31, 2002, the credit facility had an effective interest rate of 6.21%. The fair market value ofour long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates falland decrease as interest rates rise. These interest rate changes may affect the fair market value of the fixed interest rate debt but does not impact our earnings orcash flows. The fair market value of our senior notes is based on quoted market prices. The estimated fair value of our senior notes as of December 31, 2002 wasapproximately $4.6 million. Foreign Currency Risk To date, all of our recognized revenue has been denominated in U.S. dollars, generated mostly from customers in the U.S., and our exposure to foreigncurrency exchange rate fluctuations has been minimal. However, commencing in fiscal 2003, as a result of the combination, approximately 15% of ourrevenues will be in the Asia-Pacific region, and a large portion of those revenues will be denominated in a currency other than the U.S. dollar, primarily theSingapore dollar, Japanese yen and Hong Kong and Australian dollars. As a result, our operating results and cash flows will be impacted due to currencyfluctuations relative to the U.S. dollar. Furthermore, to the extent that our international sales are denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreigncurrencies could make our services less competitive in the international markets. Although we will continue to monitor our exposure to currency fluctuations,and when appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, we cannot assure you that exchange ratefluctuations will not adversely affect our financial results in the future. Commodity Price Risk Certain operating costs incurred by us are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodities mostlikely to have an impact on our results of operations in the event of significant price changes are electricity and supplies and equipment used in our IBX hubs.We are closely monitoring the cost of electricity, particularly in California. To the extent that electricity costs continue to rise, we are investigating opportunitiesto pass these additional power costs onto our customers that utilize this power. We do not employ forward contracts or other financial instruments to hedgecommodity price risk. 42Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data required by this Item 8 are listed in Item 15(a)(1) and begin at page F-1 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There is no disclosure to report pursuant to Item 9. 43Table of ContentsPART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding our Directors and Executive Officers is incorporated herein by reference from the section entitled “Election of Directors” of ourdefinitive Proxy Statement (the “Proxy Statement”) to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for our 2003Annual Meeting of Stockholders. The Proxy Statement is anticipated to be filed within 120 days after the end of our fiscal year ended December 31, 2002. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated herein by reference from the section entitled “Executive Compensation and RelatedInformation” of the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference from the section entitled“Security Ownership of Certain Beneficial Owners and Management” of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is incorporated herein by reference from the section entitled “Certain Relationshipsand Related Transactions” of the Proxy Statement. ITEM 14. CONTROLS AND PROCEDURES Within 90 days prior to the date of filing this report, the Company carried out an evaluation, under the supervision and with the participation of theCompany’s management, including the Chief Executive Officer and the Chief Financial Officer, of the design and operation of the Company’s disclosurecontrols and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports itfiles under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms. There have been no significant changes in theCompany’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation. 44Table of ContentsPART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a)(1) Financial Statements: Report of Independent Accountants F-1Consolidated Balance Sheets F-2Consolidated Statements of Operations F-3Consolidated Statements of Stockholders’ Equity and Other Comprehensive Loss F-4Consolidated Statements of Cash Flows F-5Notes to Consolidated Financial Statements. F-6 (a)(2) All schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (a)(3) Exhibits: ExhibitNumber Description of Document2.1********** Combination Agreement, dated as of October 2,2002, by and among Equinix, Inc., Eagle Panther Acquisition Corp., Eagle JaguarAcquisition Corp., i-STT Pte Ltd, STT Communications Ltd., Pihana Pacific, Inc. and Jane Dietze, as representative of thestockholders of Pihana Pacific, Inc.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 Registrant’s Common Stock certificate.4.6* Common Stock Registration Rights Agreement (See Exhibit 10.3).4.9* Amended and Restated Investors’ Rights Agreement (See Exhibit 10.6).4.10 Registration Rights Agreement (See Exhibit 10.75).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 ofCalifornia, N.A. (as warrant agent).10.3* Common Stock Registration Rights Agreement, dated as of December 1, 1999, by and among the Registrant, Benchmark CapitalPartners II, L.P., Cisco Systems, Inc., Microsoft Corporation, ePartners, Albert M. Avery, IV and Jay S. Adelson (as investors),and the Initial Purchasers.10.4* Registration Rights Agreement, dated as of December 1, 1999, by and among the Registrant and the Initial Purchasers.10.5* Form of Indemnification Agreement between the Registrant and each of its officers and directors.10.6* Amended and Restated Investors’ Rights Agreement, dated as of May 8, 2000, by and between the Registrant, the Series APurchasers, the Series B Purchasers, the Series C Purchasers and members of the Registrant’s management.10.8* The Registrant’s 1998 Stock Option Plan.10.9*+ Lease Agreement with Carlyle-Core Chicago LLC, dated as of September 1, 1999.10.10*+ Lease Agreement with Market Halsey Urban Renewal, LLC, dated as of May 3, 1999.10.11*+ Lease Agreement with Laing Beaumeade, dated as of November 18, 1998. 45Table of ContentsExhibitNumber Description of Document10.12*+ Lease Agreement with Rose Ventures II, Inc., dated as of June 10, 1999.10.13*+ Lease Agreement with Carrier Central LA, Inc., as successor in interest to 600 Seventh Street Associates, Inc., dated as of August 8,1999.10.14*+ First Amendment to Lease Agreement with TrizecHahn Centers, Inc. (dba TrizecHahn Beaumeade Corporate Management), dated asof 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, 2000.10.19*+ Master Agreement for Program Management, Site Identification and Evaluation, Engineering and Construction Services betweenEquinix, Inc. and Bechtel Corporation, dated November 3, 1999.10.20*+ Agreement between Equinix, Inc. and WorldCom, Inc., dated November 16, 1999.10.21* Customer Agreement between Equinix, Inc. and WorldCom, Inc., dated November 16, 1999.10.22*+ Lease Agreement with GIP Airport B.V., dated as of April 28, 2000.10.23* Purchase Agreement between International Business Machines Corporation and Equinix, Inc. dated May 23, 2000.10.24** 2000 Equity Incentive Plan.10.25** 2000 Director Option Plan.10.26** 2000 Employee Stock Purchase Plan.10.27** Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated June 21, 2000.10.28***+ Lease Agreement with TrizecHahn Beaumeade Technology Center LLC, dated as of July 1, 2000.10.29***+ Lease Agreement with TrizecHahn Beaumeade Technology Center LLC, dated as of May 1, 2000.10.30***+ Lease Agreement with Carrier Central LA, Inc., as successor in interest to 600 Seventh Street Associates, Inc., dated as of August 24,2000.10.31***+ Lease Agreement with Burlington Associates III Limited Partnership, dated as of July 24, 2000.10.32***+ Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft Allgemeine Anlageverwaltung vorm.Seilwolff AG von 1890, dated as of August 7, 2000.10.33***+ Lease Agreement with Quattrocento Limited, dated as of June 1, 2000.10.34*** Lease Agreement with ARE-2425/2400/2450 Garcia Bayshore, LLC, dated as of March 20, 2000.10.35*** First Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft AllgemeineAnlageverwaltung vorm. Seilwolff AG von 1890, dated as of October 11, 2000.10.37****+ Lease Agreement with Quattrocentro Limited, dated as of June 9, 2000.10.38****+ Lease Agreement with Compagnie des Entrepots et Magasins Generaux de Paris, dated as of July 18, 2000.10.39****+ Second Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft AllgemeineAnlageverwaltung vorm. Seilwolff AG von 1890, dated as of December 22, 2000.10.40**** Third Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft AllgemeineAnlageverwaltung vorm. Seilwolff AG von 1890, dated as of March 8, 2001.10.41*****+ Fourth Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft AllgemeineAnlageverwaltung vorm. Seilwolff AG von 1890, acting in partnership under the name Naxos-UnionGrundstucksverwaltungsgesellschaft GbR, dated as of July 3, 2001. 46Table of ContentsExhibitNumber Description of Document10.42*****+ First Amendment to Deed of Lease with TrizecHahn Beaumeade Technology Center LLC, dated as of March 22, 2001.10.43*****+ First Lease Amendment Agreement with Market Halsey Urban Renewal, LLC, dated as of May 23, 2001.10.44*****+ First Amendment to Lease with Nexcomm Asset Acquisition I, L.P., dated as of April 18, 2000.10.45*****+ Amendment to Lease Agreement with Burlington Realty Associates III Limited Partnership, dated as of December 18, 2000.10.46****** First Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of September 26, 2001.10.47****** Amended and Restated Credit and Guaranty Agreement, dated as of September 30, 2001.10.48****** 2001 Supplemental Stock Plan.10.49******* Deed Terminating a Commercial Lease with Compagnie des Entrepots et Magasins Generaux de Paris, dated as of September7, 2001.10.50******** Agreement terminating the Lease Agreement with Naxos Schmirdelwork Mainkur GmbH and A.A.A. AktiengesellschaftAllgemeine Anlageverwaltung vorm. Seilwolff AG von 1890, dated as of April 26, 2002.10.51******** Agreement to Surrender of a Lease Agreement by and between Equinix UK Limited and Quattrocentro Limited, dated as ofFebruary 27, 2002.10.52******** Termination Agreement by and among Equinix, Inc. and Deka Immobilien Investment GMBH, successor in title to GIPAirport B.V., dated as of February 18, 2002, terminating the Lease Agreement with GIP Airport B.V., dated as of April 28,2000.10.53******** Second Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of May 20, 2002.10.54********+ Amended and Restated Master Service Agreement by and between International Business Machines Corporation and Equinix,Inc., dated as of May 1, 2002.10.55******** Agreement for Termination of Lease and Voluntary Surrender of Premises by and between ARE-2425/2400/2450 GarciaBayshore LLC and Equinix Operating Co., Inc., dated as of July 12, 2002.10.56*********+ Second Amendment to Lease Agreement with Burlington Realty Associates III Limited Partnership, dated as of October 1,2002.10.57*********+ First Amendment to Lease Agreement for property located at 2450 Bayshore Parkway, Mountain View, CA 94043, dated asof October 1, 2002.10.58********* Form of Severance Agreement entered into by the Company and each of the Company’s executive officers.10.59 Second Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2002.10.60 Governance Agreement by and among Equinix, Inc., STT Communications Ltd., i-STT Communications Ltd.,—STTInvestments Pte Ltd and the Pihana Pacific stockholder named therein, dated as of December 31, 2002.10.61 Tenancy Agreement over units #06-01, #06-05, #06-06, #06-07 and #06-08 of Block 20 Ayer Rajah Crescent, Singapore139964.10.62 Tenancy Agreement over units #05-05, #05-06, #05-07 and #05-08 of Block 20 Ayer Rajah Crescent, Singapore 139964.10.63 Tenancy Agreement over units #03-01 and #03-02 of Block 28 Ayer Rajah Crescent, Singapore 139959. 47Table of ContentsExhibitNumber Description of Document10.64 Tenancy Agreement over units #05-01, #05-02, #05-03 and #05-04 of Block 20 Ayer Rajah Crescent, Singapore 139964.10.65 Tenancy Agreement over units #03-05, #03-06, #03-07 and #03-08 of Block 20 Ayer Rajah Crescent, Singapore 139964.10.66 Lease Agreement with Nation Multimedia Group Public Co., Ltd. For 1st and 3rd Floor of Nation Building II, Bangkok, dated as ofFebruary 1, 2001.10.67 Lease Agreement with Nation Multimedia Group Public Co., Ltd. For 6th Floor of Nation Tower, Bangkok, dated as of October 1, 2001.10.68 General Factory Lease Agreement dated February 21, 2001.10.69 Lease Agreement with Downtown Properties, LLC dated April 10, 2000, as amended.10.70 Lease Agreement with Comfort Development Limited dated November 10, 2000.10.71 Lease Agreement with PacEast Telecom Corporation dated June 15, 2000, as amended.10.72 Lease Agreement Lend Lease Real Estate Investments Limited dated October 20, 2000.10.73 Lease Agreement with AIPA Properties, LLC dated November 1, 1999, as amended.10.74 Third Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of September 30, 2002.10.75 Registration Rights Agreement by and among Equinix and the Initial Purchasers, dated as of December 31, 2002.10.76 Securities Purchase Agreement by and among Equinix, the Guarantors and the Purchasers, dated as of October 2, 2002.10.77 Series A-1 Convertible Secured Note Due 2007 issued to i-STT Investments Pte Ltd on December 31, 2002.10.78 Preferred Stock Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.79 Change in Control Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.80 Series A Cash Trigger Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.81 Series B Cash Trigger Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.82 First Supplemental Indenture between Equinix and State Street Bank and Trust Company of California, N.A., as Trustee, dated as ofDecember 28, 2002.16.1* Letter regarding change in certifying accountant.21.1 Subsidiaries of Equinix.23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.99.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Registration Statement on Form S-4 (Commission FileNo. 333-93749).** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Registration Statement in Form S-1 (Commission FileNo. 333-39752).*** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2000.**** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2000.***** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2001. 48Table of Contents****** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2001.******* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2001.******** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2002.********* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2002.********** Incorporated herein by reference to Annex A of Equinix’s Definitive Proxy Statement filed with the Commission December 12, 2002.+ Confidential treatment has been requested for certain portions which are omitted in the copy of the exhibit electronically filed with theSecurities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commissionpursuant to Equinix’s application for confidential treatment. (b) Reports on Form 8-K. On October 9, 2002, the Company filed a Current Report on Form 8-K to report the announcement that on October 2, 2002, the Company enteredinto a combination agreement to acquire the outstanding stock of i-STT Pte Ltd from STT Communications Ltd. (“STT Communications”), as well asto merge one of the Company’s wholly-owned subsidiaries with Pihana Pacific, Inc. (“Pihana”), in which Pihana would become a wholly-ownedsubsidiary of the Company (collectively, the combination). In connection with the combination, the Company also announced that it had entered into asecurities purchase agreement with STT Communications, in which at the closing of the combination, the Company would issue up to $40.0 millionaggregate principal amount of convertible secured notes to STT Communications and other purchasers. On December 26, 2002, the Company filed a Current Report on Form 8-K to make public a pro forma balance sheet as of November 30, 2002 asif the combination had occurred on such date as required by the Nasdaq Qualifications Panel. On August 15, 2002, Equinix received a notice fromNasdaq indicating that the failure of its common stock to maintain Nasdaq’s minimum closing bid price requirement of $1.00 had continued beyondthe 90-day probationary period allowed under The Nasdaq National Marketplace Rules and, therefore, its common stock may be delisted. On August21, 2002, Equinix appealed the delisting decision and requested the delisting be stayed pending a hearing before the Nasdaq Qualifications Panel. Ahearing was granted and Equinix appeared before the panel on October 3, 2002. On November 25, 2002 the Nasdaq Qualifications Panel issued adecision to continue the listing of our common stock on The Nasdaq National Market. However, such continuance is contingent upon our ability todemonstrate compliance with all of the requirements for initial listing on The Nasdaq National Market and the completion of the combination and relatedtransactions on or before December 31, 2002. In connection with the Panel’s decision, the Panel required Equinix to make a public filing, which includesa pro forma balance sheet no older than 45 days from the closing of the combination. This filing on Current Report on Form 8-K met this requirement. (c) Exhibits. See (a)(3) above. (d) Financial Statement Schedule. See (a)(2) above. 49Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized. EQUINIX, INC.(Registrant)By /s/ PETER F. VAN CAMP Peter F. Van CampChief Executive Officer March 26, 2003 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter F. Van Camp orRenee F. Lanam, or either of them, each with the power of substitution, their attorney-in-fact, to sign any amendments to this Form 10-K (including post-effective amendments), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/s/ PETER F. VAN CAMP Peter F. Van Camp Chief Executive Officer and Director (Principal ExecutiveOfficer) March 26, 2003/s/ RENEE F. LANAM Renee F. Lanam Chief Financial Officer and Secretary(Principal Financial Officer) March 26, 2003/s/ KEITH D. TAYLOR Keith D. Taylor Vice President, Finance(Principal Accounting Officer) March 26, 2003Lee Theng Kiat Chairman of the Board /s/ SCOTT KRIENS Scott Kriens Director March 26, 2003 50Table of ContentsSignature Title Date/s/ ANDREW S. RACHLEFF Andrew S. Rachleff Director March 26, 2003/s/ MICHELANGELO VOLPI Michelangelo Volpi Director March 26, 2003/s/ JEAN F.H.P. MANDEVILLE Jean F.H.P. Mandeville Director March 26, 2003/s/ HARRY F. HOPPER III Harry F. Hopper III Director March 26, 2003 Director Steven Poy Eng 51Table of ContentsCERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Peter F. Van Camp, certify that: 1. I have reviewed this annual report on Form 10-K of Equinix, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inRules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annualreport (the “Evaluation Date”); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of theEvaluation Date; 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee ofthe registrant’s board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;and 6. The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses. Dated: March 26, 2003 /s/ PETER F. VAN CAMP Peter F. Van CampChief Executive Officer 52Table of ContentsCERTIFICATION OF CHIEF FINANCIAL OFFICER I, Renee F. Lanam, certify that: 1. I have reviewed this annual report on Form 10-K of Equinix, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annualreport (the “Evaluation Date”); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of theEvaluation Date; 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee ofthe registrant’s board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;and 6. The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses. Dated: March 26, 2003 /s/ RENEE F. LANAM Renee F. LanamChief Financial Officer 53Table of ContentsReport of Independent Accountants To Board of Directors andStockholders of Equinix, Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) on page 45, present fairly, in all material respects,the financial position of Equinix, Inc. and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each ofthe three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Thesefinancial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based onour audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, whichrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. PricewaterhouseCoopers LLP San Jose, CaliforniaMarch 21, 2003 F-1Table of ContentsEQUINIX, INC. CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data) December 31, 2002 2001 Assets Current assets: Cash and cash equivalents $41,216 $58,831 Short-term investments — 28,890 Accounts receivable, net of allowance for doubtful accounts of $397 and $381 9,152 6,909 Current portion of restricted cash and short-term investments 1,981 47 Prepaids and other current assets 11,146 8,541 Total current assets 63,495 103,218 Property and equipment, net 390,048 325,226 Construction in progress — 103,691 Restricted cash and short-term investments, less current portion 2,426 27,997 Intangible assets 24,981 — Debt issuance costs, net 7,250 11,333 Other assets 3,803 3,589 Total assets $492,003 $575,054 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $20,347 $11,109 Accrued restructuring charges 11,528 6,390 Accrued construction costs — 34,650 Accrued interest payable 2,311 2,167 Current portion of debt facilities and capital lease obligations. 5,591 7,206 Current portion of credit facility 1,981 — Other current liabilities 4,413 1,807 Total current liabilities 46,171 63,329 Debt facilities and capital lease obligations, less current portion 3,633 6,344 Credit facility 89,529 105,000 Senior notes 28,908 187,882 Convertible secured note 25,354 — Other liabilities 14,214 8,978 Total liabilities 207,809 371,533 Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $0.001 par value per share; 100,000,000 and 10,000,000 shares authorized in 2002 and 2001;1,868,667 and zero shares issued and outstanding in 2002 and 2001; liquidation preference of $18,298 as ofDecember 31, 2002 2 — Common stock, $0.001 par value per share; 300,000,000 shares authorized in 2002 and 2001; 8,448,683 and2,502,412 shares issued and outstanding in 2002 and 2001 8 3 Additional paid-in capital 638,065 544,420 Deferred stock-based compensation (2,865) (11,022)Accumulated other comprehensive income 617 135 Accumulated deficit (351,633) (330,015) Total stockholders’ equity 284,194 203,521 Total liabilities and stockholders’ equity $492,003 $575,054 See accompanying notes to consolidated financial statements. F-2Table of ContentsEQUINIX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data) Year ended December 31, 2002 2001 2000 Revenues $77,188 $63,414 $13,016 Costs and operating expenses: Cost of revenues (includes stock-based compensation of $266, $426 and $766 for the years endedDecember 31, 2002, 2001, and 2000 respectively) 104,073 94,889 43,401 Sales and marketing (includes stock-based compensation of $952, $2,830, and $6,318 for theyears ended December 31, 2002, 2001, and 2000 respectively) 15,247 16,935 20,139 General and administrative (includes stock-based compensation of $5,660, $15,788, and$22,809 for the years ended December 31, 2002, 2001, and 2000, respectively) 30,659 58,286 56,585 Restructuring charges 28,885 48,565 — Total costs and operating expenses 178,864 218,675 120,125 Loss from operations (101,676) (155,261) (107,109)Interest income 998 10,656 16,430 Interest expense (35,098) (43,810) (29,111)Gain on debt extinguishment 114,158 — — Net loss $(21,618) $(188,415) $(119,790) Net loss per share: Basic and diluted $(7.23) $(76.62) $(111.23) Weighted average shares 2,990 2,459 1,077 See accompanying notes to consolidated financial statements. F-3Table of ContentsEQUINIX, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE LOSSFOR THE THREE YEARS ENDED DECEMBER 31, 2002(in thousands, except share data ) Preferred stock Common stock Additionalpaid-in capital Deferredstock-basedcompensation Accumulatedothercomprehensive Accumulateddeficit Totalstockholders’equity Shares Amount Shares Amount income (loss) Balances as of December 31, 1999 — $ — 364,756 $ — $43,974 $(13,706) $14 $(21,810) $8,472 Issuance of common stock for cash — — 3,600 — 1,033 — — — 1,033 Issuance of common stock upon exercise of common stockoptions — — 44,442 — 2,472 — — — 2,472 Issuance of common stock upon exercise of common stockwarrants — — 22,126 — 353 — — — 353 Issuance of common stock from initial public offering, net — — 709,399 1 251,481 — — — 251,482 Conversion of redeemable convertible preferred stock — — 1,271,877 1 191,579 191,580 Repurchase of unvested common stock — — (10,824) — (28) — — — (28)Issuance/revaluation of common stock options and warrants — — — — 7,744 — — — 7,744 Deferred stock-based compensation, net of forfeitures — — — — 54,537 (54,537) — — — Amortization of stock-based compensation — — — — — 29,893 — — 29,893 Comprehensive income (loss): Net loss — — — — — — — (119,790) (119,790)Foreign currency translation gain — — — — — — 1,992 — 1,992 Unrealized loss on short-term investments — — — — — — (87) — (87) Net comprehensive loss — — — — — — 1,905 (119,790) (117,885) Balances as of December 31, 2000 — — 2,405,376 2 553,145 (38,350) 1,919 (141,600) 375,116 Issuance of common stock upon exercise of common stockoptions — — 15,534 — 435 — — — 435 Issuance of common stock upon exercise of common stockwarrants — — 72,882 — — — — — — Issuance of common stock under employee stock purchaseplan — — 16,427 1 1,483 — — — 1,484 Repurchase of unvested common stock — — (7,807) — (18) — — — (18)Issuance/revaluation of common stock warrants — — — — (2,341) — — — (2,341)Deferred stock-based compensation, net of forfeitures — — — — (8,284) 8,284 — — — Amortization of stock-based compensation — — — — — 19,044 — — 19,044 Comprehensive income (loss): Net loss — — — — — — — (188,415) (188,415)Foreign currency translation loss — — — — — — (1,873) — (1,873)Unrealized gain on short-term investments — — — — — — 89 — 89 Net comprehensive loss — — — — — — (1,784) (188,415) (190,199) Balances as of December 31, 2001 — — 2,502,412 3 544,420 (11,022) 135 (330,015) 203,521 Issuance of common stock upon exercise of common stockoptions — — 12,965 — 112 — — — 112 Issuance of common stock upon exercise of common stockwarrants — — 58,551 — 11 — — — 11 Issuance of common stock under employee stock purchaseplan — — 16,689 — 415 — — — 415 Issuance of common stock upon exchange of senior notes — — 2,357,001 2 30,831 — — — 30,833 Issuance of common and preferred stock upon acquisition of i-STT 1,868,667 2 1,084,686 1 31,184 — — — 31,187 Issuance of common stock upon acquisition of Pihana — — 2,416,379 2 25,515 — — — 25,517 Issuance/revaluation of common and preferred stock warrants — — — — 6,856 — — — 6,856 Deferred stock-based compensation, net of forfeitures — — — — (1,279) 1,279 — — — Amortization of stock-based compensation — — — — — 6,878 — — 6,878 Comprehensive income (loss): Net loss — — — — — — — (21,618) (21,618)Foreign currency translation gain — — — — — — 498 — 498 Unrealized loss on short-term investments — — — — — — (16) — (16) Net comprehensive loss — — — — — — 482 (21,618) (21,136) Balances as of December 31, 2002 1,868,667 $2 8,448,683 $8 $638,065 $(2,865) $617 $(351,633) $284,194 See accompanying notes to consolidated financial statements. F-4Table of ContentsEQUINIX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year ended December 31, 2002 2001 2000 Cash flows from operating activities: Net loss. $(21,618) $(188,415) $(119,790)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 54,082 49,645 14,816 Amortization of stock-based compensation 6,878 19,044 29,893 Amortization of debt-related issuance costs and discounts 5,977 7,195 8,445 Allowance for doubtful accounts 2,329 521 608 Issuance of common stock to charity — — 780 Loss on disposal of fixed assets 11 — — Gain on debt extinguishment (114,158) — — Restructuring charges 28,885 48,565 — Changes in operating assets and liabilities: Accounts receivable (2,511) (2,505) (5,355)Prepaids and other current assets 4,290 2,001 (8,776)Other assets 2,604 (1,657) (354)Accounts payable and accrued expenses 11,126 (2,742) 9,574 Accrued restructuring charge (9,279) (2,088) — Other current liabilities 2,374 161 1,441 Other liabilities 1,501 1,421 645 Net cash used in operating activities (27,509) (68,854) (68,073) Cash flows from investing activities: Purchase of short-term investments (14,662) (168,411) (114,968)Sales and maturities of short-term investments 43,536 172,047 102,253 Purchases of property and equipment (6,508) (57,791) (296,320)Additions to construction in progress — (44,343) (74,448)Accrued construction costs (28,708) (54,693) 79,571 Purchase of restricted cash and short-term investments (5,090) (25,020) (24,246)Sale of restricted cash and short-term investments 3,904 25,197 26,000 Net cash used in investing activities (7,528) (153,014) (302,158) Cash flows from financing activities: Proceeds from issuance of common stock 537 1,918 254,560 Proceeds from convertible secured note 30,000 — — Acquisition of cash from i-STT and Pihana, less acquisition costs 29,180 — — Proceeds from issuance of debt facilities and capital lease obligations — 8,004 6,884 Repayment of debt facilities and capital lease obligations (6,118) (5,559) (9,955)Proceeds from credit facility — 150,000 — Repayment of credit facility (13,490) (45,000) — Repayment of senior notes and debt extinguishment costs (21,291) — — Repurchase of common stock — (18) (28)Proceeds from issuance of redeemable convertible preferred stock, net — — 94,353 Debt issuance costs (1,894) (1,546) (5,967) Net cash provided by financing activities 16,924 107,799 339,847 Effect of foreign currency exchange rates on cash and cash equivalents 498 (1,873) 1,992 Net decrease in cash and cash equivalents (17,615) (115,942) (28,392)Cash and cash equivalents at beginning of year 58,831 174,773 203,165 Cash and cash equivalents at end of year $41,216 $58,831 $174,773 Supplemental disclosure of cash flow information: Cash paid for taxes $39 $18 $—  Cash paid for interest $19,948 $38,103 $28,876 See accompanying notes to consolidated financial statements. F-5Table of ContentsEQUINIX, INC. 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 changedits name to Equinix, Inc. on October 13, 1998. Equinix designs, builds, and operates Internet Business Exchange (“IBX”) hubs where Internet businessesplace their equipment and their network facilities in order to interconnect with each other to improve Internet performance. The Company’s IBX hubs andInternet exchange services enable network service providers, enterprises, content providers, managed service providers and other Internet infrastructurecompanies to directly connect with each other for increased performance. Since its inception, the Company has been successful in completing several rounds of financing. During the same period, the Company has incurredsubstantial losses and negative cash flows from operations in every fiscal period since inception. As of December 31, 2002, the Company had an accumulateddeficit of $351.6 million. For the year ended December 31, 2002, the Company incurred a loss from operations of $101.7 million and negative cash flowsfrom operations of $27.5 million. In October 2002, the Company entered into agreements to consummate a series of related acquisition and financing transactions. These transactionsclosed on December 31, 2002 and, as such, the consolidated balance sheet as of that date includes the net assets acquired. Under the terms of theseagreements, the Company combined its business with two similar businesses, which are predominantly based in the Asia-Pacific region, through theacquisition of i-STT Pte Ltd (“i-STT”) and Pihana Pacific, Inc. (“Pihana”) by issuing approximately 3.5 million shares of Equinix common stock andapproximately 1.9 million shares of Equinix preferred stock. The Company refers to this transaction as the combination (the “Combination”) (see Note 2). Inconjunction with the Combination, the Company issued to i-STT’s former parent company, STT Communications Ltd. (“STT Communications”), a $30.0million convertible secured note in exchange for cash. The Company refers to this transaction as the financing (the “Financing”) (see Note 7). i-STT’s operations are, and are expected to continue to be, essentially break-even from operating activities. Although Pihana’s centers are expected tooperate at a loss for approximately 24 months from the closing of the Combination, Pihana contributed $33.3 million of cash at closing (approximately $21.7million, net of working capital), which the Company believes will be sufficient cash to offset its centers’ projected loss from operations for this period. Inaddition, by combining Equinix’s, i-STT’s and Pihana’s businesses, the Company expects to be able to reduce the annual operating expenses of the combinedcompany by approximately $13.0 million. This will be done through the elimination of duplicate corporate overhead costs, specifically including the closing ofPihana’s corporate headquarters, and a reduction in headcount of the combined companies of nearly 20%, primarily in the general and administrative areas.Furthermore, by using a portion of the cash raised in the transactions to reduce approximately $125.3 million of the Company’s debt, the Company hasreduced its annual cash interest payments by approximately $15.8 million. In connection with the Combination and Financing, the Company completed the Senior Note Exchange, whereby the Company amended the terms of theIndenture governing the Senior Notes and extinguished $116.8 million of Senior Notes in exchange for a combination of common stock and cash. Thisresulted in the recognition of a substantial gain on debt extinguishment during the fourth quarter of 2002 (see Note 5).In addition, in connection with the Combination, Financing and the Senior Note Exchange, the Company completed a further amendment to its CreditFacility (see Note 6). As of December 31, 2002, the Company had $41.2 million of cash and cash equivalents. The Company believes that this cash, together withanticipated positive cash flow from operations commencing by the end of F-6Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 2003 and projected cost-savings in connection with the Combination, will be sufficient to meet the working capital, debt service and corporate overheadrequirements associated with its operations for the next twelve months. Although the Company believes it has sufficient cash to reach cash flow break-evenfrom operating, investing and financing activities, the Company will continue to look for opportunities to raise additional capital to provide the Company withgreater operating flexibility. Under the terms of the Second Amendment to the Amended and Restated Credit Facility (see Note 6), the Company must meet certain financial and non-financial covenants. While these covenants were reset consistent with the Company’s expected future performance as a combined company, if the Companydoes not achieve the intended growth required or the Company is unable to reduce costs to a level to comply with these covenants, the Company may berequired to repay the $91.5 million currently outstanding under this facility. Since the Company does not have sufficient cash reserves to pay this if an eventof default occurs, the Company may be required to renegotiate with the debt issuers for forbearance, make other financial arrangements or take other actions inorder to pay down the loan. There can be no assurance that such revised covenants will be met, or that the Company will be able to obtain a forbearance or thatreplacement financing will be available. In addition, a default in the Second Amendment to the Amended and Restated Credit Facility will trigger cross-defaultprovisions in the Company’s other debt facilities. If the cash flows from operations are not sufficient to support the Company’s cash requirements, costreductions implemented as a result of this could adversely affect the business and the Company’s ability to achieve the Company’s business objectives. Stock Split In December 2002, the Company effected a thirty-two-for-one reverse stock split effective December 31, 2002 whereby one share of common stock wasexchanged for every thirty-two shares of common stock then outstanding. All share and per share amounts in these financial statements have been retroactivelyadjusted to give effect to the stock split. Basis of Presentation The accompanying consolidated financial statements include the accounts of Equinix and its subsidiaries. All significant intercompany accounts andtransactions have been eliminated in consolidation. Consolidation The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 94, “Consolidation of All Majority-OwnedSubsidiaries” and Emerging Issues Task Force (“EITF”) Abstract No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of theVoting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights”. As a result, all majority-owned subsidiaries areconsolidated unless the Company does not have control. Evidence of such a lack of effective control includes the Company’s inability to direct or cause thedirection of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise. As a result of the Combination (see Note 2), the Company acquired a 60% interest in i-STT Nation Limited, an IBX hub operation in Thailand.However, as a result of certain substantive participating rights granted to minority shareholders, i-STT Nation Limited is not considered a controlledsubsidiary and accordingly, it is not consolidated. Accordingly, the Company accounts for i-STT Nation Limited as an equity investment using the equitymethod of accounting. Under the preliminary purchase price allocation, the Company attributed no value to this investment as i-STT Nation Limited is in theearly stages of operations and is not able to generate positive operating cashflow for the foreseeable future. The Company is continuing to review its strategicalternatives related to i-STT Nation Limited. F-7Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from theseestimates. Cash, Cash Equivalents and Short-Term Investments The Company considers all highly liquid instruments with an original 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 ofcorporations, municipalities and the U.S. government. Short-term investments are classified as “available-for-sale” and are carried at fair value based onquoted market prices with unrealized gains and losses reported in stockholders’ equity as a component of comprehensive income. The cost of securities sold isbased on the specific identification method. Restricted Cash and Short-term Investments Restricted cash and short-term investments as of December 31, 2002, consisted of $1,981,000 deposited with an escrow agent to pay the current interestpayment on the Senior Notes (see Note 5), which was paid in January 2003; $1,939,000, which was used as collateral to support the issuance of six standbyletters of credit in lieu of deposits under certain lease agreements with various expiry dates through 2015; and 3,800,000 Hong Kong dollars (approximately$487,000 as translated using effective exchange rates at December 31, 2002) reserved for placement into an escrow account with a third party as required by acustomer agreement in Hong Kong, whereby the customer would be able to draw upon the amount in the case of Equinix’s insolvency, as defined in theagreement (the “Hong Kong Customer Escrow Account”). As of December 31, 2002 and through the date of this filing, the Hong Kong Customer EscrowAccount has not yet been funded. During the year ended December 31, 2002, the Company recorded several restructuring charges as part of its effort to exit oramend several unnecessary U.S. IBX expansion and headquarter office space leases. Part of this restructuring charge included the write-off of $250,000 for aletter of credit related to one of these U.S. leaseholds (see Note 13). In addition, part of this restructuring charge reflected the write-off of $19,010,000 for lettersof credit related to the exercise of the Company’s option to elect to permanently exclude approximately 40 acres from the San Jose Ground Lease. The remaining$5,990,000 in letters of credit associated with the San Jose Ground Lease was reclassified as prepaid rent (see Note 10). Restricted cash and short-term investments as of December 31, 2001, consisted of $28,044,000, which was used as collateral to support the issuance often standby letters of credit in lieu of deposits under certain domestic lease agreements, including two letters of credit, totaling $25,000,000, posted inconnection with Company’s San Jose Ground Lease (see Note 10). These lease agreements have expiration terms at various dates through 2020. During thequarter ended September 30, 2001, the Company recorded a restructuring charge as part of its revised European services strategy. Part of this restructuringcharge included the write-off of $8,634,000 in connection with several letters of credit related to the Company’s long-term European operating leases (see Note13). F-8Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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-terminvestments to the extent these exceed federal insurance limits and accounts receivable. Risks associated with cash, cash equivalents and short-terminvestments are mitigated by the Company’s investment policy, which limits the Company’s investing to only those marketable securities rated at least A-1 orP-1 investment grade, as determined by independent credit rating agencies. The Company’s customer base has historically been composed primarily of businesses throughout the United States; however, on December 31, 2002,as a result of the Combination (see Note 2), the Company acquired the accounts receivable balances of i-STT and Pihana, and commencing in fiscal 2003, theCompany’s revenues will include revenues from these newly-acquired Asia-Pacific operations. The Company performs ongoing credit evaluations of itscustomers. As of December 31, 2002, one customer, IBM, accounted for 20% of revenues and 15% of accounts receivables. As of December 31, 2001, onecustomer, IBM, accounted for 15% of revenues and another customer, SiteSmith, accounted for 10% of accounts receivables. As of December 31, 2000, twocustomers, IBM and Loudcloud (now known as Opsware), accounted for 12% and 11% of revenues and two customers, IBM and UUNET, accounted for19% and 14% of accounts receivables. No other single customer accounted for greater than 10% of accounts receivables or revenues for the periods presented. 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 therespective assets, generally two to five years for non-IBX hub equipment and seven to ten years for IBX hub equipment. Leasehold improvements and assetsacquired under capital lease are amortized over the shorter of the lease term or the estimated useful life of the asset or improvement, which is generally ten tofifteen years for the leasehold improvements. Construction in Progress Construction in progress includes direct and indirect expenditures for the construction of IBX hubs and is stated at original cost. The Company hascontracted out substantially all of the construction of the IBX hubs to independent contractors under construction contracts. Construction in progress includescertain costs incurred under a construction contract including project management services, site identification and evaluation services, engineering andschematic design services, design development and construction services and other construction-related fees and services. In addition, the Company hascapitalized certain interest costs during the construction phase. Once an IBX hub becomes operational, these capitalized costs are transferred to property andequipment and are depreciated at the appropriate rate consistent with the estimated useful life of the underlying asset. Included within construction in progress is the value attributed to the unearned portion of warrants issued to certain fiber carriers and our contractortotaling $1,439,000 as of December 31, 2001 (see Note 8). Interest incurred is capitalized in accordance with SFAS No. 34, Capitalization of Interest Costs. There was no interest capitalized during the yearended December 31, 2002. Total interest cost incurred and total interest capitalized during the year ended December 31, 2001, was $45,350,000 and$1,540,000, respectively. Total interest cost incurred and total interest capitalized during the year ended December 31, 2000 was $34,102,000 and$4,991,000, respectively. During the quarter ended March 31, 2002, the Company completed construction on its seventh and largest IBX hub, which is located in the New Yorkmetropolitan area, and placed it into service. The Company currently has no IBX hubs under construction. F-9Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Intangible Assets In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which is effectivefor fiscal years beginning after December 15, 2001. SFAS No. 142 provides, among other things, that goodwill should not be amortized after its initialrecognition in financial statements. In addition, the standard includes provisions for testing for impairment of existing goodwill and other intangibles. As ofJanuary 1, 2002, the Company adopted SFAS No. 142 and recorded goodwill as part of the Combination, which closed on December 31, 2002 (see Note 2). Inlieu of amortization, the Company is required to perform an impairment review of its goodwill balance on at least on an annual basis and upon the initialadoption of SFAS No. 142. This impairment review involves a two-step process as follows: Step 1—The Company compares the fair value of its reporting units to the carrying value, including goodwill of each of those units. For each reportingunit where the carrying value, including goodwill, exceeds the unit’s fair value, the Company moves on to step 2. If a unit’s fair value exceeds thecarrying value, no further work is performed and no impairment charge is necessary. Step 2—The Company performs an allocation of the fair value of the reporting unit to its identifiable tangible and non-goodwill intangible assets andliabilities. This derives an implied fair value for the reporting unit’s goodwill. The Company then compares the implied fair value of the reporting unit’sgoodwill with the carrying amount of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fairvalue of its goodwill, an impairment charge would be recognized for the excess. Other identifiable intangible assets, comprised of customer contracts and tradename, are carried at cost, less accumulated amortization. No amortizationwas recognized in fiscal 2002 as the Combination was consummated on December 31, 2002 (see Note 2). Beginning in fiscal 2003, the Company will startamortizing these other identifiable intangibles on a straight-line basis over their estimated useful lives, which are two years for customer contracts and one yearfor tradename. Fair Value of Financial Instruments The carrying value amounts of the Company’s financial instruments, which include cash equivalents, short-term investments, accounts receivable,accounts payable, accrued expenses and long-term obligations approximate their fair value due to either the short-term maturity or the prevailing interest rates ofthe related instruments. The fair value of the Company’s Senior Notes (see Note 5) is based on quoted market prices. The estimated fair value of the SeniorNotes was approximately $4.6 million and $70.0 million as of December 31, 2002 and 2001, respectively. During fiscal 2002, the Company retiredapproximately $169.5 million of Senior Notes (see Note 5). Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of The Company accounts for impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which the Company adopted in fiscal 2002. SFAS No. 144 establishes a uniform accounting model for long-lived assets to be disposed of.SFAS No. 144 also requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimatedundiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, animpairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the quarter ended June 30,2002, the Company wrote-down the value of some property and F-10Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) equipment, primarily leasehold improvements and some equipment, located in two unnecessary U.S. IBX expansion and headquarter office space operatingleaseholds that the Company decided to exit and that do not currently provide any ongoing benefit (see Note 13). In light of a number of factors, including the continued difficulty in the economy and the Company’s significant losses to date, an impairmentassessment was undertaken of the Company’s IBX hubs as of December 31, 2002. This assessment involved an assessment of the future net cash flowsgenerated by each IBX hub over their respectful useful lives and comparing this against the carrying value of that IBX hub. The revenue and cost assumptionsused in this analysis were based on numerous factors, including the current revenue and cost performance of each IBX hub, historical growth rates, theremaining space to fill each IBX hub to full capacity relative to the market demand in each of the individual geographic markets of each IBX hub, expectedinflation rates and any other available economic indicators and factors that the Company believed were relevant. This analysis showed that the total of theundiscounted future cash flows was greater than the carrying amount of the assets, and accordingly, no impairment was deemed to have occurred. Significantjudgments and assumptions were required in the forecast of future operating results used in the preparation of the estimated future cash flows, including profitmargins, customer growth and the timing of overall market growth and the Company’s percentage of that market. Accordingly, if future results do not matchthese current estimates, revised future forecasts could result in a material adverse effect on the assessment of the Company’s long-lived assets, therebyrequiring the Company to write down the assets. Prior to adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed of.” During the quarter ended September 30, 2001, the Company wrote-down the value of itsEuropean construction in progress to its net realizable value as part of a larger restructuring charge in conjunction with a revised European services strategy(see Note 13). In December 2000, based on the uncertainty of the Company’s future business relationship with NorthPoint (see Note 8), as a result of theirfiling under Chapter 11 bankruptcy protection, the Company determined that the future value of the other asset attributed to the unamortized portion of thefully-vested, nonforfeitable warrant was questionable and accordingly, the remaining asset totaling approximately $700,000 was written off. Revenue Recognition Equinix derives its revenues from (1) recurring revenue streams, such as from the leasing of cabinet space, power and interconnection services andbandwidth and (2) non-recurring revenue streams, such as from the recognized portion of deferred installation revenues, professional services and equipmentsales. Revenues from recurring revenue streams are billed monthly and recognized ratably over the term of the contract, generally one to three years. Non-recurring installation fees are deferred and recognized ratably over the term of the related contract. Professional service fees are recognized in the period in whichthe services were provided and represent the culmination of the earnings process. Fees for the provision of e-business services are recognized progressively asthe services are rendered in accordance with the contract terms, except where the future costs cannot be estimated reliably, in which case fees are recognizedupon the completion of services. The Company generally guarantees certain service levels, such as uptime, as outlined in individual customer contracts. Tothe extent that these service levels are not achieved, the Company reduces revenue for any credits given to the customer as a result. The Company has theability to determine such service level credits prior to the associated revenue being recognized, and historically, these credits have not been significant. Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of thereceivable is reasonably assured. It is customary business practice to obtain a signed master sales agreement and sales order prior to recognizing revenue in anarrangement. The F-11Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer.The Company does not request collateral from our customers. If the Company determines that collection of a fee is not reasonably assured, the Companydefers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. In addition, Equinix alsomaintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for those customersthat the Company had expected to collect the revenues. If the financial condition of Equinix’s customers were to deteriorate or if they become insolvent,resulting in an impairment of their ability to make payments, allowances for doubtful accounts may be required. Management specifically analyzes accountsreceivable and analyzes current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes incustomer payment terms when evaluating revenue recognition and the adequacy of the Company’s reserves. During the year ended December 31, 2001, the Company recognized approximately $200,000 of revenue in relation to equipment received fromcustomers in lieu of cash. This equipment is being used in the Company’s operations and was valued based on management’s assessment of the fair value ofthe equipment in relation to external prices for similar equipment. In February and March 2002, the Company entered into arrangements with numerous vendors to resell equipment and bandwidth, including two relatedparties (see Note 11). The Company began to offer such services in an effort to provide its customers a more fully-integrated services solution. Under the termsof the reseller agreements, the Company will sell the vendors’ services or products to its customers and the Company will contract with the vendor to providethe related services or products. The Company recognizes revenue from such arrangements on a gross basis in accordance with EITF Abstract No. 99-19,“Recording Revenue as a Principal versus Net as an Agent.” The Company acts as the principal in the transaction as the Company’s customer servicesagreement identifies the Company as the party responsible for the fulfillment of product/ services to the Company’s customers and has full pricing discretion.In the case of products sold under such arrangements, the Company takes title to the products and bears the inventory risk as the Company has mademinimum purchase commitments to various vendors. The Company has credit risk, as it is responsible for collecting the sales price from a customer, butmust pay the amount owed to its suppliers after the suppliers perform, regardless of whether the sales price is fully collected. In addition, the Company willoften determine the required equipment configuration and recommend bandwidth providers from numerous potential suppliers. For the year ended December31, 2002, the Company recognized revenue of $2.9 million from the sale of equipment and associated cost of revenue of $2.8 million. The Company had noequipment sales during fiscal 2001. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss andtax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which thosetemporary 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 inthe period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amounts expected to be realized. F-12Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Stock-Based Compensation The Company accounts for its stock-based compensation plans in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation.” Aspermitted under SFAS No. 123, the Company uses the intrinsic value-based method of Accounting Principles Board (“APB”) Opinion No. 25, “Accountingfor Stock Issued to Employees,” to account for its employee stock-based compensation plans. Under APB Opinion No. 25, compensation expense is based onthe difference, if any, on the date of grant, between the fair value of the Company’s shares and the exercise price of the option. The Company accounts for stock-based compensation arrangements with nonemployees in accordance with the Emerging Issues Task Force (“EITF”)Abstract No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods orServices.” Accordingly, unvested options and warrants held by nonemployees are subject to revaluation at each balance sheet date based on the then currentfair market value. Unearned deferred compensation resulting from employee and nonemployee option grants is amortized on an accelerated basis over the vesting period ofthe individual options, in accordance with FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or AwardPlans” (“FASB Interpretation No. 28”). The Company provides additional pro forma disclosures required by SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-BasedCompensation—Transition and Disclosure—An Amendment of SFAS No. 123”. Had compensation costs been determined using the fair value method for theCompany’s stock-based compensation plans including the employee stock purchase plan, net loss would have been increased by $6,007,000, $8,564,000and $3,055,000 for the years ended December 31, 2002, 2001 and 2000, respectively, as indicated below for the years ended December 31 (in thousands,except per share data): 2002 2001 2000 Net loss: As reported $(21,618) $(188,415) $(119,790)Pro forma (27,625) (196,979) (122,845)Net loss per share: As reported $(7.23) $(76.62) $(111.23)Pro forma (9.24) (80.11) (114.06) The Company’s fair value calculations for employee grants were made using the minimum value method prior to the IPO and the Black-Scholes optionpricing model after the IPO with the following weighted average assumptions for the years ended December 31: 2002 2001 2000 Dividend yield 0% 0% 0%Expected volatility 135% 80% 80%Risk-free interest rate 3.75% 3.94% 6.14%Expected life (in years) 3.50 3.04 2.50 The Company’s fair value calculations for employee’s stock purchase rights under the Purchase Plan (see Note 8) were made using the Black-Scholesoption pricing model with weighted average assumptions consistent with those used for employee grants as indicated above; however, the assumption forexpected life (in years) used for the Purchase Plan was 2 years for all periods presented. F-13Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Comprehensive Income The Company has adopted the provisions of SFAS No. 130, “Reporting Comprehensive Income.” SFAS No. 130 establishes standards for the reportingand 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 No. 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. Net Loss Per Share The Company computes net loss per share in accordance with SFAS No. 128, “Earnings per Share,” and SEC Staff Accounting Bulletin (“SAB”) No.98. Under the provisions of SFAS No. 128 and SAB No. 98 basic and diluted net loss per share are computed using the weighted average number ofcommon shares outstanding. Options, warrants and preferred stock were not included in the computation of diluted net loss per share because the effect wouldbe anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31 (in thousands, except per shareamounts). 2002 2001 2000 Numerator: Net loss $(21,618) $(188,415) $(119,790) Denominator: Weighted average shares 3,015 2,547 1,271 Weighted average unvested shares subject to repurchase (25) (88) (194) Total weighted average shares 2,990 2,459 1,077 Net loss per share: Basic and diluted $(7.23) $(76.62) $(111.23) The following table sets forth potential shares of common stock that are not included in the diluted net loss per share calculation above because to do sowould be anti-dilutive for December 31: 2002 2001 2000Series A preferred stock 1,868,667 — —Series A preferred stock warrant 965,674 — —Common stock warrants 269,586 65,831 115,851Common stock options 5,478,659 651,905 277,915Common stock subject to repurchase 24,463 88,109 194,106 Derivatives and Hedging Activities The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, at the beginning of its fiscal year2001. The standard requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fairvalue through the statement of operations. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will eitherbe offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income(loss) until the hedged item is F-14Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. As of December 31, 2002, theCompany had not entered into any derivative or hedging activities. Recent Accounting Pronouncements In May 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, andTechnical Corrections” (“SFAS 145”). SFAS 145 rescinds the automatic treatment of gains or losses from extinguishment of debt as extraordinary unless theymeet the criteria for extraordinary items as outlined in APB Opinion No. 30, “Reporting the Results of Operations, Reporting the Effects of Disposal of aSegment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” In addition, SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and makes various technicalcorrections to existing pronouncements. SFAS 145 is effective for us for all financial statements issued in fiscal 2003; however, as allowed under theprovisions of SFAS 145, the Company decided to early adopt SFAS 145 in relation to extinguishments of debt for the year ended December 31, 2002. As aresult of the early adoption of SFAS 145, the gains on debt extinguishment that the Company realized in 2002 from the extinguishment of Senior Notes duringthe year (see Note 5) were not reported as extraordinary transactions. In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 requiresthat a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. SFAS 146 eliminates the definition andrequirement for recognition of exit costs in Emerging Issues Task Force Issue No. 94-3 where a liability for an exit cost was recognized at the date of an entity’scommitment to an exit plan. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company will adopt the provisionsof SFAS 146 during the first quarter of 2003. The Company does not believe that the adoption of this statement will have a material impact on its results ofoperations, financial position or cash flows. In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingIndirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires a guarantor to recognize a liability for obligations it has undertaken in relation tothe issuance of a guarantee in addition to providing additional disclosures on such guarantees. The liability would be recorded at fair value on the date theguarantee is issued. The disclosure requirements of FIN 45 are effective for the interim and annual periods ending after December 15, 2002. The recognitionand measurement provisions of FIN 45 are effective after December 31, 2002. As of December 31, 2002, the Company adopted the disclosure requirements ofFIN 45 (see Note 10). The Company is currently evaluating the effects of the liability measurement provisions of FIN 45 on its financial statementscommencing in fiscal 2003. In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). EITF 00-21provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Theprovisions of EITF 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company is currently assessingthe impact of the adoption of this pronouncement on its consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure—an Amendment ofSFAS No. 123” (“SFAS 148”). SFAS 148 encourages the adoption of the accounting provisions of SFAS 123 and requires additional disclosure, including ininterim financial statements, for all companies regardless of whether or not they adopt the accounting provisions of F-15Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) SFAS 123. This statement is effective for the Company’s 2002 Annual Report on Form 10-K and the new interim disclosure provisions are effective for thefirst quarter of 2004. In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No.51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not havethe characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additionalsubordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31,2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual periodbeginning after June 15, 2003. The Company is currently assessing the impact of the pronouncement on its consolidated financial statements. 2. The Combination Acquisition of i-STT On December 31, 2002, a wholly-owned subsidiary of the Company acquired all issued and oustanding shares of i-STT from STT Communications(the “i-STT Acquisiton”). i-STT is a similar business to that of Equinix with IBX hub operations in Singapore and Thailand. The entire purchase price of$34,365,000 was comprised of (i) 1,868,667 shares of the Company’s Series A preferred stock and 1,084,686 shares of the Company’s common stock,with a total value of $31,187,000 and (ii) total cash consideration and direct transaction costs of $3,178,000. The fair value of the Company’s stock issued was determined using the five-trading-day average price of the Company’s common stock surroundingthe date the transaction was announced in October 2002. The Company determined that the fair value of the Series A preferred stock and the common stockwas the same because the material rights, preferences and privileges of Series A preferred stock and the common stock are virtually identical (see Note 8). The preliminary purchase price, including direct merger costs, have been allocated to the net tangible and intangible assets acquired and liabilitiesassumed based on their estimated fair value at the date of acquisition. The Company retained the services of an independent valuation expert to assist with thedetermination of the fair value of the intangible assets. The estimated fair value of the assets and liabilities assumed is summarized as follows (in thousands): Cash and cash equivalents $1,699 Accounts receivable 1,307 Other current assets 197 Property and equipment 10,824 Intangible asset—customer contracts 3,600 Intangible asset—tradename 300 Intangible asset—goodwill 21,081 Other assets 100 Total assets acquired 39,108 Accounts payable and accrued expenses (4,153)Accrued restructuring charges (400)Other current liabilities (190) Net assets acquired $34,365 F-16Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company accounted for the i-STT Acquisition using the purchase method. The customer contracts intangible asset will have a useful life of twoyears, the typical term of a customer contract, and the tradename intangible asset will have a useful life of one year, the contractual period under theCombination Agreement. Included in the net liabilities assumed, is an accrual of $400,000 representing the estimated costs to exit from an undeveloped IBXhub leasehold interest in Shanghai, China. The Company expects to exit this lease in 2003. While the Company does not expect there will be any changes to theCompany’s preliminary purchase price due to any unknown contingent liabilities or purchase price adjustments, any subsequent adjustment to the purchaseprice would result in a change to the amount of goodwill carried on the balance sheet. Acquisition of Pihana On December 31, 2002, a wholly-owned subsidiary of the Company merged with and into Pihana (the “Pihana Acquisiton”). Pihana is a similarbusiness to that of Equinix with IBX hub operations in Singapore; Tokyo, Japan; Sydney, Australia; Hong Kong, China, as well as Los Angeles andHonolulu in the U.S. The entire purchase price of $28,376,000 was comprised of (i) 2,416,379 shares of the Company’s common stock, with a total valueof $25,517,000, (ii) total cash consideration and direct transaction costs of $2,701,000 and (iii) the value of Pihana shareholder warrants assumed in thePihana Acquisition of $176,000 (the “Pihana Shareholder Warrants”). The fair market value of the Company’s stock issued was determined using the five-trading-day average price of the Company’s common stock surrounding the date the transaction was announced in October 2002. The fair value of the PihanaShareholder Warrants, which represent the right to purchase 133,442 shares of the Company’s common stock at an exercise price of $191.81 per share, wasdetermined using the Black-Scholes option-pricing model and the following assumptions: fair market value per share of $5.70, dividened yield of 0%,expected volatility of 135%, risk-free interest rate of 4% and a contractual life of approximately 3 years. The preliminary purchase price, including direct merger costs, have been allocated to assets acquired and liabilities assumed based on their estimatedfair value at the date of acquisition. The estimated fair value of the assets and liabilities assumed is summarized as follows (in thousands): Cash and cash equivalents $33,341 Accounts receivable 754 Other current assets 1,773 Property and equipment 5,691 Restricted cash 927 Other assets 2,329 Total assets acquired 44,815 Accounts payable and accrued expenses (3,455)Accrued restructuring charges and transaction fees (9,470)Other current liabilities (42)Capital lease obligations (1,536)Other liabilities (1,936) Net assets acquired $28,376 The Company accounted for the Pihana Acquisition using the purchase method. Included in the net liabilities assumed are total restructuring charges of$9,470,000, which relate primarily to the exit of the undeveloped portion of the Pihana Los Angeles IBX hub leasehold, severance related to an approximate30% reduction in workforce, including several officers of Pihana and some transaction-related professional fees (see Note 13). A substantial portion of thesecosts were paid in January 2003. Prior to December 31, 2002, Pihana sold their Korean IBX hub operations, which was excluded from the Pihana Acquisition,terminated or amended F-17Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) several operating leaseholds and recorded a substantial impairment charge against the value of their property and equipment assumed in the PihanaAcquisition. While the Company does not expect there will be any changes to the Company’s preliminary purchase price due to any unknown contingentliabilities or purchase price adjustments, any subsequent adjustment to the purchase price would result in a change to the amount of property and equipmentassumed in the Pihana Acquisition. Preliminary Unaudited Pro Forma Consolidated Combined Results The operating results of i-STT and Pihana included in the Company’s consolidated statements of operations and cash flows commencing on December31, 2002 were immaterial to the consolidated results of the Company. The following preliminary unaudited pro forma financial information presents theconsolidated results of the Company as if the i-STT Acquisition and Pihana Acquisition had occurred as of January 1, 2001, and includes adjustments toexclude the Korean operations not acquired in the Pihana Acquisiton. This preliminary pro forma financial information does not necessarily reflect the resultsof operations as they would have been if the Company had acquired these entities as of January 1, 2001. Preliminary unaudited pro forma consolidated resultsof operations for the years ended December 31, 2002 and 2001 are as follows (in thousands, except per share data): 2002 2001 Revenues $93,150 $75,581 Net loss (69,351) (250,029)Basis and diluted net loss per share (10.68) (41.95) These preliminary unaudited pro forma results do not include the effects of the the Senior Note Exchange (see Note 5) or Financing (see Note 7). 3. Balance Sheet Components Cash, Cash Equivalents and Short-term Investments Cash, cash equivalents and short-term investments consisted of the following as of December 31 (in thousands): 2002 2001 Money market $41,216 $26,864 Municipal bonds — 12,833 US government and agency obligations — 14,397 Corporate bonds — 4,116 Other securities — 29,511 Total available-for-sale securities 41,216 87,721 Less amounts classified as cash and cash equivalents (41,216) (58,831) Total market value of short-term investments $— $28,890 The original maturities of short-term investments are as follows as of December 31 (in thousands): 2002 2001Less than one year $ — $25,320Due in 1-2 years — 3,570 Total market value of short-term investments $— $28,890 F-18Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of December 31, 2002 and 2001, cost approximated market value of cash, cash equivalents and short-term investments; unrealized gains and losseswere zero as of December 31, 2002, a gain of $17,000 as of December 31, 2001 and a loss of $73,000 as of December 31, 2000. As of December 31, 2002 and2001, cash equivalents included investments in other securities with various contractual maturity dates that do not exceed 90 days. Gross realized gains andlosses from the sale of securities classified as available-for-sale were not material for the years ended December 31, 2002, 2001 and 2000. For the purpose ofdetermining gross realized gains and losses, the cost of securities is based upon specific identification. Accounts Receivable Accounts receivable, net, consists of the following as of December 31 (in thousands): 2002 2001 Accounts receivable $16,017 $12,868 Unearned revenue (6,468) (5,578)Allowance for doubtful accounts (397) (381) $9,152 $6,909 Unearned revenue consists of pre-billing for services that have not yet been provided, but which have been billed to customers ahead of time inaccordance with the terms of their contract. Accordingly, the Company invoices its customers at the end of a calendar month for services to be provided thefollowing month. Prepaids and Other Current Assets Prepaids and other current assets consist of the following as of December 31 (in thousands): 2002 2001Prepaid rent $4,913 $4,964Prepaid insurance 1,507 822Prepaid other 1,142 439Taxes receivable 2,391 28Other current assets 1,193 2,288 $11,146 $8,541 Property & Equipment Property and equipment is comprised of the following as of December 31 (in thousands): 2002 2001 Leasehold improvements $384,334 $285,090 IBX plant and machinery 61,761 54,194 Computer equipment and software 17,580 11,306 IBX equipment 33,677 28,704 Furniture and fixtures 2,522 2,533 499,716 381,827 Less accumulated depreciation (109,826) (56,601) $390,048 $325,226 F-19Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Leasehold improvements, certain computer equipment, software and furniture and fixtures recorded under capital leases aggregated $5,779,000 at bothDecember 31, 2002 and 2001, respectively. Amortization on the assets recorded under capital leases is included in depreciation expense. Included within leasehold improvements is the value attributed to the earned portion of several warrants issued to certain fiber carriers and our contractortotaling $9,883,000 and $8,105,000 as of December 31, 2002 and 2001, respectively (see Note 8). Amortization of such warrants is included in depreciationexpense. The Company included $2,234,000 of equipment held for resale within other current assets on the accompanying balance sheet as of December 31,2001. This represented the estimated net realizable value of assets purchased during the pre-construction phase of the European IBX hubs that were being heldfor resale and were written down as part of a larger restructuring charge in conjunction with a revised European services strategy. This equipment was soldduring 2002 for total proceeds of $1,169,000, resulting in an additional loss of $1,065,000 (see Note 13). Restricted Cash and Short-term Investments Restricted cash and short-term investments consisted of the following as of December 31 (in thousands): 2002 2001 Certificates of deposit due within one year $— $47 Restricted cash in U.S. treasury notes — 15,450 Restricted cash in money market funds 4,407 12,547 4,407 28,044 Less current portion (1,981) (47) $ 2,426 $27,997 As of December 31, 2002 and 2001, cost approximated market value of restricted cash and short-term investments; unrealized gains and losses were notsignificant. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following as of December 31 (in thousands): 2002 2001Accounts payable $7,243 $4,638Accrued merger and financing costs 4,488 —Accrued compensation and benefits 2,548 2,934Accrued taxes 690 1,296Accrued utility and security 771 602Accrued professional fees 1,046 565Accrued property and equipment 1,304 —Accrued other 2,257 1,074 $20,347 $11,109 F-20Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 4. Debt Facilities and Capital Lease Obligations Debt facilities and capital lease obligations consisted of the following as of December 31 (in thousands): 2002 2001 Comdisco Master Lease Agreement and Addendum (net of unamortized discount of $31 and$221 as of December 31, 2002 and 2001, respectively) $1,820 $3,374 Venture Leasing Loan Agreement (net of unamortized discount of $336 and $392 as of December 31, 2002and 2001, respectively) 1,004 3,658 Heller Loan (net of unamortized discount of $9 and $15 as of December 31, 2002 and 2001,respectively) 3,233 4,183 Wells Fargo Loan 1,631 2,335 Orix Equipment Leases 1,536 — 9,224 13,550 Less current portion (5,591) (7,206) $3,633 $6,344 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 theComdisco Master Lease Agreement, the Company sold equipment to Comdisco, which it then leased back. The amount of financing to be provided was up to$1,000,000, and this amount was fully drawn down during 1999 and 2000. Repayments are made monthly over 42 months with a final balloon interestpayment equal to 15% of the balance amount due at maturity. Interest accrues at 7.5% per annum. The Comdisco Master Lease Agreement has an effectiveinterest rate of 14.6% per annum. As of December 31, 2002, $162,000 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 theComdisco Master Lease Agreement. These leases were entered into as sales-leaseback transactions. The Company deferred a gain of $78,000 related to the sale-leaseback in July 1999, and a deferred loss of $19,000 related to the sale-leasebacks in fiscal 2000, which is being amortized in proportion to the amortizationof the leased assets. In connection with the Comdisco Master Lease Agreement, the Company granted Comdisco a warrant to purchase 937 shares of the Company’scommon stock at $53.33 per share (the “Comdisco Master Lease Agreement Warrant”). This warrant is immediately exercisable and expires in ten years fromthe date of grant. The fair value of the warrant using the Black-Scholes option pricing model with the following assumptions: deemed fair market value pershare of $96.00, dividend yield 0%, expected volatility of 80%, risk-free interest rate of 5.0% and a contractual life of 10 years, was $80,000. Such amountwas recorded as a discount to the applicable capital lease obligation, and is being amortized to interest expense, using the effective interest method, over the lifeof 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 sold equipment (hard cost items) and software and tenant improvements (soft cost items) in its San Jose IBX hub to Comdisco, which it thenleased back. The amount of financing available under the Comdisco Master Lease Agreement Addendum was up to $2,150,000 for F-21Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) hard cost items and up to $2,850,000 for soft cost items, and these amounts were fully drawn during 1999 and 2000. Amounts drawn under this addendumare collateralized by the underlying hard and soft assets of the San Jose IBX hub 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 theoriginal acquisition cost of the property financed. The Comdisco Master Lease Agreement Addendum has an effective interest rate of 15.3% per annum. As ofDecember 31, 2002, $1,689,000 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 4,687 shares of theCompany’s common stock at $96.00 per share (the “Comdisco Master Lease Agreement Addendum Warrant”). This warrant is immediately exercisable andexpires 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 valueof the warrant using the Black-Scholes option pricing model with the following assumptions: deemed fair market value per share of $153.60, dividend yield0%, expected volatility of 80%, risk-free interest rate of 5.0% and a contractual life of seven years, was $587,000. Such amount was recorded as a discount tothe 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 “VentureLeasing Loan Agreement”). The Venture Leasing Loan Agreement provided financing for equipment and tenant improvements at the Newark, New Jersey IBXhub and a secured term loan facility for general working capital purposes. The amount of financing provided was up to $10,000,000, which was allowed to beused to finance up to 85% of the projected cost of tenant improvements and equipment for the Newark IBX hub. The full $10,000,000 was fully drawnduring 1999. Notes issued beared interest at a rate of 8.5% per annum and were repayable in 42 monthly installments plus a final balloon interest paymentequal to 15% of the original advance amount due at maturity and are collateralized by the assets of the Newark, New Jersey IBX. The Venture Leasing LoanAgreement had an effective interest rate of 14.7% per annum. In connection with the Venture Leasing Loan Agreement, the Company granted VLL a warrant to purchase 9,375 shares of the Company’s commonstock at $96.00 per share (the “Venture Leasing Loan Agreement”). This warrant is immediately exercisable and expires on June 30, 2006. The fair value ofthe warrant using the Black-Scholes option pricing model with the following assumptions: deemed fair market value per share of $153.60, dividend yield 0%,expected volatility of 80%, risk-free interest rate of 5.0% and a contractual life of seven years, was $1,174,000. Such amount was recorded as a discount tothe applicable debt, and is being amortized to interest expense, using the effective interest method, over the life of the agreement. In October 2002, the Company amended the Venture Leasing Loan Agreement to secure certain short-term cash deferment benefits (the “VLL LoanAmendment”). Under the original terms of the Venture Leasing Loan Agreement, the Company borrowed $10,000,000 which was repayable over 42 months at8.5% per annum plus a 15% balloon interest payment calculated on the original advance amount. Under the terms of the VLL Loan Amendment, theCompany extended the maturity of the loan by 24 months. Commencing January 1, 2003, the Company will re-amortize the remaining principal balance andrelated balloon interest payment over the amended 27-month period ending March 1, 2005. The VLL Loan Amendment has an effective interest rate ofapproximately 14.7% per annum. As of December 31, 2002, $1,340,000 was outstanding under the VLL Loan Amendment. F-22Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In connection with the VLL Loan Amendment, the Company granted VLL warrants to purchase 32,187 shares of the Company’s common stock at$0.32 per share (the “VLL Loan Amendment Warrants”) and repriced the original remaining VLL Warrants, issued in August 1999, to have an exercise priceof $0.32 versus the original $96.00 per share (the “Amended and Restated Original VLL Warrants”). Both the VLL Loan Amendment Warrants and theAmended and Restated Original VLL Warrants are immediately exercisable and the VLL Loan Amendment Warrants expire on October 11, 2007 and theAmended and Restated Original VLL Warrants expire on the original expiration date of June 30, 2006. The fair value of the VLL Loan Amendment Warrantsusing the Black-Scholes option-pricing model was approximately $220,000 with the following assumptions: fair market value per share of $7.04, dividendyield of 0%, expected volatility of 100%, risk-free interest rate of 4.0% and a contractual life of five years. Such amount was recorded as a discount to theapplicable debt based upon the guidance of APB Opinion No. 14 and will be amortized to interest expense, using the effective interest method, over theremaining life of the VLL Loan Amendment. Following the modification of the Amended and Restated Original VLL Warrants, an additional charge ofapproximately $45,000 was recorded as an additional debt discount representing the difference between the fair value of the modified option determined inaccordance with the provisions of SFAS No. 123 and the value of the old warrants immediately before its terms were modified. Heller Loan In June 2001, the Company obtained a $5,000,000 loan from Heller Financial Leasing, Inc. (the “Heller Loan”), which was fully drawn down at thattime. Repayments on the Heller Loan were made over 36 months and interest accrued at 13.0% per annum. The Heller Loan is secured by certain equipmentlocated in the New York metropolitan area IBX hub. In connection with the Heller Loan, the Company granted Heller Financial Leasing, Inc. a warrant to purchase 1,171 shares of the Company’s commonstock at $128.00 per share (the “Heller Warrant”). This warrant is immediately exercisable and expires in five years from the date of grant. The fair value ofthe warrant using the Black-Scholes option pricing model was $18,000 with the following assumptions: fair market value per share of $36.16, dividend yieldof 0%, expected volatility of 80%, risk-free interest rate of 5% and a contractual life of 5 years. Such amount was recorded as a discount to the applicable loanamount, and is being amortized to interest expense using the effective interest method, over the life of the loan. In August 2002, the Company amended the Heller Loan to secure certain short-term cash deferment benefits (the “Heller Loan Amendment”). Under theoriginal terms of the Heller Loan, the Company borrowed $5,000,000 which was repayable over 36 months at 13% per annum. Under the terms of the HellerLoan Amendment, the Company extended the maturity of the loan by nine months. Commencing September 2002, the Company began to benefit from thereduction in monthly payments over the following 14 months thereby deferring approximately $1,200,000 of principal payments. Commencing November2003, the deferred principal payments began to be repaid over the remaining 17 months of the loan ending March 2005. The Heller Loan Amendment has aneffective interest rate of approximately 16.5% per annum. As of December 31, 2002, $3,242,000 was outstanding under the Heller Loan Amendment. The costs related to the issuance of the Heller Loan were capitalized and are being amortized to interest expense using the effective interest method, overthe life of the Heller Loan. Debt issuance costs, net of amortization, are $167,000 as of December 31, 2002. F-23Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Wells Fargo Loan In March 2001, the Company obtained a $3,004,000 loan from Wells Fargo Equipment Finance, Inc. (“Wells Fargo” and the “Wells Fargo Loan”), andthis amount was fully drawn down at that time. Repayments on the Wells Fargo Loan are made over 36 months and interest accrues at 13.15% per annum.The Wells Fargo Loan is secured by certain equipment located in the New York metropolitan area IBX hub. The Wells Fargo Loan required the Company tomaintain a minimum cash balance at all times. As of June 30, 2002, the Company was not in compliance with this requirement. The Company did not obtaina waiver for this requirement and the bank rejected a discounted settlement offer. Wells Fargo filed a lawsuit against the Company seeking to force theCompany to obtain a letter of credit in the full amount of the outstanding balance of the Wells Fargo Loan. As a result, the Company has reflected the fullamount outstanding under this facility totaling $1,631,000 as a current obligation on the accompanying balance sheet as of December 31, 2002. In January2003, the Company entered into a settlement agreement with Wells Fargo and repaid the full amount outstanding, plus accrued and unpaid interest, inFebruary 2003 (see Note 14). The costs related to the issuance of the Wells Fargo Loan were capitalized and are being amortized to interest expense using the effective interest method,over the life of the Wells Fargo Loan. Debt issuance costs, net of amortization, are $58,000 as of December 31, 2002. This remaining balance was written-offto interest expense in February 2003 in conjunction with the settlement. Orix Equipment Leases In December 2002, as a result of the Pihana Acquisition (see Note 2), the Company acquired multiple capital leases in multiple currencies for variousnewly acquired subsidiaries of the Company in the U.S. and Asia-Pacific covered under a Master Lease Agreement with Sun Microsystems, Inc., which wassubsequently assigned to Orix USA Corporation (the “Orix Equipment Leases”). The original amount financed under these capital leases was approximately$3,503,000 (as translated using effective exchange rates at December 31, 2002). These capital lease arrangements bear interest at an average rate of 6.4% perannum and are repayable over 30 months. As of December 31, 2002, $1,536,000 was outstanding under the Orix Equipment Leases (as translated usingeffective exchange rates at December 31, 2002). Maturities Combined aggregate maturities for debt facilities and future minimum capital lease obligations as of December 31, 2002 are as follows (in thousands): Debt facilities Capital lease obligations Total 2003 $2,887 $2,965 $5,852 2004 2,597 422 3,019 2005 729 — 729 6,213 3,387 9,600 Less amount representing unamortized discount (345) (31) (376) 5,868 3,356 9,224 Less current portion (2,657) (2,934) (5,591) $3,211 $422 $3,633 F-24Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 5. Senior Notes On December 1, 1999, the Company issued 200,000 units, each consisting of a $1,000 principal amount 13% Senior Note due 2007 (the “SeniorNotes”) and one warrant to purchase .527578 shares (for an aggregate of 105,515 shares) of common stock for $0.2144 per share (the “Senior NoteWarrants”), for aggregate net proceeds of $193,400,000, net of offering expenses. Of the $200,000,000 gross proceeds, $16,207,000 was allocated toadditional paid-in capital for the deemed fair value of the Senior Note Warrants and recorded as a discount to the Senior Notes. The discount on the SeniorNotes is being amortized to interest expense, using the effective interest method, over the life of the debt. The Senior Notes have an effective interest rate of14.1% per annum. The fair value attributed to the Senior Note Warrants was consistent with the Company’s treatment of its other common stock transactionsprior to the issuance of the Senior Notes. The fair value was based on recent equity transactions by the Company. Interest is payable semi-annually, in arrears, on June 1 and December 1 of each year. The notes are unsecured, senior obligations of the Company andare 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 Companyof California, N.A., as trustee (the “Indenture”). Subject to certain exceptions, the Indenture restricts, among other things, the Company’s ability to incuradditional indebtedness and the use of proceeds therefrom, pay dividends, incur certain liens to secure indebtedness or engage in merger transactions. During the first half of 2002, the Company retired $52,751,000 of Senior Notes plus forgiveness of $785,000 of accrued and unpaid interest thereon inexchange for 499,565 shares of the Company’s common stock, valued at $18,351,000 based on the actual exchange dates of the Senior Notes and$2,511,000 of cash. The Company wrote-off a proportionate amount of unamortized debt issuance costs and debt discount associated with these Senior Notestotaling $1,293,000 and $3,093,000, respectively. The Company incurred debt extinguishment costs totaling approximately $1,100,000 in connection with theretirement of these Senior Notes and recognized a gain on these transactions of $27,188,000. In December 2002, the Company, in connection with, and as a condition to closing the Combination (see Note 2) and Financing (see Note 7), initiated anexchange offer to substantially reduce the amount of Senior Notes then outstanding in order to improve the Company’s existing capital structure and reduce theamount of outstanding debt of the Company (the “Senior Note Exchange”). The Senior Note Exchange was contingent on both the Combination and Financingclosing, all of which were subject to stockholder vote. The Combination, Financing and Senior Note Exchange closed on December 31, 2002, and theCompany retired an additional $116,774,000 of Senior Notes plus forgiveness of $8,855,000 of accrued and unpaid interest thereon in exchange for1,857,436 shares of the Company’s common stock, valued at $12,482,000 based on the actual exchange date of the Senior Notes and $15,181,000 of cash.The Company wrote-off a proportionate amount of unamortized debt issuance costs and debt discount associated with these Senior Notes totaling $2,492,000and $6,004,000, respectively. The Company incurred debt extinguishment costs totaling approximately $2,500,000 in connection with the retirement of theseSenior Notes and recognized a gain on these transactions of $86,970,000. In conjunction with the Combination, Financing and Senior Note Exchange, theCompany amended the Indenture in order to allow the Combination and Financing to occur. As of December 31, 2002, the Company had a total of $30,475,000 Senior Notes remaining outstanding, which are presented net of remaining discountas $28,908,000 on the accompanying balance sheet. The costs related to the issuance of the Senior Notes were capitalized and are being amortized to interest expense using the effective interest method, overthe life of the Senior Notes. Debt issuance costs, net of amortization and write-offs associated with debt retirement, are $650,000 as of December 31, 2002. F-25Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 6. Credit Facility On December 20, 2000, the Company and a newly created, wholly-owned subsidiary of the Company, entered into a $150,000,000 Credit Facility (the“Credit Facility”) with a syndicate of lenders. The Credit Facility consisted of the following: • Term loan facility in the amount of $50,000,000. The outstanding term loan amount was required to be paid in quarterly installments beginning inMarch 2003 and ending in December 2005. The Company drew this down in January 2001. • Delayed draw term loan facility in the amount of $75,000,000. The Company was required to borrow the entire facility on or before December 20,2001. The outstanding delayed draw term loan amount was required to be paid in quarterly installments beginning in March 2003 and ending inDecember 2005. The Company drew this down in March 2001. • Revolving credit facility in an amount up to $25,000,000. The outstanding revolving credit facility was required to be paid in full on or beforeDecember 15, 2005. The Company drew this down in June 2001. The Credit Facility had a number of covenants, which included achieving certain minimum revenue targets and limiting cumulative EBITDA lossesand maximum capital spending limits among others. As of September 30, 2001, the Company was not in compliance with one of these covenants. However,the syndicate of lenders provided a forbearance and, in October 2001, the Company successfully completed the renegotiation of the Credit Facility andamended certain of the financial covenants to reflect the prevailing economic environment as part of the Amended and Restated Credit Facility (the “Amendedand Restated Credit Facility”). As required under this amendment, the Company repaid $50,000,000 of the $150,000,000 Credit Facility outstanding as ofSeptember 30, 2001, of which $25,000,000 represented a permanent reduction. As such, the Amended and Restated Credit Facility provides a total of$125,000,000 of debt financing and consists of the following: • Term loan facility, redesignated as tranche A, in the amount of $100,000,000, which represents the remaining $100,000,000 outstanding afterrepayment of the $50,000,000 in October 2001. • Term loan facility, redesignated as tranche B, in the amount of $25,000,000, of which $5,000,000 was immediately drawn with the remaining$20,000,000 available for future draw. The remaining $20,000,000 is only available for drawdown commencing September 30, 2002 and only if theCompany remains in full compliance with all covenants as outlined in the Amended and Restated Credit Facility, and meets an additional EBITDAtest. The ability to draw on the remaining $20,000,000 expires on December 31, 2002. As of June 30, 2002, the Company was not in compliance with certain provisions, including the revenue covenant, of the Amended and Restated CreditFacility. As a result, in August 2002, the Company further amended the Amended and Restated Credit Facility (the “First Amendment to the Amended andRestated Credit Facility”). The most significant terms and conditions of the First Amendment to the Amended and Restated Credit Facility were as follows: • The Company was granted a full waiver for the covenants that were not in compliance as of June 30, 2002. In addition, the amendment reset theminimum revenue and cash balance and maximum EBITDA loss covenants through September 30, 2002. • The Company agreed to repay $5,000,000 of the then outstanding balance of $105,000,000 as of June 30, 2002, which was designated as a trancheB term loan. This amount was repaid in August 2002. In addition, the remaining $20,000,000 available for borrowing under the Amended andRestated Credit Facility, also designated as a tranche B term loan, was permanently eliminated. As a result, the First F-26Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Amendment to the Amended and Restated Credit Facility reduced the credit facility to a $100,000,000 credit facility, which was designated atranche A term loan, and which remained fully outstanding as of September 30, 2002. • The Company must convert at least $100,000,000 of Senior Notes into common stock or convertible debt on or before November 8, 2002. As ofSeptember 30, 2002, a total of $147,249,000 of Senior Note principal remained outstanding. In November 2002, the lenders agreed to waive certain conditions of the First Amendment to the Amended and Restated Credit Facility (the “November2002 Waiver”). The most significant terms and conditions of the November 2002 Waiver were as follows: • The Company was granted a waiver to reset the minimum revenue and maximum EBITDA loss covenants through December 31, 2002 and theminimum cash balance covenant through March 31, 2003. • The Company was granted a waiver, subject to certain conditions, of an event of default created by a minimum cash covenant default and apayment default, if any, in existence pursuant to the Wells Fargo Loan (see Note 4). • The Company was granted a waiver of the covenant requiring the Company to convert $100,000,000 of Senior Notes by November 8, 2002. • The Company was granted a waiver, subject to certain conditions, of a default or an event of default created by a failure by the Company to makethe interest payment due on the Senior Notes in December 2002. The November 2002 Waiver expired upon the earlier of the closing of the Second Amendment to the Amended and Restated Credit Facility, thetermination of the Combination, or December 31, 2002, provided that if the sole reason the Combination has not closed by that date is as a result of pendingregulatory and related approvals, the date may be extended for up to three successive 30-day periods, but such date shall not be extended past March 31, 2003. On December 31, 2002, the Company closed the Combination (see Note 2), Financing (see Note 7) and Senior Note Exchange (see Note 5), and inconjunction, the Company further amended the First Amendment to the Amended and Restated Credit Facility (the “Second Amendment to the Amended andRestated Credit Facility”). The most significant terms and conditions of the Second Amendment to the Amended and Restated Credit Facility are as follows: • The Company was granted a full waiver of previous covenant breaches and was granted consent to use cash in connection with the Senior NoteExchange (see Note 5); • future revenue and EBITDA covenants were eliminated and the remaining minimum cash balance and maximum capital expenditure covenants andother ratios were reset consistent with the expected future performance of the combined company for the remaining term of the loan; • the Company permanently repaid $8,490,000 of the then currently outstanding $100,000,000 balance, bringing the total amount owed under thisfacility to $91,510,000 as of December 31, 2002; and • the amortization schedule for the remaining amount owed under this facility was amended such that the minimum amortization due in 2003-2004was significantly reduced. Loans under the Second Amendment to the Amended and Restated Credit Facility bear interest at floating rates, plus applicable margins, based on eitherthe prime rate or LIBOR. Interest rates on the First Amendment to F-27Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) the Amended and Restated Credit Facility were increased by 0.50% and the frequency of interest payments had been amended to monthly from quarterly, andsuch modifications remain in effect under the terms of the Second Amendment to the Amended and Restated Credit Facility. As of December 31, 2002, theCompany’s total indebtedness under the Second Amendment to the Amended and Restated Credit Facility was $91,510,000 and had an effective interest rateof 6.21%. Repayment of principal under the Second Amendment to the Amended and Restated Credit Facility is summarized as follows as of December 31, 2002(in thousands): Year ending: 2003 $1,9812004 6,9812005 82,548 Total $91,510 Borrowings under the Second Amendment to the Amended and Restated Credit Facility are collateralized by a first priority lien against substantially allof the Company’s assets. The costs related to the issuance of the Credit Facility were capitalized and are being amortized to interest expense using the effective interest method, overthe life of the Credit Facility. As a result of amending and restating the Credit Facility in both 2001 and 2002, the Company incurred additional fees ofapproximately $1,519,000 and $1,300,000, respectively, which have been added to debt issuance costs and are being amortized to interest expense using theeffective interest method over the remaining life of the Second Amendment to the Amended and Restated Credit Facility. Total debt issuance costs, net ofamortization, were $5,757, 000 and $5,940,000 as of December 31, 2002 and December 31, 2001, respectively. 7. The Financing In conjunction with the Combination (see Note 2), STT Communications made a $30,000,000 strategic investment in the Company (the “Financing”) inthe form of a convertible secured note (the “Convertible Secured Note”), convertible into shares of preferred stock, with a detachable warrant for the furtherissuance of 965,674 shares of preferred stock (the “Convertible Secured Note Warrant”). The Convertible Secured Note bears non-cash interest at a rate of14% per annum, payable semi-annually in arrears on May 1 and November 1, and has an initial term of five years. Interest on the Convertible Secured Notewill be payable in kind in the form of additional convertible secured notes having a principal amount equal to the amount of interest then due having termswhich are identical to the terms of the Convertible Secured Note (the “PIK Notes”). The Convertible Secured Note Warrant was valued at $4,646,000 and is reflected as a discount to the Convertible Secured Note on the accompanyingconsolidated balance sheet as of December 31, 2002. The fair value of the Convertible Secured Note Warrant was calculated under the provisions of APB 14and determined using the Black-Scholes option-pricing model under the following assumptions: contractual life of five years, risk-free interest rate of 4%,expected volatility of 135% and no expected dividend yield. The Company has considered the guidance in EITF Abstract No. 98-5, “Accounting forConvertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” and has determined that the Convertible SecuredNote does not contain a beneficial conversion feature as the fair value of the Company’s common stock on the date of issuance, was less than the stockconversion ratio outlined in the agreement. The allocated value to the Convertible Secured Note Warrant of $4,646,000 will be amortized using the effectiveinterest rate method to interest expense over the five-year term of the Convertible Secured Note. F-28Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Convertible Secured Note is secured by (i) a first priority security interest in i-STT’s assets and Pihana’s Singapore assets and by a pledge of thestock of i-STT’s subsidiaries and (ii) by a second priority security interest in all of the collateral securing the Company’s obligations under the Credit Facility,as amended. The Convertible Secured Note is guaranteed by all of the Company’s existing subsidiaries and by all of the Company’s future domesticsubsidiaries. The Convertible Secured Note, the Convertible Secured Note Warrant and any outstanding PIK Notes can be converted into shares of the Company’sSeries A or Series A-1 preferred stock at a price of $10.7712 per underlying share at any time at the option of STT Communications (the “Conversion Price”).The Conversion Price will be adjusted to mitigate or prevent dilution if fundamental changes occur to the Company’s common stock, dividends are declared,or the Company issues, or contracts to issue, shares of the Company’s common stock at a price per share below the Conversion Price. Through December 31,2005, the Company may convert 95% of the Convertible Secured Note and after December 31, 2005, the Company may convert 100% of the ConvertibleSecured Note, if: • the closing price of the Company’s common stock exceeds $37.6992 for thirty consecutive trading days; • the average daily trading volume of the Company’s common stock during that thirty day trading window exceeds 17,188; and • the Company has caused a registration statement to become effective under the Securities Act which provides for the resale by the noteholders of theshares of the Company’s common stock issued or issuable upon conversion. The Company must offer to purchase the Convertible Secured Note and any outstanding PIK Notes together with any accrued and unpaid interest if theCompany experiences a change of control, as defined. In addition, in connection with the Financing, the Company issued a warrant to STT Communications,which will become exercisable if the Company does experience a change of control (the “Change in Control Warrant”). The Change of Control Warrant, whichhas an exercise price of $0.01 per share and a contractual life of five years, is contingently exercisable for shares of the Company’s common stock with a totalcurrent market value of up to 20% of: • the $30,000,000 principal amount of the Convertible Secured Note, plus • the principal amount of any issued and outstanding PIK Notes, minus • the principal amount of any portion of the Convertible Secured Note which has been converted into shares of the Company’s capital stock or repaidin cash, plus • accrued and unpaid interest on any then outstanding portion of the Convertible Secured Note. Furthermore, the Company, in order to provide a mechanism to allow STT Communications to ensure the Company’s compliance with covenants underthe Second Amendment to the Amended and Restated Credit Facility (see Note 6), issued two additional warrants to STT Communications in conjunctionwith the Financing. These two additional warrants, comprised of the Series A Cash Trigger Warrant and the Series B Cash Trigger Warrant (collectively, the“Cash Trigger Warrants”), are contingently exercisable if the Company (i) does not have sufficient funds to pay, and fails to pay when due, any principal,interest, fee or other amount due under the Second Amendment to the Amended and Restated Credit Facility, or (ii) breaches the Company’s obligations tomaintain certain minimum cash balances under the terms of the Second Amendment to the Amended and Restated Credit Facility. The Cash Trigger Warrants,which will have a contractual life for as long as the Company has any remaining amounts due under the Second Amendment to the Amended and RestatedCredit F-29Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Facility, will have an exercise price and be exercisable for shares of the Company’s common stock valued at up to $30,000,000 as follows: • The Series A Cash Trigger Warrant will have a value of $10,000,000, with an exercise price per share which is the lesser of (i) $9.792 or (ii) 90%of the then current market value of shares of the Company’s common stock. The $9.792 exercise price of the Series A Cash Trigger Warrant willbe adjusted to mitigate or prevent dilution if fundamental changes occur to the Company’s common stock, dividends are declared, or the Companyissues, or contracts to issue, shares of the Company’s common stock at a price per share below $9.792. • The Series B Cash Trigger Warrant will have a value of $20,000,000, with an exercise price per share equal to 90% of the then current market valueof shares of the Company’s common stock. The holder of the Cash Trigger Warrants, STT Communications, has no obligation to exercise such warrants. If the Cash Trigger Warrants areexercised based on the inability to pay any principal, interest or fees due under the Second Amendment to the Amended and Restated Credit Facility, the CashTrigger Warrants will be exercisable for not less than $5,000,000 and not more than $5,000,000 plus the amount of the missed payment. If the Cash TriggerWarrants are exercised on the inability of Company to maintain certain minimum cash balances under the terms of the Second Amendment to the Amendedand Restated Credit Facility, the Cash Trigger Warrants will be exercisable for not less than $5,000,000 and not more than $5,000,000 plus any shortfall inthe Company’s minimum cash balance requirement. The Company applied EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments,” and EITF 96-18, “Accounting for EquityInstruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and concluded that neither acommitment date, or a measurement date, had occurred when the Financing was closed as of December 31, 2002 in relation to the Change in Control Warrantand the Cash Trigger Warrants. As a result, the Change in Control Warrant and the Cash Trigger Warrants have been treated, and will continue to be treated,as unissued for accounting purposes until such time as the events that trigger the right to the issuance of shares of the Company’s stock as outlined in thesewarrants have occurred, if ever. The costs related to the Financing were capitalized and are being amortized to interest expense using the effective interest method, over the life of theConvertible Secured Note. Debt issuance costs, net of amortization, are $617,000 as of December 31, 2002. 8. Redeemable Convertible Preferred Stock and Stockholders’ Equity In May 2000, the Company amended and restated its Certificate of Incorporation to change the authorized share capital to 80,000,000 shares of commonstock and 43,000,000 shares of redeemable convertible preferred stock, of which 20,000,000 has been designated as Series A, 16,000,000 has been designatedas Series B and 7,000,000 has been designated as Series C. In August 2000, the Company amended and restated its Certificate of Incorporation to change the authorized share capital to 300,000,000 shares ofcommon stock and 10,000,000 shares of preferred stock. In December 2002, the Company amended and restated its Certificate of Incorporation to change the authorized share capital to 300,000,000 shares ofcommon stock and 100,000,000 shares of preferred stock, of which 25,000,000 has been designated Series A, 25,000,000 has been designated as Seriec A-1and 50,000,000 is undesignated. F-30Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Redeemable Convertible Preferred Stock Between May and June 2000, the Company completed its Series C redeemable convertible preferred stock financing. The Company issued 195,661shares of Series C redeemable convertible preferred stock, at a price of $482.56 per share. All 1,271,877 shares of Series A, Series B and Series C redeemable convertible preferred stock were converted to shares of common stock on a one-for-one basis upon the closing of the Company’s initial public offering (“IPO”) in August 2000. All outstanding warrants to purchase preferred stock are nowexercisable for common stock. Preferred Stock On December 31, 2002, as a result of the i-STT Acquisition (see Note 2), the Company issued 1,868,667 shares of Series A preferred stock to STTCommunications. As of December 31, 2002, this preferred stock had a total liquidation value of $18,298,000. The rights, preferences and privileges of the Series A and Series A-1 preferred stock are as follows: Voting Rights. Holders of Series A preferred stock are entitled to one vote for each share of common stock into which such preferred stock could thenbe converted. Except as otherwise provided by the Delaware General Corporation Law, Series A-1 preferred stock shall have no voting rights. Until the earlierof either December 31, 2004 or the date on which less than 100 shares of the Company’s Series A preferred stock remain outstanding, the holders of shares ofSeries A preferred stock will be entitled to elect a number of directors at any election of directors, as follows: • three directors for so long as the holders of Series A preferred stock collectively beneficially own at least 30% of the Company’s outstanding votingstock; • two directors for so long as the holders of Series A preferred stock collectively beneficially own at least 15% of the Company’s outstanding votingstock; • one director for so long as the holders of Series A preferred stock collectively beneficially own at least 100 shares of the Company’s outstandingvoting stock; and • no directors at such time as the holders of Series A preferred stock collectively beneficially own less than 100 of the Company’s outstanding votingstock. Dividend Rights. Holders of Series A preferred stock and Series A-1 preferred stock are entitled to receive an amount equal to any dividend paid on theCompany’s common stock as may be declared from time to time by the Company’s board of directors. Liquidation Rights. In the event of the Company’s liquidation, dissolution or winding up, the Company’s assets available for distribution tostockholders will be distributed to holders of common stock, Series A preferred stock and Series A-1 preferred stock on a pro rata basis, based on the numberof shares of common stock held by each assuming full conversion of Series A preferred stock and Series A-1 preferred stock, until holders of Series Apreferred stock and Series A-1 preferred stock have received $9.792 per share of Series A preferred stock and Series A-1 preferred stock, plus the amount ofany declared but unpaid dividends for each share of Series A preferred stock and Series A-1 preferred stock. Thereafter, any remaining available assets fordistribution to stockholders will be distributed among the holders of the Company’s common stock pro rata based on the number of shares of common stockheld by each. F-31Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Redemption Rights. Beginning after December 31, 2009, the Company may at any time it may lawfully do so, at the option of the Company’s boardof directors, redeem some or all of the Series A preferred stock or Series A-1 preferred stock, on a pro rata basis, at a price in cash per share equal to thenumber of shares of the Company’s common stock into which such share may then be converted multiplied by the average closing sale price of theCompany’s common stock on The Nasdaq National Market (or any trading system on which the Company’s common stock may then trade) over the 30consecutive trading day period ending five trading days prior to the date of redemption. There are no sinking fund provisions applicable to the Company’sSeries A preferred stock or Series A-1 preferred stock. Conversion and Other Rights. The Company’s Series A preferred stock is convertible at any time into shares of common stock on a one-for-onebasis. The Company’s Series A-1 preferred stock is convertible into Series A preferred stock or shares of common stock on a one-for-one basis as long as (i)the conversion of the Series A-1 preferred stock will not cause STT Communications to hold more than 40% of outstanding voting stock and (ii) the value ofall outstanding voting stock held by STT Communications will not exceed $50.0 million or any threshold that would require compliance with the HSRAntitrust Improvements Act of 1976, as amended (the “HSR Act”), unless STT Communications has previously complied with the HSR Act.Notwithstanding these limitations, and except for limitations imposed by the HSR Act, the Company’s Series A-1 preferred stock is convertible into Series Apreferred stock or common stock in the following circumstances: • STT Communications makes a fully financed tender offer for all of the Company’s outstanding stock and at least 50% of the outstanding sharesnot held by STT Communications are tendered; • the Company commences bankruptcy or reorganization proceedings; • a third party obtains a 15% interest in the Company; • the Company agrees to sell a 15% or greater interest in the Company to a third party; • the Company sells all or substantially all of its assets, or enters into an agreement to sell all or substantially all of its assets; • a third party commences a bona fide, fully financed tender offer; • STT Communications’ nominees are not elected to our board of directors despite STT Communications voting in favor of such nominees; • the Company breaches certain material agreements with STT Communications contained in the Financing or Combination agreements (see Notes 2and 7); • STT Communications’ interest in the Company falls below 10%; or • the Cash Trigger Warrants are exercised (see Note 7). In addition, the Company may force all but 100 shares of the Company’s Series A preferred stock and all shares of Series A-1 preferred stock (subjectto the conversion restrictions described above) to convert into shares of the Company’s common stock after the Company reports four consecutive quarters ofnet income. The Company’s Series A and Series A-1 preferred stock have no preemptive or other subscription rights. Common Stock On August 11, 2000 the Company completed an IPO of 625,000 shares of its common stock. On September 7, 2000 the underwriters exercised theiroption to purchase 84,399 shares to cover the over-allotment of shares. F-32Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company’s founders purchased 189,375 shares of common stock. Approximately 170,437 shares were subject to restricted stock purchaseagreements whereby the Company had the right to repurchase the stock upon voluntary or involuntary termination of the founder’s employment with theCompany at $0.00033 per share. The Company’s repurchase right lapsed at a rate of 25% per year. In May 2000, the Board of Directors agreed to waive therepurchase right with respect to one of the founder’s unvested shares. As of December 31, 2002 and 2001, zero and 10,652 shares were subject to repurchaseat a price of $0.00033 per share, respectively. Upon the exercise of certain unvested stock options, the Company issued to employees common stock which is subject to repurchase by the Companyat the original exercise price of the stock option. This right lapses over the vesting period. As of December 31, 2002 and 2001, there were 6,986 and 33,548shares, respectively, subject to repurchase. As of December 31, 2002, the Company has reserved the following shares of authorized but unissued shares of common stock for future issuance: Conversion of convertible secured note 2,785,205Conversion of issued and outstanding preferred stock 1,868,667Conversion of preferred stock warrant 965,674Common stock warrants 302,792Common stock options 5,478,659Common stock purchase plan 35,634 11,436,631 Stock Purchase Plan In May 2000, the Company adopted the Employee Stock Purchase Plan (the “Purchase Plan”) under which 31,250 shares were reserved for issuancethereafter. On each January 1, the number of shares in reserve will automatically increase by 2% of the total number of shares of common stock outstanding atthat time, or, if less, by 600,000 shares. The Purchase Plan permits purchases of common stock via payroll deductions. The maximum payroll deduction is15% of the employee’s cash compensation. Purchases of the common stock will occur on February 1 and August 1 of each year. The price of each sharepurchased will be 85% of the lower of: • The fair market value per share of common stock on the date immediately before the first day of the applicable offering period (which lasts 24months); or • The fair market value per share of common stock on the purchase date. The value of the shares purchased in any calendar year may not exceed $25,000. As of December 31, 2002, 33,116 shares had been issued under the Purchase Plan during fiscal 2002 and 2001 at a weighted-average purchase price of$57.31 per share. There were no purchases under the Purchase Plan during fiscal 2000. Stock Option Plans In September 1998, the Company adopted the 1998 Stock Plan. In May 2000, the Company adopted the 2000 Equity Incentive Plan and 2000 DirectorStock Option Plan; and in September 2001, the Company adopted the 2001 Supplemental Stock Plan (collectively, the “Plans”) under which nonstatutorystock options and restricted stock may be granted to employees, outside directors, consultants, and incentive stock options may be F-33Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) granted to employees. Accordingly, the Company reserved a total of 5,708,326 shares of the Company’s common stock for issuance upon the grant ofrestricted stock or exercise of options granted in accordance with the Plans. On each January 1, commencing with the year 2001, the number of shares inreserve will automatically increase by 6% of the total number of shares of common stock that are outstanding at that time or, if less, by 6,000,000 shares forthe 2000 Equity Incentive Plan and by 50,000 shares for the 2000 Director Stock Option Plan. Options granted under the Plans generally expire 10 yearsfollowing the date of grant and are subject to limitations on transfer. The Plans are administered by the Board of Directors. The Plans provide 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 Plans are subject to various vesting provisions, all of which are contingent upon the continuous service of the optionee and maynot impose vesting criterion more restrictive than 20% per year. Stock options may be exercised at anytime subsequent to grant. Stock obtained throughexercise of unvested options is subject to repurchase at the original purchase price. The Company’s repurchase right decreases as the shares vest under theoriginal 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 beissued 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 ofcontrol, all shares granted under the Plans shall immediately vest. F-34Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) A summary of the Plans is as follows: Shares availablefor grant Number ofshares Weighted-average exerciseprice per shareBalances, December 31, 1999 479,598 81,755 $21.67Additional shares authorized 1,642,609 — —Options granted (258,885) 258,885 176.61Options exercised — (44,442) 55.71Options forfeited 14,442 (14,442) 168.50Shares repurchased (10,824) — 2.90 Balances, December 31, 2000 1,888,588 281,756 150.99Additional shares authorized 2,394,356 — —Options granted (497,700) 497,700 44.20Options exercised — (15,534) 28.03Options forfeited 110,762 (110,762) 138.31Shares repurchased 7,807 — 2.28 Balances, December 31, 2001 3,903,813 653,160 74.26Additional shares authorized 934,651 — —Options granted (147,244) 147,244 26.75Options exercised — (12,965) 8.67Options forfeited 61,618 (61,618) 77.66 Balances, December 31, 2002 4,752,838 725,821 65.51 The following table summarizes information about stock options outstanding as of December 31, 2002: Outstanding ExercisableRange of exercise prices Number of shares Weighted-average remainingcontractual life Weighted-averageexercise price Number of shares Weighted-averageexercise price$ 0.03 to $ 8.64 21,923 7.84 $4.26 11,265 $2.13$ 10.24 to $ 15.68 205,289 8.76 12.18 124,789 12.17$ 16.96 to $ 24.96 45,625 9.18 22.17 2,174 20.94$ 27.84 to $ 56.00 206,126 8.59 34.68 57,952 37.60$ 61.76 to $ 93.00 13,202 8.23 80.99 5,143 83.48$100.80 to $160.00 186,071 7.60 132.73 110,782 134.26$176.00 to $384.00 47,585 7.58 231.65 28,346 232.62 725,821 8.32 65.51 340,451 75.38 The weighted-average remaining contractual life of options outstanding at December 31, 2002 and December 31, 2001 was 8.32 years and 9.09 years,respectively. Stock-Based Compensation Employees The Company uses the intrinsic-value method prescribed in APB No. 25 in accounting for its stock-based compensation arrangements with employees.Stock-based compensation expense is recognized for employee stock option grants in those instances in which the deemed fair value of the underlying commonstock was F-35Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) subsequently determined to be greater than the exercise price of the stock options at the date of grant. The Company recorded a reduction of $1,161,000 ofdeferred stock-based compensation due to forfeitures of pre-IPO stock options for the year ended December 31, 2002. The Company recorded a reduction of$8,119,000 of deferred stock-based compensation due to forfeitures of pre-IPO stock options for the year ended December 31, 2001. The Company recordeddeferred stock-based compensation, net of forfeitures, related to employees of $53,206,000 for the year ended December 31, 2000. A total of $6,859,000,$18,993,000 and $28,796,000 has been amortized to stock-based compensation expense for the years ended December 31, 2002, 2001 and 2000,respectively, on an accelerated basis over the vesting period of the individual options, in accordance with FASB Interpretation No. 28. The weighted averageestimated fair value of employee stock options granted at exercise prices below market price at grant during 2000 was $276.48. 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, theCompany has recognized a reduction in deferred stock-based compensation of $118,000 for the year ended December 31, 2002 and $164,000 for the yearended December 31, 2001 due to a reduction in the fair value of the Company’s stock during this period, and an increase in deferred stock-basedcompensation of $1,332,000 for the year ended December 31, 2000. A total of $19,000, $51,000 and $1,097,000 has been amortized to stock-basedcompensation expense for the years ended December 31, 2002, 2001, and 2000, respectively. There were no non-employee stock option grants during 2002.The weighted average estimated fair value of non-employee stock options granted at exercise prices below market price at grant during 2001 and 2000 was$37.44 and $10.88 per share, respectively. The Company’s calculations for non-employee grants were made using the Black-Scholes option-pricing model with the following weighted averageassumptions for the years ended December 31: 2002 2001 2000 Dividend yield 0% 0% 0%Expected volatility 135% 80% 80%Risk-free interest rate 4.00% 5.14% 5.99%Expected life (in years) 10.00 10.00 10.00 Warrants In August 1999, the Company entered into a strategic agreement with NorthPoint Communications, Inc. (“NorthPoint”). Under the terms of the strategicagreement, NorthPoint has agreed to use certain of the Company’s domestic IBX hubs and install their operational nodes in such centers. In exchange, theCompany granted NorthPoint a warrant to purchase 10,567 shares of the Company’s common stock at $17.07 per share (the “NorthPoint Warrant”). TheNorthPoint Warrant was earned upon execution of the strategic agreement, as NorthPoint’s performance commitment was complete. The NorthPoint Warrantwas immediately exercisable and expired five years from the date of grant. The NorthPoint Warrant was valued at $1,508,000 using the Black-Scholes option-pricing model, which was capitalized on the accompanying consolidated balance sheet in other assets as a customer acquisition cost and was being amortizedover the term of the agreement as a reduction of revenues recognized. The following assumptions were used in determining the fair value of the warrant: deemedfair market value per share of $153.60, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 5.0% and a contractual life of 5 years. InDecember 2000, based on the uncertainty of the Company’s future business relationship with NorthPoint, as a result of their filing under Chapter 11bankruptcy protection, the Company determined that the future value of the other asset attributed to the unamortized portion of the fully-vested, nonforfeitablewarrant was questionable and accordingly, the remaining asset totaling approximately $700,000 was written off. F-36Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In November 1999, the Company entered into a definitive agreement with WorldCom, whereby WorldCom agreed to install high-bandwidth localconnectivity services to the Company’s first seven IBX hubs by a pre determined date in exchange for a warrant to purchase 21,094 shares of common stockof the Company at $21.33 per share (the “WorldCom Warrant”). The WorldCom Warrant was immediately exercisable and expires five years from the date ofgrant. As of December 31, 1999, a total of 18,750 shares were subject to repurchase at the original exercise price if WorldCom’s performance commitmentswere not completed. The WorldCom Warrant was initially valued at $2,969,000 using the Black-Scholes option-pricing model and was recorded toconstruction in progress. Under the applicable guidelines in EITF 96-18, the underlying shares of common stock associated with the WorldCom Warrantsubject to repurchase were revalued at each balance sheet date to reflect their current fair value until WorldCom’s performance commitment was completed.Any resulting increase in fair value of the warrant was recorded to construction in progress. In addition, the following assumptions were used in determiningthe fair value of the warrant: deemed fair market value per share of $153.60, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 5.5%and a contractual life of 5 years. In June 2000, the agreement with Worldcom was amended (see below). In November 1999, the Company entered into a master agreement with Bechtel Corporation, or Bechtel, whereby Bechtel agreed to act as the exclusivecontractor under a Master Agreement to provide program management, site identification and evaluation, engineering and construction services to buildapproximately 29 IBX hubs over a four year period under mutually agreed upon guaranteed completion dates. As part of the agreement, the Company grantedBechtel a warrant to purchase 11,016 shares of the Company’s common stock at $32.00 per share (the “Bechtel Warrant”). The Bechtel Warrant wasimmediately exercisable and expires five years from date of grant. The Bechtel Warrant was initially valued at $1,497,000 using the Black-Scholes option-pricing model and was recorded to construction in progress. Under EITF 96-18, the underlying shares of common stock associated with the Bechtel Warrantsubject to repurchase were revalued at each balance sheet date to reflect their current fair value until Bechtel’s performance commitment is complete. Anyresulting increase in fair value of the warrants was recorded to construction in progress. In addition, the following assumptions were used in determining thefair value of the warrant: deemed fair market value per share of $153.60, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 5.5% anda contractual life of 5 years. In January 2000, the Bechtel Warrant was exercised. As of December 31, 2002 and 2001, a total of zero and 6,220 shares weresubject to repurchase at the original exercise price, until Bechtel’s performance obligations were completed. In January 2000, the Company entered into an operating lease agreement for its new corporate headquarters facility in Mountain View, California. Inconnection with the lease agreement, the Company granted the lessor a warrant to purchase up to 1,034 shares of the Company’s common stock at $192.00per share (the “Headquarter Warrant”). The warrant expires 10 years from the date of grant. The warrant was valued at $186,000 using the Black-Scholesoption pricing model and will be recorded as additional rent expense over the life of the lease. The following assumptions were used in determining the fairvalue of the warrant: deemed fair value per share of $209.60, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 6.0% and a contractuallife of 10 years. In April 2000, the Company entered into a definitive agreement with a fiber carrier whereby the fiber carrier agreed to install high-bandwidth localconnectivity services to a number of the Company’s IBX hubs in exchange for colocation space and related benefits in such IBX hubs. In connection with thisagreement, the Company granted the fiber carrier a warrant to purchase up to 16,875 shares of the Company’s common stock at $128.00 per share (the“Fiber Warrant”). The warrant was immediately exercisable and expires five years from date of grant. A total of 4,375 shares were immediately vested and theremaining 12,500 shares are subject to repurchase at the original exercise price if certain performance commitments are not completed by a pre-determined date.The fiber carrier is not obligated to install high-bandwidth local connectivity services and, apart F-37Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) from forfeiting the relevant number of shares and colocation space, will not be penalized for not installing. The warrant was initially valued at $5,372,000using the Black-Scholes option-pricing model and had been recorded initially to construction in progress until installation was completed. The followingassumptions were used in determining the fair value of the warrant: deemed fair market value per share of $378.24, dividend yield of 0%, expected volatilityof 80%, risk-free interest rate of 6.56% and a contractual life of 5 years. Under the applicable guidelines in EITF 96-18, the underlying shares of commonstock associated with these warrants subject to repurchase are revalued at each balance sheet date to reflect their current fair value until the performancecommitment is complete. As of December 31, 2002, a total of 1,562 shares remain unearned. As the Company has no plans to construct any additional IBXhubs in the foreseeable future, the value of these unearned shares totaling $5,000 is reflected in other assets on the accompanying balance sheet as of December31, 2002. In June 2000, the Company entered into a memorandum of understanding with COLT Telecommunications (“Colt”) whereby Colt agreed to install high-bandwidth local connectivity services to a number of the Company’s European IBX hubs in exchange for colocation space and related benefits in such IBXhubs. In connection with this agreement, the Company granted Colt a warrant to purchase up to 7,813 shares of the Company’s common stock at $170.67per share (the “Colt Warrant”). The warrant was immediately exercisable and expires five years from the date of grant. The shares are subject to repurchase atthe original exercise price if certain performance commitments are not completed by a pre-determined date. Colt is not obligated to install high-bandwidth localconnectivity services and, apart from forfeiting the relevant number of shares and colocation space, will not be penalized for not installing. The warrant wasinitially valued at $2,795,000 using the Black-Scholes option-pricing model and was initially recorded to construction in progress. The followingassumptions were used in determining the fair value of the warrants: deemed fair market value per share of $434.56, dividend yield of 0%, expected volatilityof 80%, risk-free interest rate of 6.23% and a contractual life of 5 years. Under the applicable guidelines in EITF 96-18, the underlying shares of commonstock associated with this warrant subject to repurchase are revalued at each balance sheet date to reflect their current fair value until the performancecommitment is complete. As of December 31, 2002, the Colt Warrant remains unearned as a result of the Company’s revised European services strategy (seeNote 13). As a result, the value of these unearned shares totaling $25,000 is now reflected in other assets on the accompanying balance sheet as of December31, 2002. In June 2000, the Company entered into a strategic agreement with WorldCom and UUNET, an affiliate of WorldCom (the “UUNET StrategicAgreement”), which amends, supersedes and restates the definitive agreement entered into with WorldCom in November 1999 and the related WorldComWarrant. Under the UUNET Strategic Agreement, WorldCom agreed to install high-bandwidth local connectivity services and UUNET agreed to providehigh-speed data entrance facilities to a number of the Company’s IBX hubs in exchange for colocation services and related benefits in such IBX hubs. Inconnection with this strategic agreement, the Company granted WorldCom Venture Fund a warrant (the “WorldCom Venture Fund Warrant”) to purchase up to20,313 shares of Company’s common stock at $170.67 per share and all but 1,172 of the shares under the earlier WorldCom Warrant were immediatelyvested under the UUNET Strategic Agreement. As of January 31, 2002, all shares under the earlier Worldcom Warrant have been fully earned. The WorldComVenture Fund Warrant was immediately exercisable and expires five years from the date of grant. The warrant is subject to repurchase at the original exerciseprice if certain performance commitments are not completed by a pre-determined date. WorldCom and UUNET are not obligated to install high-bandwidthlocal connectivity services and provide high-speed data entrance facilities, respectively, and, apart from forfeiting the relevant number of shares and colocationspace, will not be penalized for not performing. The warrant was initially valued at $7,255,000 using the Black-Scholes option-pricing model and has beenrecorded initially to construction in progress until installation is complete. The following assumptions were used in determining the fair value of the warrant:deemed fair market value per share of $434.56, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 6.23% and a contractual life of 5years. Under the applicable guidelines in EITF 96-18, the underlying shares of common stock associated with this warrant subject to repurchase are revaluedat each F-38Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) balance sheet date to reflect their current fair value until the performance commitment is complete. Any resulting increase in fair value of the warrant willultimately be recorded as a leasehold improvement once construction is completed. In September 2001, the Company amended and restated the Worldcom Venture Fund Warrant, issued in June 2000, and reduced the total number ofshares available to purchase to 9,219 shares of the Company’s common stock at $170.56 per share, which had been previously earned. In return forproviding services to the New York metropolitan area IBX hub, the Company issued two new warrants to the Worldcom Venture Fund. The first new warrantwas to purchase 11,094 shares of the Company’s common stock at $0.01 per share, of which 4,688 shares were immediately vested and exercisable (the“Second Worldcom Venture Fund Warrant”). The second new warrant was to purchase 7,656 shares of the Company’s common stock at $0.01 per share (the“Third Worldcom Venture Fund Warrant”). All Worldcom Venture Fund warrants expire five years from the date of grant. The Company has accounted forthese warrants in accordance with the guidance in EITF 96-18 and EITF Abstracts Topic D-90. The unearned portion of the Second Worldcom Venture FundWarrant and the Third Worldcom Venture Fund Warrant will be fully earned and exercisable at such time as Worldcom provides services, as defined in thewarrant agreements, to the New York metropolitan area IBX hub. The unearned portion of the Second Worldcom Venture Fund Warrant and the ThirdWorldcom Venture Fund Warrant are subject to a reduction in shares if there are Worldcom-caused delays in providing Worldcom service by the opening dateof the New York metropolitan area IBX hub. Consistent with the guidance of EITF 96-18 and EITF Abstracts Topic D-90, these warrants have been treated asunissued for accounting purposes until the future services are received from the fiber carrier. The earned portion of the Second Worldcom Venture FundWarrant, however, was valued in September 2001 at $56,000 using the Black-Scholes option-pricing model and has been recorded initially to construction inprogress until installation is complete. The following assumptions were used in determining the fair value of the earned portion of this warrant: fair marketvalue per share of $12.16, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 6.00% and a contractual life of 5 years. In January 2002, Worldcom completed their installation of fiber in the Company’s New York metropolitan area IBX hub, and the Company valued theunearned portion of the Second Worldcom Venture Fund Warrant and the Third Worldcom Venture Fund Warrant, representing 6,406 and 7,656 shares ofthe Company’s common stock, respectively. The Second Worldcom Venture Fund Warrant and the Third Worldcom Venture Fund Warrant were valued at$1,040,000 using the Black-Scholes option-pricing model and have been recorded to property and equipment as a leasehold improvement. The followingassumptions were used in determining the fair value of these warrants: fair market value per share of $2.32, dividend yield of 0%, expected volatility of 80%,risk-free interest rate of 4.00% and a contractual life of five years. In addition, the Company has issued several warrants in connection with its debt facilities and capital lease obligations (see Note 4), the Senior Notes(see Note 5), two European lease terminations (see Note 10) and the Pihana Acquisition (see Note 2). In March 2001, holders of the NorthPoint Warrant, theComdisco Loan and Security Agreement Warrant, the Comdisco Master Lease Agreement Warrant and the Comdisco Master Lease Agreement AddendumWarrant exercised such warrants pursuant to the cashless “net-exercise” provisions thereof. Upon such exercises, such warrant holders received an aggregate of32,799 shares of the Company’s common stock. In addition, certain holders of Senior Note Warrants exercised their warrants during 2002, 2001 and 2000resulting in 21,662, 40,096, and 10,552 shares of the Company’s common stock being issued, respectively. A total of 33,206 shares underlying theseSenior Note Warrants remain outstanding as of December 31, 2002. F-39Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company has the following common stock warrants outstanding as of December 31, 2002: Underlyingsharesoutstanding ExercisepriceCommon stock warrants: Amended and Restated Original VLL Warrants 8,438 $0.32VLL Loan Amendment Warrants 32,188 0.32Senior Note Warrants 33,206 0.21WorldCom Warrant 21,094 21.33Headquarter Warrant 1,034 192.00Fiber Warrant 16,875 128.00Colt Warrant 7,813 170.67Worldcom Venture Fund Warrant 9,219 170.56Second Worldcom Venture Fund Warrant 11,094 0.32Third Worldcom Venture Fund Warrant 7,656 0.32Heller Warrant 1,172 128.00UK Warrant 18,750 0.32Pihana Shareholder Warrants 133,442 191.81Other warrant 625 0.32Other warrant 186 160.00 302,792 In addition to the above common stock warrants outstanding as of December 31, 2002, the Company also has several additional warrants issued inconnection with the Financing, which are comprised of the Convertible Secured Note Warrant, the Change in Control Warrant and the Cash Trigger Warrants(see Note 7). 9. Income Taxes No provision for federal income taxes was recorded from inception through December 31, 2002 as the Company incurred net operating losses during theperiod. State tax expense is included in general and administrative expenses and aggregated less than $40,000 for each of the years in the three year period endedDecember 31, 2002. Based on the available objective evidence, the Company believes it is more likely than not that the net deferred tax assets will not be fully realizable.Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2002. F-40Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Deferred tax assets (liabilities) as of December 31 consists of the following (in thousands): 2002 2001 Deferred tax assets: Depreciation and amortization $(4,246) $(2,767)Reserves 24,505 4,840 Credits 211 120 Capitalized start-up costs 317 5,206 Net operating losses 86,475 74,577 Restructuring charges 11,847 3,023 119,109 84,998 Deferred tax liability — — — — Gross deferred tax asset 119,109 84,998 Valuation allowance (119,109) (84,998) Net deferred tax asset $— $— As of December 31, 2002, the Company has a net operating loss carryforward of approximately $232.7 million for federal and approximately $126.2million for state tax purposes. If not utilized, these carryforwards will begin to expire beginning in 2010 for federal and 2003 for state tax purposes. The Company has research credit carryforwards of approximately $156,000 and $83,000 for federal and state income tax purposes, respectively. If notutilized, the federal carryforward will expire in various amounts beginning in 2010. The California credit can be carried forward indefinitely. The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stockownership of a company. In the event the Company has had a change in ownership, utilization of the carryforwards could be restricted. 10. Commitments and Contingencies San Jose Ground Lease In May 2000, the Company entered into a purchase agreement regarding approximately 80 acres of real property in San Jose, California. In June 2000,before closing on this property, the Company assigned its interest in the purchase agreement to a buyer and on the same date, this buyer purchased theproperty and entered into a 20-year lease with the Company for the property (the “San Jose Ground Lease”). Under the terms of the San Jose Ground Lease, theCompany has the option to extend the lease for an additional 60 years, for a total lease term of 80 years. In addition, the Company has the option to purchasethe property from the buyer on certain designated dates in the future. In September 2001, the Company amended the San Jose Ground Lease (the “First SanJose Ground Lease Amendment”). Previously, the Company posted a letter of credit in the amount of $10,000,000 and was required to increase the letter ofcredit by $25,000,000 to an aggregate of $35,000,000 if the Company did not meet certain development and financing milestones. Pursuant to the terms of theFirst San Jose Ground Lease Amendment, the aggregate obligation was reduced by $10,000,000 to $25,000,000 provided the Company agreed to post anadditional letter of credit totaling $15,000,000 prior to September 30, 2001. In addition, the operating lease commitments, for the 12-month period endingSeptember 2002, were reduced by $3,000,000 provided the Company prepaid a full year of lease payments. The benefit of this reduction was amortized to rentexpense over F-41Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) the full term of the lease. The additional letter of credit was funded prior to September 30, 2001 and the rent pre-payment was funded subsequent to September30, 2001. These letter of credit security deposits were to be reduced on a pro rata basis based on the status of construction activity on this property. In May 2002, the Company further amended the San Jose Ground Lease to provide the Company the option to reduce its obligation under this leasearrangement by up to approximately one-half (the “Second San Jose Ground Lease Amendment”). Pursuant to the terms of the Second San Jose Ground LeaseAmendment, for a one-time fee of $5,000,000, which was recorded as a restructuring charge (see Note 13), the Company had a one-year option, effective July1, 2002, to elect to exclude from this lease anywhere from 20 to 40 acres of the unimproved real property. In September 2002, the Company exercised the optionit had purchased in May 2002 and reduced its obligation under the San Jose Ground Lease by approximately one-half and entered into a further amendment ofthe San Jose Ground Lease (the “Third San Jose Ground Lease Amendment”), which became effective upon the closing of the Combination (see Note 2) andFinancing (see Note 7). Pursuant to the terms of the Third San Jose Ground Lease Amendment, in connection with the exercise of the $5,000,000 option, thelandlord was permitted to unconditionally draw down on the $25,000,000 in letters of credit. A portion of these letters of credit, totaling approximately$5,990,000, was recorded as prepaid rent expense representing fair value of the lease costs for the 15-month period from October 1, 2002 to December 31,2003. The prepaid rent represents the total payments that would have otherwise been paid during this period for the remaining one-half of the lease. TheCompany plans to amortize this prepaid rent expense ratably over the 15-month period. The remaining balance, approximately $19,010,000, was written offand recorded as a restructuring charge as the Company was unable to recognize any future economic benefit attributed to the remaining balance of the letters ofcredit (see Note 13). The Company is currently working with the city of San Jose and county of Santa Clara to prepare this land for future development should additionalfinancing become available for this project. As a result, the Company will be assessed increased property taxes on the remaining approximately 40 acres relatedto the improvement of this land commencing in 2004. Operating Lease Terminations and Amendments In February 2002, the Company entered into a termination agreement for its operating leasehold in Amsterdam, The Netherlands (the “TerminationAgreement”). As stipulated in the Termination Agreement, the Company will surrender two previously-posted letters of credit totaling approximately$4,814,000, which the Company had already fully written-off in conjunction with the restructuring charge that the Company recorded during the third quarterof 2001 (see Note 13). The first letter of credit was surrendered in March 2002 and the second letter of credit was surrendered in August 2002. The costsassociated with terminating this leasehold were consistent with those that the Company estimated during the third quarter of 2001. In February 2002, the Company entered into an agreement to surrender for its operating leasehold in London, England that was declared effective inMarch 2002 (the “Agreement to Surrender”). As stipulated in the Agreement to Surrender, the Company surrendered a previously-posted letter of credit totalingapproximately $822,000, which the Company had already fully written-off in conjunction with the restructuring charge that the Company recorded during thethird quarter of 2001 (see Note 13) and issued a warrant to purchase 18,750 shares of the Company’s common stock at $0.32 per share to the Company’slandlord (the “UK Warrant”). The UK Warrant was valued at $702,000 using the Black-Scholes option-pricing model and has been recorded as an offset toaccrued restructuring charges (see Note 13). The following assumptions were used in determining the fair value of the earned portion of this warrant: fairmarket value per share of $37.76, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 4.00% and a contractual life of one year. The costsassociated with terminating this leasehold were consistent with those that the Company estimated during the third quarter of 2001. F-42Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In April 2002, the Company entered into an agreement to exit its operating leasehold in Frankfurt, Germany (the “Lease Exit Agreement”). As stipulatedin the Lease Exit Agreement, the Company surrendered a previously-posted letter of credit totaling approximately $1,076,000, which the Company had alreadyfully written-off in conjunction with the restructuring charge that the Company recorded during the third quarter of 2001 (see Note 13). As also stipulated inthe Lease Exit Agreement, the Company additionally agreed to (1) pay rent through May 2002, (2) pay cash settlement fees totaling approximately $1,845,000and (3) issued a warrant to purchase 35,938 shares of the Company’s common stock at $0.32 per share to the Company’s landlord in Frankfurt (the“Frankfurt Warrant”). The Frankfurt Warrant was valued at $725,000 using the Black-Scholes option-pricing model and has been recorded as an offset toaccrued restructuring charges. The following assumptions were used in determining the fair value of the earned portion of this warrant: fair market value pershare of $20.48, dividend yield of 0%, expected volatility of 80%, risk-free interest rate of 4.00% and a contractual life of one year. In May 2002, this warrantwas exercised with cash. In July 2002, the Company finalized its agreement to exit one of its excess U.S. operating leaseholds in Mountain View, California, adjacent to theCompany’s headquarters (the “Excess Headquarter Lease Termination”). As stipulated in the Excess Headquarter Lease Termination, the Company agreed topay rent through July 2002 and to waive any rights to any remaining personal property on the premises beyond a specified date. During the quarter ended June30, 2002, the Company wrote-off all property and equipment located in this excess office space, primarily leasehold improvements and some furniture andfixtures, totaling $1,552,000. This was included in the restructuring charges recorded during 2002 (see Note 13). In October 2002, the Company amended the lease for its headquarters in Mountain View, California (the “First Amendment to HQ Lease”). Pursuant tothe First Amendment to HQ Lease, the Company was granted the option to terminate the leasehold in exchange for a termination fee of $924,000. TheCompany paid this fee and exercised this option in October 2002. Provided the Company complies with the terms of the First Amendment to HQ Lease,including the timely payment of its lease obligations for six months, the Company will be permitted to terminate the lease without further penalty and will beentitled to a discharge fee equal to $924,000 at the time the premises are vacated. In March 2003, the Company terminated this lease and moved into newheadquarter facilities in Foster City, California (see Note 14). In October 2002, the Company amended its lease for its Secaucus IBX hub (the “Second Amendment to the Secaucus IBX Lease”). Pursuant to theterms of the Second Amendment to the Secaucus IBX Lease, commencing October 1, 2002 and expiring March 31, 2004, a portion of the base rent otherwisedue for the period will be deferred under January 2005. Commencing January 1, 2005, the portion of the base rent deferred, plus interest calculated thereon,will be repaid to the Secaucus landlord in 36 equal payments ending December 1, 2007. Operating Lease Commitments The Company leases its IBX hubs and certain equipment under noncancelable operating lease agreements expiring through 2020. The centers’ leaseagreements typically provide for base rental rates that increase at defined intervals during the term of the lease. In addition, the Company has negotiated rentexpense abatement periods to better match the phased build-out of its centers. The Company accounts for such abatements and increasing base rentals usingthe 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. F-43Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Minimum future operating lease payments as of December 31, 2002 are summarized as follows (in thousands): Year ending: 2003 $20,9132004 23,0752005 26,1342006 27,1892007 28,050Thereafter 206,840 Total $332,201 Total rent expense was approximately $25,193,000, $27,150,000 and $16,157,000 for the years ended December 31, 2002, 2001 and 2000,respectively. Deferred rent included in other liabilities was $13,420,000 and $9,691,000 as of December 31, 2002 and 2001, respectively. Legal Actions During the quarter ended September 30, 2001, putative shareholder class action lawsuits were filed against the Company, certain of its officers anddirectors, and several investment banks that were underwriters of the Company’s initial public offering. The suits allege that the underwriter defendants agreedto allocate stock in the Company’s initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by thoseinvestors to make additional purchases in the aftermarket at pre-determined prices. Plaintiffs allege that the prospectus for the Company’s initial publicoffering was false and misleading and in violation of the securities laws because it did not disclose these arrangements. The Company and its officers anddirectors intend to defend the action vigorously. The Company believes that more than one hundred other companies have been named in nearly identicallawsuits that have been filed by some of the same plaintiffs’ law firms. The Company believes it has adequate legal defenses and believes that the ultimateoutcome of these actions will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows, although therecan be no assurance as to the outcome of such litigation. Furthermore, no range of loss can be estimated at this time. Under the Wells Fargo Loan (see Note 4), the Company was required to maintain a minimum cash balance at all times. As of June 30, 2002, theCompany was not in compliance with this requirement. Wells Fargo filed a lawsuit against the company seeking to force the Company to obtain a letter ofcredit in the full amount of the outstanding balance of the Wells Fargo loan. In February 2003, as part of a settlement agreement with Wells Fargo, theCompany made a payment to Wells Fargo of approximately $1.7 million in full satisfaction of all amounts owed to Wells Fargo under this loan agreement. Aspart of the same agreement, the lawsuit has been dismissed and the loan agreement has been terminated (see Note 14). From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accruescontingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. In the opinion ofmanagement, there are no pending claims of which the outcome is expected to result in a material adverse effect in the financial position, results of operationsor cash flows of the Company. F-44Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Employment Agreements 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. In August 2002, the Company entered into severance agreements with certain of its executive officers. Under the terms of the agreements, the officers areentitled to one year’s salary, bonus and certain healthcare benefits in the event of an involuntary termination for reasons other than cause. Employee Benefit Plan The Company has a 401(k) Plan that allows eligible employees to contribute up to 15% of their compensation, limited to $11,000 in 2002. Employeecontributions and earnings thereon vest immediately. Although the Company may make discretionary contributions to the 401(k) Plan, no contributions haveever been made as of December 31, 2002. Guarantor Arrangements In November 2002, the FASB issued FIN No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guaranteesof Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34 (“FIN 45”). FIN 45requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. FIN 45also requires additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees ithas issued. The accounting requirements for the initial recognition of guarantees are applicable on a prospective basis for guarantees issued or modified afterDecember 31, 2002. The disclosure requirements are effective for all guarantees outstanding, regardless of when they were issued or modified, during the firstquarter of fiscal 2003. The adoption of FIN 45 did not have a material effect on the Company’s consolidated financial statements. The following is a summaryof the agreements that the Company has determined are within the scope of FIN 45. As permitted under Delaware law, the Company has agreements whereby the Company indemnifies its officers and directors for certain events oroccurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The term of the indemnification period is for theofficer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnificationagreements is unlimited; however, the Company has a director and officer insurance policy that limits the Company’s exposure and enables the Company torecover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of theseindemnification agreements is minimal. All of these indemnification agreements were grandfathered under the provisions of FIN 45 as they were in effect priorto December 31, 2002. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2002. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Companyindemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’sbusiness partners or customers, in connection with any U.S. patent, or any copyright or other intellectual property infringement claim by any third party withrespect to the Company’s services. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. Themaximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, theCompany has never incurred costs to defend lawsuits or settle claims related to these indemnification F-45Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. These indemnification agreements were grandfatheredunder the provisions of FIN 45 as they were in effect prior to December 31, 2002. Accordingly, the Company has no liabilities recorded for these agreements asof December 31, 2002. The Company enters into arrangements with its business partners, whereby the business partner agrees to provide services as a subcontractor for theCompany’s implementations. The Company may, at its discretion and in the ordinary course of business, subcontract the performance of any of its services.Accordingly, the Company enters into standard indemnification agreements with its customers, whereby the Company indemnifies them for other acts, suchas personal property damage, of its subcontractors. The maximum potential amount of future payments the Company could be required to make under theseindemnification agreements is unlimited; however, the Company has general and umbrella insurance policies that enable the Company to recover a portion ofany amounts paid. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, theCompany believes the estimated fair value of these agreements is minimal. These arrangements were grandfathered under the provisions of FIN 45 as they werein effect prior to December 31, 2002. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2002. The Company has service level commitment obligations to certain of its customers. As a result, service interruptions or significant equipment damage inthe Company’s IBX hubs, whether or not within our control, could result in service level commitments to these customers. The Company’s liability insurancemay not be adequate to cover those expenses. In addition, any loss of services, equipment damage or inability to meet the Company’s service level commitmentobligations, particularly in the early stage of the Company’s development, could reduce the confidence of the Company’s customers and could consequentlyimpair the Company’s ability to obtain and retain customers, which would adversely affect both the Company’s ability to generate revenues and theCompany’s operating results. Historically, these service level credits have not been significant. These arrangements were grandfathered under the provisions ofFIN 45 as they were in effect prior to December 31, 2002. Accordingly, the Company has no significant liabilities for these agreements as of December 31,2002. Under the terms of the Combination Agreement (see Note 2), the Company is contractually obligated to use commercially reasonable efforts to ensurethat at all times from and after the closing of the Combination, until such time as neither STT Communications nor its affiliates hold the Company’s capitalstock or debt securities (or the capital stock received upon conversion of the debt securities) received by STT Communications in connection with theCombination, that none of the Company’s capital stock issued to STT Communications is constituted as “United States real property interests” within themeaning of Section 897(c) of the Internal Revenue Code of 1986. Under Section 897(c) of the Code, the Company’s capital stock issued to STTCommunications would generally constitute “United States real property interests” at such point in time that the fair market value of the “United States realproperty interests” owned by the Company equals or exceeds 50% of the sum of the aggregate fair market values of (a) the Company’s “United States realproperty interests,” (b) the Company’s interests in real property located outside the U.S., and (c) any other assets held by the Company which are used or heldfor use in the Company’s trade or business. The Company refers to this provision in the Combination Agreement as the FIRPTA covenant. Pursuant to theFIRPTA covenant, the Company may be forced to take commercially reasonable proactive steps to ensure the Company’s compliance with the FIRPTAcovenant, including, but not limited to, (a) a sale-leaseback transaction with respect to all real property interests, or (b) the formation of a holding companyorganized under the laws of the Republic of Singapore which would issue shares of its capital stock in exchange for all of the Company’s outstanding stock(this reorganization would require the submission of that transaction to the Company’s stockholders for their approval and the consummation of thatexchange). Currently, the Company is in compliance with the FIRPTA covenant. This F-46Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) arrangement was grandfathered under the provisions of FIN 45 as it was in effect prior to December 31, 2002. Accordingly, the Company has no liabilitiesrecorded related to non-compliance with the FIRPTA covenant as of December 31, 2002. Under the terms of the Combination Agreement (see Note 2), the Company is contractually obligated to use the Company’s reasonable best efforts toobtain the release of STT Communications from a bank guarantee associated with i-STT’s unconsolidated Thailand joint venture. Such efforts may include i-STT assuming such guarantee if it is commercially reasonable to do so. Currently, the Company has not assumed such guarantee and accordingly, noliability has been recorded for this potential liability as of December 31, 2002. This guarantee is for a Thai baht 260,000,000 bank loan (approximately$6,032,000 as translated using effective exchange rates at December 31, 2002), of which Thai baht 54,900,000 is currently outstanding as of December 31,2002 (approximately $1,274,000 as translated using effective exchange rates at December 31, 2002). This arrangement was grandfathered under the provisionsof FIN 45 as it was in effect prior to December 31, 2002. Accordingly, the Company has no liabilities recorded related to this matter as of December 31, 2002. When as part of an acquisition the Company acquires all of the stock or all of the assets and liabilities of a company, we assume the liability for certainevents or occurrences that took place prior to the date of acquisition. The maximum potential amount of future payments the Company could be required tomake for such obligations is undeterminable at this time. All of these obligations were grandfathered under the provisions of FIN No. 45 as they were in effectprior to December 31, 2002. Accordingly, we have no liabilities recorded for these liabilities as of December 31, 2002. 11. Related Party Transactions Officer Loans Through December 31, 2000, the Company advanced an aggregate of $1,150,000 to three officers of the Company. During 2001, the Companyadvanced an additional $2,412,000 to two officers of the Company, including a loan to the Company’s chief executive officer totaling $1,512,000. All suchofficer loans were evidenced by promissory notes. The proceeds of these loans were used to fund the purchase of personal residences. The loans were due atvarious dates through 2006, but were subject to certain events of acceleration and were secured by a second deed of trust on the officers’ residences. The loanswere non-interest bearing. In October 2001, one of these loans totaling $150,000 was repaid in full in conjunction with an officer leaving the Company. In January 2002, the Board of Directors forgave $874,000 of the chief executive officer’s employee loan totaling $1,512,000 in exchange for the chiefexecutive officer waiving his right to any bonuses earned and expensed in 2001. The remaining amount due under the loan of $638,000 was repaid to theCompany in full in February 2002. Furthermore, the Company negotiated with two other executive officers of the Company to repay their loans in full totaling$1,000,000. In exchange, the Company agreed to pay a portion of the interest on the officer’s mortgage for their principal residence for a 24-month period. Oneof these loans totaling $750,000 was repaid in full in February 2002 and the second loan totaling $250,000 was repaid in full in March 2002. In September 2002, the Company negotiated with a non-executive officer of the Company for early repayment of the last remaining officer loan totaling$900,000. A portion of the loan was forgiven to compensate the employee for related out-of-pocket costs of sale of the residence. The remaining amount, totaling$700,000, due under the loan was repaid to the Company in October 2002. No other officer or employee loans exist as of December 31, 2002. These loans were presented in other assets on the accompanying consolidated balancesheet as of December 31, 2001. F-47Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Revenue Transactions In February and March 2002, the Company entered into two agreements to resell equipment with related party companies. Both related party companieshave executive officers that serve on the Company’s Board of Directors, and one of the related party company executive officers also serves on the board ofdirectors of such company. In addition, one of the companies was also a 5% or greater stockholder in the Company. Revenue recognized during 2002 fromsuch equipment reseller agreements totaled approximately $2,936,000. For the year ended December 31, 2001, Loudcloud, Inc. (“Loudcloud”) was the Company’s second largest customer. Revenues from Loudcloudamounted to $5,105,000, which represented 8% of the Company’s total revenues for fiscal 2001. Andrew S. Rachleff, one of the Company’s directors, is aco-founder and general partner of Benchmark Capital. Benchmark Capital is a greater than 5% stockholder of Loudcloud, and Mr. Rachleff currently serveson the Board of Directors of Loudcloud. Subsequent to December 31, 2001, Loudcloud changed its name to Opsware, Inc. and sold its Equinix-relatedoperations to Electronic Data Systems (“EDS”). As a result, Equinix now contracts its services to EDS. 12. Segment Information The Company and its subsidiaries are principally engaged in the design, build-out and operation of neutral IBX hubs. All revenues result from theoperation of these IBX hubs. Accordingly, the Company considers itself to operate in a single segment for purposes of disclosure under SFAS No. 131. TheCompany’s chief operating decision-maker evaluates performance, makes operating decisions and allocates resources based on financial data consistent withthe presentation in the accompanying consolidated financial statements. Due to the Combination (see Note 2), the Company acquired operations in Asia-Pacific effective December 31, 2002. As a result, the Company’sconsolidated balance sheet as of December 31, 2002 includes certain net identifiable assets based in Asia-Pacific. In addition, commencing in fiscal 2003, theCompany’s consolidated statement of operations will include revenues and operating expenses from Asia-Pacific. The Company expects that in fiscal 2003,Asia-Pacific revenues will comprise approximately 15% of the Company’s total consolidated revenues. During the quarter ended September 30, 2001, the Company recorded a restructuring charge as part of its revised European services strategy. A total of$45,315,000 of the restructuring charge related to the write-off of certain European assets to their net realizable value (see Note 13). As of December 31, 2002,all of the Company’s operations and assets were based in the United States with the exception of $9,840,000 of the Company’s net identifiable assets based inAsia-Pacific, $681,000 of the Company’s net identifiable assets based in Europe and $605,000 of the Company’s total net loss was attributable to additionalrestructuring and other activity in Europe for the year ended December 31, 2002. As of December 31, 2001, all of the Company’s operations and assets werebased in the United States with the exception of $2,234,000 of the Company’s net identifiable assets based in Europe and $51,515,000 of the Company’stotal net loss was attributable to the development and restructuring of its European operations for the year ended December 31, 2001. As of December 31, 2000,all of the Company’s operations and assets were based in the United States with the exception of $24,459,000 of the Company’s identifiable assets based inEurope and $429,000 of the Company’s total net loss was attributable to the development of its European operations. F-48Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 13. Restructuring Charges 2001 Restructuring Charge During the quarter ended September 30, 2001, the Company revised its European services strategy through the development of new partnerships withother leading international Internet exchange partners rather than build and operate its own European IBX hubs. In addition, the Company initiated efforts toexit certain leaseholds relating to certain excess U.S. operating leases. Also, in September 2001, the Company implemented an approximate 15% reduction inworkforce, primarily in headquarter positions, in an effort to reduce operating costs, which resulted in approximately $5.6 million in annual savings. As aresult, the Company took a total restructuring charge of $48,565,000 primarily related to the write-down of European construction in progress assets to theirnet realizable value, the write-off of several European letters of credit related to various European operating leases, the accrual of estimated European and U.S.leasehold exit costs and the severance accrual related to the reduction in workforce. The remaining European assets as of December 31, 2001, totaling$2,234,000, represented assets purchased during pre-construction activities that were held for resale and sold during 2002 (see Note 3). As of December 31,2001, the Company had successfully surrendered one of the European leases. The Company completed the exit of the remaining European leases and one ofthe U.S. leases during 2002 (see Note 10). The collective costs of these European exit activities, primarily the exit of the German leasehold and an additionalloss incurred on the sale of the European assets held for resale, exceeded the amount estimated by management during the third quarter of 2001. As a result, theCompany recorded an additional restructuring charge during the second quarter of 2002 (see 2002 Restructuring Charges below). The reduction in workforcewas substantially completed during the fourth quarter of 2001. A summary of the movement in the 2001 restructuring charge accrual for the year ended December 31, 2002 is outlined as follows (in thousands): Accrued restructuringcharge as of December 31,2001 Non-cashcharges Cashpayments Accruedrestructuring chargeas of December 31,2002European exit costs $4,606 (2,492) (2,114) $—U.S. lease exit costs 1,512 — (702) 810Workforce reduction 272 — (272) — $6,390 $(2,492) $(3,088) $810 A summary of the 2001 restructuring charge through December 31, 2001 is outlined as follows (in thousands): Total 2001restructuringcharge Non-cashcharges Cashpayments Accrued restructuring charge asof December 31, 2001Write-down of European construction in progress $29,260 $(29,260) $— $—Write-off of European letters of credit 8,634 (8,634) — —European exit costs 7,421 (2,059) (756) 4,606U.S. lease exit costs 2,000 — (488) 1,512Workforce reduction 1,250 (134) (844) 272 $48,565 $(40,087) $(2,088) $6,390 F-49Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 2002 Restructuring Charges During the quarter ended June 30, 2002, the Company took a second restructuring charge to reflect the Company’s ongoing efforts to exit or amendseveral unnecessary U.S. IBX expansion and headquarter office space operating leaseholds and to complete the Company’s European exit activities. Inaddition, in May 2002, the Company implemented a reduction in workforce of less than 10%, primarily in headquarter positions, in an effort to reduceoperating costs. As a result, the Company took a total restructuring charge of $9,950,000, primarily related to the Second San Jose Ground Lease option fee of$5,000,000 (see Note 10); the write-off of property and equipment, primarily leasehold improvements and some equipment, located in two unnecessary U.S.IBX expansion and headquarter office space operating leaseholds that the Company decided to exit and that do not currently provide any ongoing benefit; thewrite-off of two U.S. letters of credit related to one U.S. operating leasehold from which the Company has committed to exit; an accrual for the remainingestimated European exit costs and additional U.S. leasehold exit costs and the severance accrual related to the reduction in workforce. The Company continuesto work on an exit plan for the excess U.S. operating leases and expects to complete the exit of the U.S. operating leases within the next twelve months. Shouldit take longer to negotiate the exit of the remaining U.S. leases or the lease settlement amounts exceed the amounts estimated by management, the actual U.S.lease exit costs could exceed the amount estimated and additional restructuring charges may be required. The reduction in workforce was substantiallycompleted during the second quarter of 2002. During the quarter ended September 30, 2002, the Company recorded an additional restructuring charge as a result of the Third San Jose Ground LeaseAmendment (see Note 10). As a result, the Company released its letters of credit relating to the San Jose Ground Lease and recorded a restructuring charge of$19,010,000. During the fourth quarter ended December 31, 2002, the Company recorded an additional restructuring charge as a result of a small reduction inworkforce in headquarter positions offset by the reversal of the previous write-down of one of the letters of credit recorded in conjunction with the secondquarter 2002 restructuring charge noted above. Based on further negotiation with the landlord, both parties agreed that the letter of credit will be left intact. Thereduction in workforce was substantially completed in January 2003. The reductions in workforce undertaken in the second and fourth quarters of 2002, which represented a less than 10% reduction in workforce primarilyin the Company’s headquarter functions, resulted in approximately $2.8 million of annual savings. F-50Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) A summary of the 2002 restructuring charges through December 31, 2002 is outlined as follows (in thousands): Total 2002restructuringcharges Non-cashcharges Cashpayments Accrued restructuringcharge as ofDecember 31, 2002San Jose ground lease option fee $5,000 $— $(5,000) $—Write-off of U.S. property and equipment 2,585 (2,585) — —Additional lease exit costs 1,115 — (723) 392Write-off of two U.S. letters of credit 750 (750) — —Workforce reduction 500 — (469) 31 Second quarter subtotal 9,950 (3,335) (6,192) 423 Write-off of San Jose ground lease letters of credit 19,010 (19,010) — — Third quarter subtotal 19,010 (19,010) — — Workforce reduction 425 — — 425Write-up of one U.S. letter of credit (500) 500 — — Fourth quarter subtotal (75) 500 — 425 $28,885 $(21,845) $(6,192) $848 Acquired Restructuring Charges As a result of the Combination (see Note 2), the Company acquired several accruals related to restructuring activities from both i-STT and Pihana,which were commenced in 2002, but will not be completed until 2003. A summary of these acquired restructuring accruals as of December 31, 2002 isoutlined as follows (in thousands): Workforce reduction and relocation $5,712Lease exit and office shutdown costs 1,735Other professional fees 2,423 $9,870 A significant portion of the above activities will be completed and paid during the first and second quarters of 2003. 14. Subsequent Events On January 1, 2003, pursuant to the provisions of the Company’s stock plans (see Note 8), the number of common shares in reserve automaticallyincreased by 506,921 shares for the 2000 Equity Incentive Plan, 168,974 shares for the Employee Stock Purchase Plan and 50,000 shares for the 2000Director Stock Option Plan. In January 2003, the Company entered into a settlement agreement with Wells Fargo in connection with a lawsuit related to the Wells Fargo Loan (the“Wells Fargo Settlement”) (see Notes 4 and 10). In compliance with the terms of the Wells Fargo Settlement, in February 2003, the Company paid Wells Fargo$1,703,000 in full satisfaction of all amounts owed to Wells Fargo, including $1,631,000 in principal. As part of the Wells Fargo Settlement, the lawsuit hasbeen dismissed and the Wells Fargo Loan terminated. F-51Table of ContentsEQUINIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In February 2003, the Company entered into a new corporate headquarter lease in Foster City, California, which commenced March 2003 and ends inMarch 2008. In March 2003, the Company terminated its Mountain View, California, corporate headquarter lease (see Note 10) and moved its corporateheadquarters to the new office facility in Foster City. In March 2003, the Board of Directors granted options to all employees as part of an annual grant to all employees, including all officers of theCompany, to purchase 2,663,600 shares of common stock at a weighted average exercise price of $3.25 per share under the Plans (see Note 8). F-52Table of ContentsEQUINIX, INC. CONSOLIDATED STATEMENTS OF OPERATIONSQUARTERLY FINANCIAL INFORMATION (Unaudited) The Company believes that period-to-period comparisons of its financial results should not be relied upon as an indication of future performance. TheCompany’s revenues and results of operations have been subject to significant fluctuations, particularly on a quarterly basis, and the Company’s revenuesand results of operations could fluctuate significantly quarter-to-quarter and year-to-year. Significant quarterly fluctuations in revenues will cause significantfluctuations in our cash flows and the cash and cash equivalents and accounts receivable accounts on the Company’s balance sheet. Causes of suchfluctuations may include the volume and timing of new orders and renewals, the sales cycle for our services, the introduction of new services, changes inservice prices and pricing models, trends in the Internet infrastructure industry, general economic conditions (such as the recent economic slowdown),extraordinary events such as acquisitions or litigation and the occurrence of unexpected events. The unaudited quarterly financial information presented below has been prepared by the Company and reflects all adjustments, consisting only ofnormal recurring adjustments, which in the opinion of management are necessary to present fairly the financial position and results of operations for theinterim periods presented. The following table presents selected quarterly information for fiscal 2002, 2001 and 2000: First quarter Second quarter Third quarter Fourth quarter (in thousands, except per share data) 2002: Revenues $20,158 $18,040 $20,187 $18,803 Net income (loss) (13,694) (24,557) (44,088) 60,721 Basic net income (loss) per share (5.16) (7.94) (14.04) 19.14 Diluted net income (loss) per share (5.16) (7.94) (14.04) 18.12 2001: Revenues $12,613 $16,157 $17,178 $17,466 Net loss (41,537) (37,857) (81,574) (27,447)Basic and diluted net loss per share (17.40) (15.52) (33.01) (10.90)2000: Revenues $136 $892 $3,933 $8,055 Net loss (18,009) (26,811) (32,085) (42,885)Basic and diluted net loss per share (73.21) (92.13) (22.72) (18.27) F-53Table of ContentsINDEX TO EXHIBITS ExhibitNumber Description of Document 2.1********** Combination Agreement, dated as of October 2,2002, by and among Equinix, Inc., Eagle Panther Acquisition Corp., EagleJaguar Acquisition Corp., i-STT Pte Ltd, STT Communications Ltd., Pihana Pacific, Inc. and Jane Dietze, as representativeof the stockholders of Pihana Pacific, Inc. 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 Registrant’s Common Stock certificate. 4.6* Common Stock Registration Rights Agreement (See Exhibit 10.3). 4.9* Amended and Restated Investors’ Rights Agreement (See Exhibit 10.6). 4.10 Registration Rights Agreement (See Exhibit 10.75).10.1* Indenture, dated as of December 1, 1999, by and among the Registrant and State Street Bank and Trust Company ofCalifornia, 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 ofCalifornia, N.A. (as warrant agent).10.3* Common Stock Registration Rights Agreement, dated as of December 1, 1999, by and among the Registrant, BenchmarkCapital Partners II, L.P., Cisco Systems, Inc., Microsoft Corporation, ePartners, Albert M. Avery, IV and Jay S. Adelson (asinvestors), and the Initial Purchasers.10.4* Registration Rights Agreement, dated as of December 1, 1999, by and among the Registrant and the Initial Purchasers.10.5* Form of Indemnification Agreement between the Registrant and each of its officers and directors.10.6* Amended and Restated Investors’ Rights Agreement, dated as of May 8, 2000, by and between the Registrant, the Series APurchasers, the Series B Purchasers, the Series C Purchasers and members of the Registrant’s management.10.8* The Registrant’s 1998 Stock Option Plan.10.9*+ Lease Agreement with Carlyle-Core Chicago LLC, dated as of September 1, 1999.10.10*+ Lease Agreement with Market Halsey Urban Renewal, LLC, dated as of May 3, 1999.10.11*+ Lease Agreement with Laing Beaumeade, dated as of November 18, 1998.10.12*+ Lease Agreement with Rose Ventures II, Inc., dated as of June 10, 1999.10.13*+ Lease Agreement with Carrier Central LA, Inc., as successor in interest to 600 Seventh Street Associates, Inc., dated as ofAugust 8, 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 December15, 1999.10.17* Lease Agreement with ARE-2425/2400/2450 Garcia Bayshore LLC, dated as of January 28, 2000.10.19*+ Master Agreement for Program Management, Site Identification and Evaluation, Engineering and Construction Services betweenEquinix, Inc. and Bechtel Corporation, dated November 3, 1999.Table of ContentsExhibitNumber Description of Document10.20*+ Agreement between Equinix, Inc. and WorldCom, Inc., dated November 16, 1999.10.21* Customer Agreement between Equinix, Inc. and WorldCom, Inc., dated November 16, 1999.10.22*+ Lease Agreement with GIP Airport B.V., dated as of April 28, 2000.10.23* Purchase Agreement between International Business Machines Corporation and Equinix, Inc. dated May 23, 2000.10.24** 2000 Equity Incentive Plan.10.25** 2000 Director Option Plan.10.26** 2000 Employee Stock Purchase Plan.10.27** Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated June 21, 2000.10.28***+ Lease Agreement with TrizecHahn Beaumeade Technology Center LLC, dated as of July 1, 2000.10.29***+ Lease Agreement with TrizecHahn Beaumeade Technology Center LLC, dated as of May 1, 2000.10.30***+ Lease Agreement with Carrier Central LA, Inc., as successor in interest to 600 Seventh Street Associates, Inc., dated as ofAugust 24, 2000.10.31***+ Lease Agreement with Burlington Associates III Limited Partnership, dated as of July 24, 2000.10.32***+ Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft Allgemeine Anlageverwaltungvorm. Seilwolff AG von 1890, dated as of August 7, 2000.10.33***+ Lease Agreement with Quattrocento Limited, dated as of June 1, 2000.10.34*** Lease Agreement with ARE-2425/2400/2450 Garcia Bayshore, LLC, dated as of March 20, 2000.10.35*** First Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. Aktiengesellschaft AllgemeineAnlageverwaltung vorm. Seilwolff AG von 1890, dated as of October 11, 2000.10.37****+ Lease Agreement with Quattrocentro Limited, dated as of June 9, 2000.10.38****+ Lease Agreement with Compagnie des Entrepots et Magasins Generaux de Paris, dated as of July 18, 2000.10.39****+ Second Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. AktiengesellschaftAllgemeine Anlageverwaltung vorm. Seilwolff AG von 1890, dated as of December 22, 2000.10.40**** Third Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. AktiengesellschaftAllgemeine Anlageverwaltung vorm. Seilwolff AG von 1890, dated as of March 8, 2001.10.41*****+ Fourth Supplement to the Lease Agreement with Naxos Schmirdelwerk Mainkur GmbH and A.A.A. AktiengesellschaftAllgemeine Anlageverwaltung vorm. Seilwolff AG von 1890, acting in partnership under the name Naxos-UnionGrundstucksverwaltungsgesellschaft GbR, dated as of July 3, 2001.10.42*****+ First Amendment to Deed of Lease with TrizecHahn Beaumeade Technology Center LLC, dated as of March 22, 2001.10.43*****+ First Lease Amendment Agreement with Market Halsey Urban Renewal, LLC, dated as of May 23, 2001.Table of ContentsExhibitNumber Description of Document10.44*****+ First Amendment to Lease with Nexcomm Asset Acquisition I, L.P., dated as of April 18, 2000.10.45*****+ Amendment to Lease Agreement with Burlington Realty Associates III Limited Partnership, dated as of December 18,2000.10.46****** First Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of September26, 2001.10.47****** Amended and Restated Credit and Guaranty Agreement, dated as of September 30, 2001.10.47****** Amended and Restated Credit and Guaranty Agreement, dated as of September 30, 2001.10.48****** 2001 Supplemental Stock Plan.10.49******* Deed Terminating a Commercial Lease with Compagnie des Entrepots et Magasins Generaux de Paris, dated as ofSeptember 7, 2001.10.50******** Agreement terminating the Lease Agreement with Naxos Schmirdelwork Mainkur GmbH and A.A.A.Aktiengesellschaft Allgemeine Anlageverwaltung vorm. Seilwolff AG von 1890, dated as of April 26, 2002.10.51******** Agreement to Surrender of a Lease Agreement by and between Equinix UK Limited and Quattrocentro Limited, datedas of February 27, 2002.10.52******** Termination Agreement by and among Equinix, Inc. and Deka Immobilien Investment GMBH, successor in title toGIP Airport B.V., dated as of February 18, 2002, terminating the Lease Agreement with GIP Airport B.V., dated asof April 28, 2000.10.53******** Second Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of May 20,2002.10.54********+ Amended and Restated Master Service Agreement by and between International Business Machines Corporation andEquinix, Inc., dated as of May 1, 2002.10.55******** Agreement for Termination of Lease and Voluntary Surrender of Premises by and between ARE-2425/2400/2450Garcia Bayshore LLC and Equinix Operating Co., Inc., dated as of July 12, 2002.10.56*********+ Second Amendment to Lease Agreement with Burlington Realty Associates III Limited Partnership, dated as ofOctober 1, 2002.10.57*********+ First Amendment to Lease Agreement for property located at 2450 Bayshore Parkway, Mountain View, CA 94043,dated as of October 1, 2002.10.58********* Form of Severance Agreement entered into by the Company and each of the Company’s executive officers.10.59 Second Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2002.10.60 Governance Agreement by and among Equinix, Inc., STT Communications Ltd., i-STT CommunicationsLtd.,— STT Investments Pte Ltd and the Pihana Pacific stockholder named therein, dated as of December 31,2002.10.61 Tenancy Agreement over units #06-01, #06-05, #06-06, #06-07 and #06-08 of Block 20 Ayer Rajah Crescent,Singapore 139964.10.62 Tenancy Agreement over units #05-05, #05-06, #05-07 and #05-08 of Block 20 Ayer Rajah Crescent, Singapore139964.10.63 Tenancy Agreement over units #03-01 and #03-02 of Block 28 Ayer Rajah Crescent, Singapore 139959.Table of ContentsExhibitNumber Description of Document10.64 Tenancy Agreement over units #05-01, #05-02, #05-03 and #05-04 of Block 20 Ayer Rajah Crescent, Singapore 139964.10.65 Tenancy Agreement over units #03-05, #03-06, #03-07 and #03-08 of Block 20 Ayer Rajah Crescent, Singapore 139964.10.66 Lease Agreement with Nation Multimedia Group Public Co., Ltd. For 1st and 3rd Floor of Nation Building II, Bangkok, dated as ofFebruary 1, 2001.10.67 Lease Agreement with Nation Multimedia Group Public Co., Ltd. For 6th Floor of Nation Tower, Bangkok, dated as of October 1, 2001.10.68 General Factory Lease Agreement dated February 21, 2001.10.69 Lease Agreement with Downtown Properties, LLC dated April 10, 2000, as amended.10.70 Lease Agreement with Comfort Development Limited dated November 10, 2000.10.71 Lease Agreement with PacEast Telecom Corporation dated June 15, 2000, as amended.10.72 Lease Agreement Lend Lease Real Estate Investments Limited dated October 20, 2000.10.73 Lease Agreement with AIPA Properties, LLC dated November 1, 1999, as amended.10.74 Third Modification to Ground Lease by and between iStar San Jose, LLC and Equinix, Inc., dated as of September 30, 2002.10.75 Registration Rights Agreement by and among Equinix and the Initial Purchasers, dated as of December 31, 2002.10.76 Securities Purchase Agreement by and among Equinix, the Guarantors and the Purchasers, dated as of October 2, 2002.10.77 Series A-1 Convertible Secured Note Due 2007 issued to i-STT Investments Pte Ltd on December 31, 2002.10.78 Preferred Stock Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.79 Change in Control Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.80 Series A Cash Trigger Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.81 Series B Cash Trigger Warrant issued to i-STT Investments Pte Ltd on December 31, 2002.10.82 First Supplemental Indenture between Equinix and State Street Bank and Trust Company of California, N.A., as Trustee, dated as ofDecember 28, 2002.16.1* Letter regarding change in certifying accountant.21.1 Subsidiaries of Equinix.23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.99.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Registration Statement on Form S-4 (Commission FileNo. 333-93749).** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Registration Statement in Form S-1 (Commission FileNo. 333-39752).*** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2000.**** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2000.***** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2001.Table of Contents ****** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2001.******* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2001.******** Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2002.********* Incorporated herein by reference to the exhibit of the same number in the Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2002.********** Incorporated herein by reference to Annex A of Equinix’s Definitive Proxy Statement filed with the Commission December 12, 2002.+ Confidential treatment has been requested for certain portions which are omitted in the copy of the exhibit electronically filed with theSecurities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commissionpursuant to Equinix’s application for confidential treatment. Exhibit 3.2 AMENDED AND RESTATED BYLAWS OF EQUINIX, INC. A DELAWARE CORPORATION  TABLE OF CONTENTS PageARTICLE I OFFICE AND RECORDS 1Section 1.1 Delaware Office 1Section 1.2 Other Offices 1Section 1.3 Books and Records 1ARTICLE II STOCKHOLDERS 1Section 2.1 Annual Meeting 1Section 2.2 Special Meeting 1Section 2.3 Place of Meeting 1Section 2.4 Notice of Meeting 1Section 2.5 Quorum and Adjournment 2Section 2.6 Proxies 2Section 2.7 Notice of Stockholder Business and Nominations 2Section 2.8 Procedure for Election of Directors 4Section 2.9 Inspectors of Elections; Opening and Closing the Polls 4Section 2.10 Consent of Stockholders in Lieu of Meeting 4ARTICLE III BOARD OF DIRECTORS 5Section 3.1 General Powers 5Section 3.2 Number, Tenure and Qualifications 5Section 3.3 Regular Meetings 5Section 3.4 Special Meetings 5Section 3.5 Notice 5Section 3.6 Conference Telephone Meetings 6Section 3.7 Quorum 6Section 3.8 Vacancies 6Section 3.9 Committee 6Section 3.10 Removal 6ARTICLE IV OFFICERS 7Section 4.1 Elected Officers 7Section 4.2 Election and Term of Office 7Section 4.3 Chairman of the Board 7Section 4.4 President and Chief Executive Officer 7Section 4.5 Secretary 7Section 4.6 Treasurer 8Section 4.7 Removal 8Section 4.8 Vacancies 8ARTICLE V STOCK CERTIFICATES AND TRANSFERS 8Section 5.1 Stock Certificates and Transfers 8  ARTICLE VI INDEMNIFICATION 9Section 6.1 Right to Indemnification 9Section 6.2 Right to Advancement of Expenses 9Section 6.3 Right of Indemnitee to Bring Suit 10Section 6.4 Non-Exclusivity of Rights 10Section 6.5 Insurance 10Section 6.6 Indemnification of Employees and Agents of the Corporation 10ARTICLE VII GOVERNANCE PROVISIONS 11Section 7.1 Number of Directors 11Section 7.2 Nomination of Directors 11Section 7.3 Board Committees 13Section 7.4 Chairman of the Board 13Section 7.5 Budgets 13Section 7.6 Termination of Governance Provisions 13ARTICLE VIII MISCELLANEOUS PROVISIONS 13Section 8.1 Fiscal Year 13Section 8.2 Dividends 13Section 8.3 Seal 13Section 8.4 Waiver of Notice 14Section 8.5 Audits 14Section 8.6 Resignations 14Section 8.7 Contracts 14Section 8.8 Proxies 14ARTICLE IX AMENDMENTS 15Section 9.1 Amendments 15  ARTICLE I OFFICES AND RECORDS Section 1.1 Delaware Office. The registered office of the Corporation in the State of Delaware shall be located in the City of Wilmington, County of NewCastle. Section 1.2 Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the board of directors of theCorporation (the “Board of Directors”) may designate or as the business of the Corporation may from time to time require. Section 1.3 Books and Records. The books and records of the Corporation may be kept at the Corporation’s principal offices or at such other locationsoutside the State of Delaware as may from time to time be designated by the Board of Directors. ARTICLE II STOCKHOLDERS Section 2.1 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held at such date, place and/or time as may be fixed byresolution of the Board of Directors. Section 2.2 Special Meeting. Special meetings of stockholders of the Corporation may be called only by the Board of Directors acting pursuant to aresolution adopted by a majority of the Whole Board. For purposes of these Amended and Restated Bylaws, the term “Whole Board” shall mean the totalnumber of authorized directors whether or not there exist any vacancies in previously authorized directorships. Section 2.3 Place of Meeting. The Board of Directors may designate the place of meeting for any meeting of the stockholders. If no designation is madeby the Board of Directors, the place of meeting shall be the principal office of the Corporation. Section 2.4 Notice of Meeting. Except as otherwise required by law, written or printed notice or notice otherwise allowed by Delaware General CorporationLaw, stating the place, day and hour of the meeting and the purposes for which the meeting is called, shall be prepared and delivered by the Corporation notless than ten days nor more than sixty days before the date of the meeting, either personally, or by mail, to each stockholder of record entitled to vote at suchmeeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to thestockholder at his, her or its address as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required bylaw. Meetings may be held without notice if all stockholders entitled to vote are present (except as otherwise provided by law), or if notice is waived by thosenot present. Any previously scheduled meeting of the stockholders may be postponed and (unless the Corporation’s certificate of incorporation (as in effectfrom time to time, including any certificates of designation, the “Certificate of Incorporation”) otherwise provides) anyspecial meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduledfor such meeting of stockholders. Section 2.5 Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of thevoting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), represented in person or byproxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series voting separately as aclass or series, the holders of a majority of the voting power of the shares of such class or series shall constitute a quorum for the transaction of suchbusiness. The chairman of the meeting or a majority of the shares of Voting Stock so represented may adjourn the meeting from time to time, whether or notthere is such a quorum (or, in the case of specified business to be voted on by a class or series, the chairman or a majority of the shares of such class or seriesso represented may adjourn the meeting with respect to such specified business). No notice of the time and place of adjourned meetings need be given except asrequired by law. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawalof enough stockholders to leave less than a quorum. Section 2.6 Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as may be permitted bylaw, or by his, her or its duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or his representative at or before thetime of the meeting. Section 2.7 Notice of Stockholder Business and Nominations. A. Subject to Article VII, nominations of persons for election to the Board of Directors and the proposal of business to be transacted by thestockholders may be made at an annual meeting of stockholders (1) pursuant to the Corporation’s notice with respect to such meeting, (2) by or at the directionof the Board of Directors or (3) by any stockholder of record of the Corporation who was a stockholder of record at the time of the giving of the notice providedfor in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 2.7. B. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to paragraph (A)(3) of thisSection 2.7, (1) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and (2) such business must be a propermatter for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder’s notice shall be delivered to the Secretary of theCorporation at the principal executive offices of the Corporation not less than 45 or more than 75 days prior to the first anniversary (the “Anniversary”) of thedate on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that if no proxymaterials were mailed by the Corporation in connection with the preceding year’s annual meeting, or if the date of the annual meeting is advanced more than 30days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be sodelivered not later than the close of business on the later of (x) the 90th day prior to such annual meeting or (y) the 10th day following the day on which publicannouncement of the date of such 2meeting is first made. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as adirector all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directorspursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such person’s written consent to serve as adirector if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons forconducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf theproposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) thename and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (ii) the class and number of shares ofthe Corporation that are owned beneficially and of record by such stockholder and such beneficial owner. C. Notwithstanding anything in the second sentence of paragraph (B) of this Section 2.7 to the contrary, if the number of directors to beelected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increasedBoard of Directors made by the Corporation at least 55 days prior to the Anniversary, a stockholder’s notice required by this Section 2.7 shall also beconsidered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporationat the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcementis first made by the Corporation. D. Subject to Article VII, only persons nominated in accordance with the procedures set forth in this Section 2.7 shall be eligible to serve asdirectors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with theprocedures set forth in this Section 2.7. The chair of the meeting shall have the power and the duty to determine whether a nomination or any businessproposed to be brought before the meeting has been made in accordance with the procedures set forth in these Amended and Restated Bylaws and, if anyproposed nomination or business is not in compliance with these Amended and Restated Bylaws, to declare that such defective proposed business ornomination shall not be presented for stockholder action at the meeting and shall be disregarded. E. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to theCorporation’s notice of meeting. Subject to Article VII, nominations of persons for election to the Board of Directors may be made at a special meeting ofstockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or (2) byany stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitledto vote at the meeting and who complies with the notice procedures set forth in this Section 2.7. Subject to Article VII, nominations by stockholders of personsfor election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder’s notice required by paragraph (B) of thisSection 2.7 shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on thelater of 3 the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting andof the nominees proposed by the Board of Directors to be elected at such meeting. F. For purposes of this Section 2.7, “public announcement” shall mean disclosure in a press release reported by the Dow Jones NewsService, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and ExchangeCommission pursuant to Section 13, 14 or 15(d) of the Exchange Act. G. Notwithstanding the foregoing provisions of this Section 2.7, a stockholder shall also comply with all applicable requirements of theExchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2.7. Nothing in this Section 2.7 shall be deemed to affectany rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 2.8 Procedure for Election of Directors. Election of directors at all meetings of the stockholders at which directors are to be elected shall be bywritten ballot or other means allowed by Delaware General Corporation Law, and, except as otherwise set forth in the Certificate of Incorporation with respect tothe right of the holders of any series of preferred stock of the Corporation (the “Preferred Stock”) or any other series or class of stock to elect additionaldirectors under specified circumstances, a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate ofIncorporation or these Amended and Restated Bylaws, all matters other than the election of directors submitted to the stockholders at any meeting shall bedecided by the affirmative vote of a majority of the voting power of the outstanding Voting Stock present in person or represented by proxy at the meeting andentitled to vote thereon. Section 2.9 Inspectors of Elections; Opening and Closing the Polls. A. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals whoserve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at themeeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If noinspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of stockholders, thechairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign anoath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the dutiesprescribed by the Delaware General Corporation Law. B. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for eachmatter upon which the stockholders will vote at a meeting. Section 2.10 Consent of Stockholders in Lieu of Meeting. Except as provided in the Certificate of Incorporation, any action required or permitted to betaken by the 4stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by anyconsent in writing by such stockholders. ARTICLE III BOARD OF DIRECTORS Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Inaddition to the powers and authority expressly conferred upon them by statute or by the Certificate of Incorporation or by these Amended and Restated Bylaws,the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Section 3.2 Number, Tenure and Qualifications. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors underspecified circumstances and Article VII, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolutionadopted by a majority of the Whole Board. Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held without notice other than this Bylaw immediately after, and at thesame place as, each annual meeting of stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additionalregular meetings without notice other than such resolution. Until December 31, 2003, the Board of Directors shall meet at least monthly. Section 3.4 Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the President or amajority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of themeetings. Section 3.5 Notice. Notice of any special meeting shall be given to each director at his business or residence in writing or by telegram, facsimiletransmission or telephone communication. If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed,with postage thereon prepaid, at least five days before such meeting. If by telegram, such notice shall be deemed adequately delivered when the telegram isdelivered to the telegraph company at least twenty-four hours before such meeting. If by facsimile transmission, such notice shall be transmitted at leasttwenty-four hours before such meeting. If by telephone, the notice shall be given at least twelve hours prior to the time set for the meeting. Neither the businessto be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except foramendments to these Amended and Restated Bylaws as provided under Section 8.1. A meeting may be held at any time without notice if all the directors arepresent (except as otherwise provided by law) or if those not present waive notice of the meeting in writing, either before or after such meeting. 5 Section 3.6 Conference Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board ofDirectors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in themeeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 3.7 Quorum. A whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction ofbusiness, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meetingfrom time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Boardof Directors. Section 3.8 Vacancies. Subject to Article VII and the rights of holders of any series of Preferred Stock then outstanding, newly created directorshipsresulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement,disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board of Directors, be filled only by amajority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting ofstockholders at which the term of office of the class to which they have been chosen expires. No decrease in the authorized number of directors shall shortenthe term of any incumbent director. Section 3.9 Committees. A. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of theCorporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent member at anymeeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and notdisqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at themeeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution ofthe Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of theCorporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. B. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rulesfor the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conductsits business pursuant to these Amended and Restated Bylaws. Section 3.10 Removal. Subject to Article VII and the rights of the holders of any series of Preferred Stock then outstanding, any directors, or the entireBoard of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of 6the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the Corporationentitled to vote generally in the election of directors, voting together as a single class. ARTICLE IV OFFICERS Section 4.1 Elected Officers. The elected officers of the Corporation shall be a Secretary and a Treasurer, and may be a Chairman of the Board, aPresident and a Chief Executive Officer, and such other officers as the Board of Directors from time to time may deem proper. The Chairman of the Board, ifany, shall be chosen from the directors. All officers shall be chosen by the Board of Directors and shall each have such powers and duties as generally pertainto their respective offices, subject to the specific provisions of Articles II, III, IV and V. Such officers shall also have powers and duties as from time to timemay be conferred by the Board of Directors or by any committee thereof. Section 4.2 Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meetingof the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall beheld as soon thereafter as convenient. Subject to Section 4.7 of these Amended and Restated Bylaws, each officer shall hold office until his successor shallhave been duly elected and shall have qualified or until his or her death or until he or she shall resign. Section 4.3 Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board. In the absence of the Chairman of theBoard at any meeting, a majority of the directors present at such meeting shall have the power to select any director at the meeting to preside. Section 4.4 President and Chief Executive Officer. The Chief Executive Officer, or if there is no Chief Executive Officer, the President, shall be thegeneral manager of the Corporation, subject to the control of the Board of Directors, and as such shall preside at all meetings of stockholders, shall havegeneral supervision of the affairs of the Corporation, shall sign or countersign or authorize another officer to sign all certificates, contracts, and otherinstruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and stockholders, and shall perform allsuch other duties as are incident to such office or are properly required by the Board of Directors. If the Board of Directors creates the office of the President asa separate office from the Chief Executive Officer, the President shall have such duties as are determined by, and shall be subject to the general supervision,direction, and control of, the Chief Executive Officer unless the Board of Directors provides otherwise. Section 4.5 Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors and all other notices requiredby law or by these Amended and Restated Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any personthereunto directed by the Chairman of the Board, the 7Chief Executive Officer or the President, or by the Board of Directors, upon whose request the meeting is called as provided in these Amended and RestatedBylaws. He or she shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the stockholders of the Corporation ina book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the Board of Directors (to the extent consistentwith the Chairman’s duty and authority to preside at all meetings of the Board of Directors), the Chief Executive Officer or the President. He or she shall havecustody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors, the Chairman of theBoard, the Chief Executive Officer or the President, and attest to the same. Section 4.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate receipts anddisbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of theCorporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may beordered by the Board of Directors, the Chief Executive Officer or the President, taking proper vouchers for such disbursements. The Treasurer shall render tothe Chairman of the Board, the President, the Chief Executive Officer and the Board of Directors, whenever requested, an account of all his transactions asTreasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for thefaithful discharge of his or her duties in such amount and with such surety as the Board of Directors shall prescribe. Section 4.7 Removal. Any officer elected by the Board of Directors may be removed by the Board of Directors whenever, in their judgment, the bestinterests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue ofsuch election beyond the date of the election of his successor, his death, his resignation or his removal, whichever event shall first occur, except as otherwiseprovided in an employment contract or an employee plan. Section 4.8 Vacancies. A newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the Board ofDirectors for the unexpired portion of the term. ARTICLE V STOCK CERTIFICATES AND TRANSFERS Section 5.1 Stock Certificates and Transfers. A. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the appropriateofficers of the Corporation may from time to time prescribe. The shares of the stock of the Corporation shall be transferred on the books of the Corporation bythe holder thereof in person or by his, her or its attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment andpower of transfer endorsed thereon or attached thereto, duly executed, and 8with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. B. The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolutionprescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar whohas signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate isissued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. ARTICLE VI INDEMNIFICATION Section 6.1 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in anyaction, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was adirector or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of apartnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basisof such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer,employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as thesame exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to providebroader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excisetaxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shallcontinue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors andadministrators; provided, however, that, except as provided in Section 6.3 with respect to proceedings to enforce rights to indemnification, the Corporationshall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof)was authorized by the Board of Directors of the Corporation. Section 6.2 Right to Advancement of Expenses. The right to indemnification conferred in Section 6.1 shall include, to the extent permitted by law, theright to be paid by the Corporation the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of itsfinal disposition (hereinafter an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement ofexpenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by suchindemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking(hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial 9decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for suchexpenses under this Section or otherwise. Section 6.3 Right of Indemnitee to Bring Suit. The rights to indemnification and to the advancement of expenses conferred in Section 6.1 and Section6.2, respectively, shall be contract rights. If a claim under Section 6.1 or Section 6.2 is not paid in full by the Corporation within sixty days after a writtenclaim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twentydays, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in partin any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shallbe entitled to be paid also the expense of prosecuting or defending such suit. In (A) any suit brought by the indemnitee to enforce a right to indemnificationhereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (B) in any suit by theCorporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon afinal adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither thefailure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to thecommencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard ofconduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legalcounsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not metthe applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee toenforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to theterms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section orotherwise shall be on the Corporation. Section 6.4 Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusiveof any other right which any person may have or hereafter acquire under the Certificate of Incorporation, these Amended and Restated Bylaws, or any statute,agreement, vote of stockholders or disinterested directors or otherwise. Section 6.5 Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any indemnitee or another corporation, partnership,joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such personagainst such expense, liability or loss under the Delaware General Corporation Law. Section 6.6 Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Boardof Directors, grant 10rights to indemnification, and to the advancement of expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Sectionwith respect to the indemnification and advancement of expenses of directors and officers of the Corporation. ARTICLE VII GOVERNANCE PROVISIONS Section 7.1 Number of Directors. Notwithstanding Section 3.2, until this Article VII terminates in accordance with Section 7.6, the number of directorsof this Corporation shall be fixed at nine. Section 7.2 Nomination of Directors. At each annual meeting of the stockholders, or at any meeting of the stockholders at which members of the Boardof Directors are to be elected, the nominees to the Board of Directors shall be determined as follows: A. Series A Directors. (1) Each Series A Director (as defined in Section 7 of the Corporation’s certificate of designation filed with the Secretary of the State ofDelaware on December 30, 2002 (the “Certificate of Designation”)) shall be nominated by holders of a majority of the shares of Series A Preferred Stockoutstanding. (2) If at any time the number of Series A Directors is reduced by operation of Section 7 of the Certificate of Designation, nominations forthe director seats affected by such reduction shall thereafter be made in accordance with Section 7.2(D) of these Amended and Restated Bylaws. B. Pihana Director. (1) Until the earlier of (the “Pihana Board Termination Date”) (i) this Corporation’s first annual meeting of stockholders after December31, 2002, provided such meeting does not occur prior to May 30, 2003, and (ii) the sale by this Corporation of convertible debt securities in aggregate principalamount of at least $10 million, one director (the “Pihana Director”) shall be nominated by holders of a majority of the Corporation’s voting stock held by thePihana Stockholders (as defined in that certain Governance Agreement between the Corporation, STT Communications Ltd. and the former stockholders ofPihana Pacific, Inc. dated December 31, 2002 (the “Governance Agreement”)) as of the record date for any election of directors; provided, however, that anyPihana Director shall be reasonably acceptable to a majority of the the Series A Directors, the Equinix Directors (as defined below) and the IndependentDirectors (as defined below), taken as a whole. (2) At such time as the Pihana Stockholders are no longer eligible to nominate a Pihana Director pursuant to Section 7.2(B)(1),nominations for the director seat affected by such reduction shall be made in accordance with Section 7.2(D) of these Amended and Restated Bylaws. 11 (3) Notwithstanding Section 7.2(B)(2), Section 9.1 or any other provision in these Bylaws to the contrary, after the Pihana BoardTermination Date the Board of Directors may amend this Section 7.2(B) to provide an alternative nomination process to fill the seat vacated by the PihanaDirector; provided, however, that any such action by the Board of Directors shall include the vote of at least one non-independent Series A Director, one non-independent Equinix Director and one Remaining Director. For purposes of this Section 7.2(B)(3) whether or not a director is independent shall be determinedbased on the definition of “independent” provided in Section 7.2(C)(3). C. Equinix Directors. So long as any Series A Directors may be nominated pursuant to Section 7.2(A), the stockholders of the Corporationshall be represented by three directors (the “Equinix Directors”) who shall be nominated as follows: (1) The initial Equinix Directors shall be the Original Equinix Directors (as defined in the Governance Agreement) until their resignation orremoval. (2) Any vacancies among the Equinix Directors shall be filled based on the nomination of the remaining Original Equinix Directors or anysuccessor directors nominated by Original Equinix Directors or properly nominated successors of Original Equinix Directors; provided, however, if noOriginal Equinix Directors or successors of Original Equinix Directors are then on the Board of Directors, the Equinix Directors shall be Independent Directors(as defined below) selected for nomination by Parent’s nominating committee. (3) One Equinix Director nominated pursuant to Section 7.2(C)(1) or (2) shall at all times be “independent” within the meaning of thethen-applicable rules and regulations of The Nasdaq National Market or any stock exchange or trading system (“Trading Rules”) on which the Corporation’sCommon Stock may then trade (an “Independent Director”), and the nomination of such independent Equinix Director shall be subject to reasonable approvalby nomination by Parent’s nominating committee. D. Remaining Directors. All other directors (the “Remaining Directors”) shall be Independent Directors selected for nomination by Parent’snominating committee. E. Removal of Directors. Stockholders and other persons having the right to designate a Series A Director or Pihana Director pursuant to thisSection 7.2 may remove the director or directors so designated by providing written notice to the Corporation at any time and from time to time, and may do sowith or without cause, in their sole discretion. Equinix Directors may only be removed by this Corporation’s stockholders for cause. F. Appointment of Directors. In the event of the resignation, death, removal or disqualification of an Equinix Director, Series A Director orPihana Director, the stockholders or directors having the right to nominate that director pursuant to this Section 7.2 may nominate a new director to fill thevacancy so created, and, after written notice of such nomination has been given by such stockholders to Parent, the Board shall appoint such nominee to fillsuch vacancy or, if necessary, shall nominate such nominee for election to the Board. 12 Section 7.3 Board Committees. A. To the extent permitted under applicable Trading Rules, each committee of the Board of Directors shall have at least one Series A Directorand one Equinix Director. There shall at all times be an equal number of Series A Directors and Equinix Directors on each committee. B. Subject to applicable Trading Rules, so long as at least two Series A Directors may be nominated pursuant to Section 7.2(A), a Series ADirector shall be the Chairman of the Compensation Committee with the powers, if any, delegated by the Board of Directors to such Chairman in theCompensation Committee charter. C. The Corporation shall at all times have an audit committee, compensation committee and a nominating committee. Each such committeeshall be constituted and operated pursuant to applicable Trading Rules. Section 7.4 Chairman of the Board. Subject to applicable Trading Rules, so long as at least two Series A Directors may be nominated pursuant toSection 7.2(a), the Chairman of the Board shall be a Series A Director. Section 7.5 Budgets. Each annual, and, if applicable, quarterly, budget shall be approved by the Board of Directors, which approval shall include thevote of at least one non-independent Series A Director, one non-independent Equinix Director and one Remaining Director. For purposes of this Section7.2(B)(3), whether or not a director is independent shall be determined based on the definition of “independent” provided in Section 7.2(C)(3). Section 7.6 Termination of Governance Provisions. The provisions of this Article VII shall terminate on the earliest of (i) such time as the holders ofshares of Series A Preferred Stock are no longer eligible to nominate a Series A Director pursuant to Section 7.2, (ii) upon the occurrence of a Voting StockTrigger Event (as defined in the Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock Certificate of Designation to the Corporation’sAmended and Restated Certificate of Incorporation) and (iii) December 31, 2004. MISCELLANEOUS PROVISIONS Section 8.1 Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of eachyear. Section 8.2 Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in themanner and upon the terms and conditions provided by law and the Certificate of Incorporation. Section 8.3 Seal. The corporate seal shall have inscribed the name of the Corporation thereon and shall be in such form as may be approved from time totime by the Board of Directors. 13 Section 8.4 Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of theDelaware General Corporation Law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time statedtherein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting ofthe stockholders of the Board of Directors need be specified in any waiver of notice of such meeting. Section 8.5 Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independentcertified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be made annually. Section 8.6 Resignations. Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of such resignationon the Chairman of the Board, the President, the Chief Executive Officer or the Secretary, and such resignation shall be deemed to be effective as of the close ofbusiness on the date said notice is received by the Chairman of the Board, the President, the Chief Executive Officer or the Secretary or at such later date as isstated therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective. Section 8.7 Contracts. Except as otherwise required by law, the Certificate of Incorporation, these Amended and Restated Bylaws and any signingauthority policies adopted by the Board of Directors from time to time, any contracts or other instruments may be executed and delivered in the name and onthe behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may begeneral or confined to specific instances as the Board may determine. The Chairman of the Board, the President, the Chief Executive Officer or any VicePresident may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to anyrestrictions imposed by the Board of Directors, the Chairman of the Board, the President, the Chief Executive Officer or any Vice President of the Corporationmay delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officerof responsibility with respect to the exercise of such delegated power. Section 8.8 Proxies. The Board of Directors may by resolution from time to time appoint any attorney or attorneys or agent or agents of the Corporation,in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in anyother corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock and othersecurities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such othercorporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and mayexecute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or otherinstruments as he may deem necessary or proper in the premises. 14 ARTICLE IX AMENDMENTS Section 9.1 Amendments. Subject to the provisions of the Certificate of Incorporation and these Amended and Restated Bylaws, these Amended andRestated Bylaws may be amended, altered, added to, rescinded or repealed at any meeting of the Board of Directors or by the affirmative vote of the holders ofat least seventy-five percent (75%) of the Corporation’s outstanding voting stock (on an as-converted to Common Stock basis), provided notice of theproposed change was given in the notice of the meeting and, in the case of a meeting of the Board of Directors, in a notice given no less than twenty-four hoursprior to the meeting; provided, however, that, except as provided in Section 7.2(B), until Article VII terminates pursuant to Section 7.6 of these Amended andRestated Bylaws, Article VII (including references thereto throughout these Amended and Restated Bylaws) and this Section 9.1 may not be amended by theBoard of Directors and may only be amended by the affirmative vote of the holders of at least seventy-five percent (75%) of the Corporation’s outstandingvoting stock (on an as-converted to Common Stock basis). 15 CERTIFICATE OF SECRETARY OF EQUINIX, INC. The undersigned, Renee F. Lanam, hereby certifies that he is the duly elected and acting Secretary of Equinix, Inc, a Delaware corporation (the“Corporation”), and that the Bylaws attached hereto constitute the Bylaws of said Corporation as duly adopted by the Directors on December 30, 2002. IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name this 30th day of December, 2002. /s/ RENEE F. LANAM Renee F. LanamSecretaryExhibit 10.59 Execution Copy SECOND AMENDED AND RESTATEDCREDIT AND GUARANTY AGREEMENT dated as of December 31, 2002 among EQUINIX OPERATING CO., INC.as Borrower and EQUINIX, INC. AND CERTAIN OF ITS SUBSIDIARIES,as Guarantors, VARIOUS LENDERS, SALOMON SMITH BARNEY INC.,as Lead Arranger and Book Runner, and CITICORP USA, INC.,as Administrative Agent and Collateral AgentTABLE OF CONTENTS PageSECTION 1. DEFINITIONS AND INTERPRETATION 2 1.1 Definitions 2 1.2 Accounting Terms 32 1.3 Interpretation, etc. 33SECTION 2. LOANS 33 2.1 Confirmation and Redesignation of Existing Loans as Term Loans. 33 2.2 [Reserved] 33 2.3 Pro Rata Shares 33 2.4 Use of Proceeds 33 2.5 Evidence of Debt; Register; Lenders' Books and Records; Notes. 33 2.6 Interest on Loans. 34 2.7 Conversion/Continuation. 35 2.8 Default Interest 36 2.9 Fees. 36 2.10 Scheduled Payments 36 2.11 Voluntary Prepayments. 37 2.12 Mandatory Prepayments. 38 2.13 Application of Prepayments/Reductions 40 2.14 Allocation of Certain Payments and Proceeds 40 2.15 General Provisions Regarding Payments 41 2.16 Ratable Sharing 42 2.17 Making or Maintaining Eurodollar Rate Loans 42 2.18 Increased Costs; Capital Adequacy 44 2.19 Taxes; Withholding, etc 46 2.20 Obligation to Mitigate 47 2.21 [Reserved] 48 2.22 Removal or Replacement of a Lender 48SECTION 3. CONDITIONS PRECEDENT 49 3.1 Conditions to Effectiveness 49 3.2 Notices by Borrower 52SECTION 4. REPRESENTATIONS AND WARRANTIES 52 4.1 Organization; Requisite Power and Authority; Qualification 52 4.2 Capital Stock and Ownership 52 4.3 Due Authorization 53 4.4 No Conflict 53 4.5 Governmental Consents 53 4.6 Binding Obligation 53 4.7 Second Amendment Effective Date Financial Statements 53 i 4.8 Projections 54 4.9 No Material Adverse Change 54 4.10 No Restricted Junior Payments 54 4.11 Adverse Proceedings, etc. 54 4.12 Payment of Taxes 54 4.13 Properties 55 4.14 Collateral 55 4.15 Environmental Matters 56 4.16 No Defaults 56 4.17 Material Contracts 57 4.18 Governmental Regulation 57 4.19 Margin Stock 57 4.20 Employee Matters 57 4.21 Employee Benefit Plans 57 4.22 Solvency 58 4.23 Compliance with Statutes, etc. 58 4.24 Disclosure 58 4.25 Fees to Management in Connection with the Recapitalization Transactions. 59SECTION 5. AFFIRMATIVE COVENANTS 59 5.1 Financial Statements and Other Reports 59 5.2 Existence 63 5.3 Payment of Taxes and Claims 63 5.4 Maintenance of Properties 63 5.5 Insurance 63 5.6 Books and Records; Inspections; Lenders Meetings 64 5.7 Compliance with Laws 65 5.8 Environmental 65 5.9 Subsidiaries 66 5.10 Post Closing Covenants With Respect to Real Estate Assets 67 5.11 [Reserved]. 67 5.12 Post Closing Covenants With Respect to Permitted Equipment Financing Collateral 68 5.13 Further Assurances 68 5.14 Notice of Default Under Lease 68 5.15 Certain Post Second Amendment Effective Date Obligations. 68SECTION 6. NEGATIVE COVENANTS 69 6.1 Indebtedness 69 6.2 Liens 70 6.3 No Further Negative Pledges 72 6.4 Restricted Junior Payments; Restrictions on Payments to European Subsidiaries 73 6.5 Investments 73 ii 6.6 Stage 1 Financial Covenants 74 6.7 Stage 2 Financial Covenants 75 6.8 Maximum Consolidated Capital Expenditures 76 6.9 Fundamental Changes; Disposition of Assets; Acquisitions 77 6.10 Disposal of Subsidiary Interests 78 6.11 Sales and Lease-Backs 78 6.12 Sale and Discount of Receivables 78 6.13 Transactions with Shareholders and Affiliates 78 6.14 Conduct of Business 79 6.15 Permitted IBX Facilities 79 6.16 Amendments or Waivers of Certain Documents 79 6.17 Fiscal Year 80 6.18 Foreign Subsidiaries 80 6.19 Acquisition and Ownership of Assets by Company 80 6.20 Company Subsidiaries 81SECTION 7. GUARANTY 81 7.1 Guaranty of the Obligations 81 7.2 Contribution by Guarantors 81 7.3 Payment by Guarantors 82 7.4 Liability of Guarantors Absolute 82 7.5 Waivers by Guarantors 84 7.6 Guarantors' Rights of Subrogation, Contribution, etc. 85 7.7 Subordination of Other Obligations 85 7.8 Continuing Guaranty 85 7.9 Authority of Guarantors or Borrower 86 7.10 Financial Condition of Borrower 86 7.11 Bankruptcy, etc. 86 7.12 Notice of Events 87 7.13 Discharge of Guaranty Upon Sale of Guarantor 87SECTION 8. EVENTS OF DEFAULT 87 8.1 Events of Default 87SECTION 9. AGENTS 90 9.1 Appointment of Agents 90 9.2 Powers and Duties 91 9.3 General Immunity 91 9.4 Agents Entitled to Act as Lender 92 9.5 Lenders' Representations, Warranties and Acknowledgment 92 9.6 Right to Indemnity 92 9.7 Successor Administrative Agent and Collateral Agent 93 9.8 Collateral Documents and Guaranty 94 iii SECTION 10. MISCELLANEOUS 94 10.1 Notices 94 10.2 Expenses 95 10.3 Indemnity 95 10.4 Set-Off 96 10.5 Amendments and Waivers 96 10.6 Successors and Assigns; Participations 97 10.7 Independence of Covenants 100 10.8 Survival of Representations, Warranties and Agreements 100 10.9 No Waiver; Remedies Cumulative 100 10.10 Marshalling; Payments Set Aside 101 10.11 Severability 101 10.12 Entire Agreement 101 10.13 Obligations Several; Independent Nature of Lenders’ Rights 101 10.14 Headings 101 10.15 Acknowledgment and Consent. 102 10.16 APPLICABLE LAW 102 10.17 CONSENT TO JURISDICTION 102 10.18 WAIVER OF JURY TRIAL 103 10.19 Confidentiality 104 10.20 Usury Savings Clause 104 10.21 Counterparts 105 10.22 Effectiveness 105 10.23 General Release 105 10.24 Amendment and Restatement 105 iv APPENDICES: A-1 Outstandings under Existing Credit Agreement A-2 Term Loans; Pro Rata Shares B Notice Addresses SCHEDULES: 1.1(a) Permitted IBX Facilities 1.1(b) Singapore Subsidiaries 4.1 Jurisdictions of Organization and Qualification 4.2 Capital Stock and Ownership 4.5 Governmental Approvals 4.13 Real Estate Assets 4.16 Certain Defaults 4.17(a) Material Contracts 4.17(b) Intellectual Property 4.24 Disclosure 5.1(a)(i) Second Amendment Effective Date Reporting Requirements 5.1(a)(iii) Cash and Cash Equivalents at Singapore Subsidiaries 5.5 Insurance 5.15(a) Post-Closing Foreign Collateral 5.15(b) Post-Closing Domestic Collateral 6.1 Certain Indebtedness 6.1(i) Permitted Equipment Financing Entered into since the Effective Date 6.2 Certain Liens 6.6 Stage 1 Minimum Cash and Cash Equivalents 6.7(a) Stage 2 Senior Secured Debt to Annualized Consolidated EBITDA 6.7(b) Stage 2 Total Debt to Annualized Consolidated EBITDA 6.7(c) Stage 2 Minimum Annualized Consolidated EBITDA/Interest Expense Ratio 6.7(d) Stage 2 Pro Forma Debt Service Coverage Ratio 6.7(e) Stage 2 Minimum Cash and Cash Equivalents 6.8(a) Stage 1 and 2 Maximum Consolidated Capital Expenditures 6.8(b) Capital Expenditures of Singapore Subsidiaries 6.13 Certain Affiliate Transactions v EXHIBITS: A-1 [Reserved] A-2 Conversion/Continuation Notice B-1 Tranche A Term Loan Note B-2 [Reserved] C-1 Stage 1 Compliance Certificate C-2 Stage 2 Compliance Certificate D Opinions of Counsel E Assignment Agreement F Certificate Re Non-bank Status G Second Amendment Effective Date Certificate H Counterpart Agreement I Master Pledge and Security Agreement J Mortgage K Landlord Agreement L [Reserved] M Form of Confirmation of Grant N Form of Release O [Reserved] P Singapore Subsidiaries Investment Certificate Q Intercreditor Agreement viSECOND AMENDED AND RESTATEDCREDIT AND GUARANTY AGREEMENT This SECOND AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of December 31, 2002, is entered into byand among EQUINIX OPERATING CO., INC., a Delaware corporation, as the Borrower (“OpCo”), EQUINIX, INC., a Delaware corporation, as aGuarantor (“Company”), and CERTAIN SUBSIDIARIES OF THE COMPANY, as Guarantors, the Lenders party hereto from time to time,SALOMON SMITH BARNEY INC. (“SSB”), as Lead Arranger (in such capacity, the “Lead Arranger”), and Book Runner (in such capacity, the“Book Runner”), CITICORP USA INC. (“Citicorp”), as Administrative Agent (together with its permitted successors and assigns in such capacity,“Administrative Agent”) and as Collateral Agent (as successor to CIT Lending Services Corporation and together with its permitted successors and assignsin such capacity, “Collateral Agent”). RECITALS: WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof; WHEREAS, OpCo, Company and the Guarantors are party to that certain Amended and Restated Credit Agreement dated as of September 30, 2001 (asamended through the date hereof, the “Existing Credit Agreement”) among Goldman Sachs Credit Partners L.P., as joint lead arranger, joint book runnerand syndication agent, SSB as joint lead arranger and joint book runner, Citicorp as administrative agent, CIT Lending Services Corporation, as thecollateral agent and the lenders party thereto; WHEREAS, pursuant to the Existing Credit Agreement and the other documents entered into in connection therewith Company secured all of itsobligations under the Existing Credit Agreement by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all ofits assets, including a pledge of all of the Capital Stock of each of its Subsidiaries, other than Purchase Money Loans made to Company which were securedsolely by the assets financed with the proceeds of such Loans; WHEREAS, pursuant to the Existing Credit Agreement and the other documents entered into in connection therewith OpCo has secured all of itsobligations under the Existing Credit Agreement by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all ofits assets, including a pledge of all of the Capital Stock of each of its Subsidiaries and all the Capital Stock of each of its Foreign Subsidiaries; WHEREAS, pursuant to the Existing Credit Agreement and the other documents entered into in connection therewith Guarantors have guaranteed theobligations of OpCo (and, to the extent not prohibited under the Senior Notes, Company) hereunder and to secure their respective obligations thereunder bygranting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of their respective assets, including a pledge of all of theCapital Stock of each of their respective Domestic Subsidiaries and all the Capital Stock of each of their respective Foreign Subsidiaries;WHEREAS, (i) Company proposes to exchange at least $110,000,000 aggregate principal amount of Senior Notes for Cash and Qualifying Equity asmore fully described herein, (ii) Company proposes to issue up to $40,000,000 aggregate principal amount of Convertible Notes, of which at least $30,000,000will be issued on the Second Amendment Effective Date and (iii) Company proposes to consummate the Recapitalization Transactions pursuant to the terms ofthe Combination Agreement; WHEREAS, Company and OpCo have requested that Lenders and Agents make certain amendments to the Existing Credit Agreement to permit theExchange Offer, the issuance of the Convertible Notes and the Recapitalization Transactions and to make certain revisions to the Existing Credit Agreement inconnection therewith; WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities of the parties under theExisting Credit Agreement and that this Agreement amend and restate in its entirety the Existing Credit Agreement and re-evidence the Obligations of OpCo andeach other Credit Party outstanding after giving effect to the prepayment of Existing Loans on the Effective Date contemplated hereby; and WHEREAS, it is the intent of Credit Parties to confirm that all Obligations of Credit Parties under the other Credit Documents, as amended hereby,shall continue in full force and effect and that, from and after the Effective Date, all references to the “Credit Agreement” contained therein shall be deemed torefer to this Agreement. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree toamend and restate the Existing Credit Agreement as follows: SECTION 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings: “A-1 Notes” means the 14% Series A-1 Convertible Secured Notes due 2007 of Company in an aggregate principal amount of up to $30,000,000plus any corresponding PIK Notes issued pursuant to the terms and conditions of the Securities Purchase Agreement. “A-2 Notes” means the 10% Series A-2 Convertible Secured Notes due 2007 of Company in an aggregate principal amount of up to $10,000,000plus any corresponding PIK Notes issued pursuant to the terms and conditions of the Securities Purchase Agreement. “Adjusted Eurodollar Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, therate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an averageBritish Bankers Association Interest Settlement Rate (such page currently being page 2number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined asof approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a)does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal tothe rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers AssociationInterest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as ofapproximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a)and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the Londoninterbank market by Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day fundscomparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is thenbeing determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date,by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement. “Administrative Agent” as defined in the preamble hereto. “Adverse Proceeding” means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration(whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic orforeign (including any Environmental Claims), whether pending or, to the knowledge of Company or any of its Subsidiaries, threatened against or affectingCompany or any of its Subsidiaries or any property of Company or any of its Subsidiaries. “Affected Lender” as defined in Section 2.17(b). “Affected Loans” as defined in Section 2.17(b). “Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, thatPerson. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under commoncontrol with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinaryvoting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether throughthe ownership of voting securities or by contract or otherwise. Neither any Agent nor any Lender shall be deemed Affiliates of any Credit Party, by virtue of thesecurity interests granted under the Pledge and Security Agreement. “Agent” means each of the Lead Arranger, Book Runner, Administrative Agent and Collateral Agent. 3 “Aggregate Amounts Due” as defined in Section 2.16. “Aggregate Excess Cash” means the aggregate consolidated amount of Cash and Cash Equivalents in excess of $20,000,000 as listed on theconsolidated balance sheet of Company and its Subsidiaries as at the end of any Fiscal Quarter. “Aggregate Payments” as defined in Section 7.2. “Agreement” means prior to the Second Amendment Effective Date, the Existing Credit Agreement and, on and after the Second Amendment EffectiveDate, this Amended and Restated Credit and Guaranty Agreement, dated as of December 31, 2002, as it may be amended, restated, supplemented or otherwisemodified from time to time. “Annualized Consolidated EBITDA” means, as of any date of determination, Consolidated EBITDA for the most recently completed Fiscal Quartermultiplied by four. “Applicable Margin” means (i) from the Closing Date until the end of Stage 1, (a) with respect to Loans that are Eurodollar Rate Loans, 4.25% perannum and (b) with respect to Loans that are Base Rate Loans, an amount equal to the Applicable Margin for Eurodollar Rate Loans as set forth in clause(i)(a) above, minus 1.00% per annum; provided that, on and after the Effective Date the interest rates otherwise applicable pursuant to this clause (i) shall beincreased by 0.50% per annum; and (ii) during Stage 2, (a) with respect to the Loans that are Eurodollar Rate Loans, a percentage, per annum, determined byreference to the Total Leverage Ratio in effect from time to time as set forth below: TotalLeverageRatio Applicable Marginfor Eurodollar Rate6.0:1.00 4.25%<6.0:1.004.5:1.00 4.00%<4.5:1.003.0:1.00 3.75%<3.0:1.00 3.50% and (b) with respect to Loans that are Base Rate Loans, an amount equal to the Applicable Margin for Eurodollar Rate Loans as set forth in clause (ii)(a) aboveminus 1.00% per annum. No change in the Applicable Margin contemplated by clause (ii) above shall be effective until three (3) Business Days after the dateon which Administrative Agent shall have received the applicable financial statements and a Compliance Certificate pursuant to Section 5.1(d) calculating theTotal Leverage Ratio. At any time Company has not submitted to Administrative Agent the applicable information as and when required under Section 5.1(d),the Applicable Margin shall be determined as if the Total Leverage Ratio were in excess of 6.00:1.00 until such time as Company has provided the informationrequired under Section 5.1(d). Within one (1) 4Business Day of receipt of the applicable information as and when required under Section 5.1(d), Administrative Agent shall give each Lender telefacsimile ortelephonic notice (confirmed in writing) of the Applicable Margin in effect from such date. “Applicable Reserve Requirement” means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves(including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect theretoagainst “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of theFederal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect anyother reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which theapplicable Adjusted Eurodollar Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets whichinclude Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserverequirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of intereston Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. “Asset Sale” means a sale, lease or sublease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition (anysuch transaction, a “Disposition”) to, or any exchange of property with, any Person (other than Company or any Guarantor Subsidiary), in one transactionor a series of transactions, of all or any part of Company’s or any of its Subsidiaries’ businesses, assets or properties of any kind, whether real, personal, ormixed and whether tangible or intangible, whether now owned or hereafter acquired, including, without limitation, the Capital Stock of any of Company’sSubsidiaries, other than (i) inventory (or other assets) sold or leased in the ordinary course of business, (ii) disposals of obsolete, worn out or surplusproperty, (iii) Dispositions of other assets for aggregate consideration of less than $50,000 with respect to any transaction or series of related transactions andless than $250,000 in the aggregate during any Fiscal Year, (iv) sales of Cash Equivalents in the ordinary course of business, (v) Permitted Liens, and (vi)sale and leaseback transactions in connection with a Permitted Equipment Financing. “Assignment Agreement” means an Assignment Agreement substantially in the form of Exhibit E, with such amendments or modifications as may beapproved by Administrative Agent. “Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executiveofficer, president and one of its vice presidents (or the equivalent thereof), or such Person’s chief financial officer and treasurer. “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute. 5 “Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds EffectiveRate in effect on such day plus ½ of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effectiveon the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. “Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate. “Beneficiary” means each Agent, Lender and Lender Counterparty. “Book Runner” as defined in the preamble hereto. “Borrower” means OpCo. “Business Day” means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is aday on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) with respect to allnotices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, the term “Business Day”shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in theLondon interbank market. “Capital Expenditure” means, for any period, the aggregate of all expenditures of any Person during such period that, in accordance with GAAP, areor should be included in “purchase of property and equipment” or similar items, including without limitation construction in progress, reflected in thestatement of cash flows of such Person. Notwithstanding the foregoing, the term “Capital Expenditure” shall not include capital expenditures constituting(i) the reinvestment of Net Asset Sale Proceeds or Net Insurance/Condemnation Proceeds made in accordance with Sections 2.12(a) and (b), (ii) PermittedAcquisitions and (iii) that portion of any capital expenditure solely attributable to or deemed paid for through the issuance by Company of a warrant topurchase capital stock of Company. “Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, inconformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, anyand all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests,and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. “Cash” means money, currency or a credit balance in any demand or Deposit Account. 6 “Cash Equivalents” means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as tointerest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faithand credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the UnitedStates of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such dateand having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing no morethan one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 fromMoody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by anycommercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least “adequatelycapitalized” (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than$100,000,000; (v) repurchase obligations of any Lender or of any commercial bank that is a member of the Federal Reserve System, is organized under thelaws of the United States or any State thereof and has combined capital and surplus of at least $1 billion having a term of not more than 90 days with respectto securities issued or fully guaranteed or insured by the Government of the United States and (vi) shares of any money market mutual fund that (a) has asubstantial portion of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than$500,000,000, and (c) has the highest rating obtainable from either S&P or Moody’s. “Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit F. “Change of Control” means, at any time, (i) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, other thanthe Principal Stockholders, (a) (x) shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest inthe Capital Stock of Company and (y) the Principal Stockholders own, in the aggregate, a lesser percentage of the total voting and/or economic interest in theCapital Stock of Company than such Person or group and do not have the ability by voting power, contract or otherwise to elect or designate for election amajority of the board of directors (or similar governing body) of Company, or (b) shall have obtained the power (whether or not exercised) to elect a majority ofthe board of directors (or similar governing body) of Company; (ii) the majority of the seats (other than vacant seats) on the board of directors (or similargoverning body) of Company shall cease to be occupied by Persons who either (a) were members of the board of directors of Company on the SecondAmendment Effective Date or (b) were nominated for election by the board of directors of Company, a majority of whom were directors on the SecondAmendment Effective Date or whose election or nomination for election was previously approved by a majority of such directors; (iii) STT shall cease to ownor have the right to own at least 75% of the percentage of voting and/or economic interest of the Capital Stock of Company that it owns on the SecondAmendment Effective Date on a fully diluted basis (excluding (y) options and stock issued pursuant to Company’s stock incentive and stock purchase plansexisting on the Second Amendment Effective Date; and (z) 7stock issuable in connection with the issuance of A-2 Notes and associated warrants); or (iv) any “change of control” or similar event under the SecuritiesPurchase Agreement or any document evidencing any Permitted Equipment Financing shall occur. “Closing Date” means December 20, 2000, the date on which the conditions set forth in Section 3.1 of the Original Credit Agreement were satisfied. “Collateral” means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be grantedpursuant to the Collateral Documents as security for the Obligations. “Collateral Agent” as defined in the preamble hereto. “Collateral Documents” means the Pledge and Security Agreement, the Mortgages, the Landlord Agreements, the Intercreditor Agreement and all otherinstruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant toCollateral Agent, for the benefit of Secured Parties, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations. “Columbia” means Columbia Capital Partners and any affiliate thereof. “Columbia Syndicate” means Lone Tree Capital and Goldman, Sachs & Co. “Combination Agreement” means that certain Combination Agreement dated as of October 2, 2002 among Company, Eagle Panther AcquisitionCorp., a Delaware corporation, Eagle Jaguar Acquisition Corp., a Delaware corporation, i-STT Pte Ltd, a corporation organized under the laws of the Republicof Singapore, STT Communications Ltd, a corporation organized under the laws of the Republic of Singapore, Pihana and Jane Dietze, as representative ofthe stockholders of Pihana. “Company” as defined in the preamble hereto. “Complementary Business” means storage services, content distribution, network management, security services, monitoring, site management andsimilar related activities, in each case relating to the operation of Permitted IBX Facilities. “Compliance Certificate” means a Compliance Certificate substantially in the form of Exhibit C-1 or C-2. “Consolidated Capital Expenditures” means, for any period, the aggregate of all Capital Expenditures of Company and its Subsidiaries duringsuch period determined on a consolidated basis, in accordance with GAAP. “Consolidated Cash Interest Expense” means, for any period, Consolidated Interest Expense for such period, excluding any amount not payable inCash. 8 “Consolidated Current Assets” means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis thatmay properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents. “Consolidated Current Liabilities” means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidatedbasis that may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of long term debt. “Consolidated EBITDA” means, for any period, an amount determined for Company and its Subsidiaries on a consolidated basis equal to (i) thesum, without duplication, of the amounts for such period of (a) Consolidated Net Income, (b) Consolidated Interest Expense, (c) provisions for taxes based onincome, (d) total depreciation expense, (e) total amortization expense, (f) to the extent deducted in determining Consolidated Net Income, any amount deductedsolely as a result of the repayment of reimbursement obligations owed to issuing banks in connection with a drawing under letters of credit in an aggregate faceamount of $25,000,000 in favor of iStar San Jose LLC, pursuant to a release of cash collateral in a like amount and (f) other non-Cash items reducingConsolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve for potential Cash items in any future periodor amortization of a prepaid Cash item that was paid in a prior period), minus (ii) other non-Cash items increasing Consolidated Net Income for such period(excluding any such non-Cash item to the extent it represents an accrual of revenue, the reversal of an accrual or reserve for potential Cash item in any priorperiod, in each case, in the ordinary course of business) and (iii) interest income. “Consolidated Excess Cash Flow” means, for any period, an amount (if positive) equal to: (i) the sum, without duplication, of the amounts for suchperiod of (a) Consolidated EBITDA, minus (b) the Consolidated Working Capital Adjustment, minus (ii) the sum, without duplication, of the amounts forsuch period of (a) repayments of Consolidated Total Debt, (b) Consolidated Capital Expenditures (excluding any Capital Expenditures prohibited by Section6.8) (net of (i) any proceeds of any related financings with respect to such expenditures, and (ii) any insurance and condemnation proceeds used to finance thereplacement of destroyed or appropriated property), (c) Consolidated Cash Interest Expense; provided, that Consolidated Cash Interest Expense shall bedeemed to include any savings realized by Company and its Subsidiaries attributable to interest deferrals and interest reductions in connection with therefinancing or exchange of any of the Senior Notes, and (d) provisions for current taxes based on income of Company and its Subsidiaries and payable incash with respect to such period, and (e) to the extent not otherwise deducted in determining Consolidated Excess Cash Flow, Cash consideration paid forPermitted Acquisitions and Investments permitted hereunder (in each case, net of any proceeds of related financings and issuances of Capital Stock incurred tofinance such Permitted Acquisitions and Investments). “Consolidated Interest Expense” means, for any period, total interest expense (including commitment fees and that portion attributable to CapitalLeases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstandingIndebtedness of Company and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and 9 bankers’ acceptance financing and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in Section 2.9 payable on orbefore the Closing Date and fees payable to Lenders pursuant to Section 3.1(j). “Consolidated Net Income” means, for any period, (i) the net income (or loss) of Company and its Subsidiaries on a consolidated basis for suchperiod taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary) inwhich any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or otherdistributions actually paid to Company or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior tothe date it becomes a Subsidiary or is merged into or consolidated with Company or any of its Subsidiaries or that Person’s assets are acquired by Companyor any of its Subsidiaries, (c) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by thatSubsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute,rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of anyPension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net extraordinary losses. “Consolidated Senior Secured Debt” means, as at any time of determination, the aggregate stated balance sheet amount of all outstandingIndebtedness of Company and its Subsidiaries under (i) this Agreement, (ii) the Permitted Equipment Financings, (iii) any secured trade payables and (iv)Capital Leases. “Consolidated Total Capitalization” means the sum of (a) Consolidated Total Debt and (b) paid-in-equity capital of Company or any of itsSubsidiaries (including preferred stock but excluding (i) any additional equity issued as pay-in-kind dividends on issued and outstanding equity securitiesand (ii) any accumulated deficits resulting from operations). “Consolidated Total Debt” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness (without giving effectto any original issue discount) of Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. “Consolidated Working Capital” means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated CurrentLiabilities. “Consolidated Working Capital Adjustment” means, for any period on a consolidated basis, the amount (which may be a negative number) bywhich Consolidated Working Capital as of the end of such period exceeds (or is less than) Consolidated Working Capital as of the beginning of such period. “Contractual Obligation” means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deedof trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it orany of its properties is subject. 10 “Contributing Guarantors” as defined in Section 7.2. “Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicableConversion/Continuation Notice. “Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit A-2. “Convertible Note Collateral Documents” means the Convertible Note Security Agreement, any landlord agreement or mortgage entered into withSTT as the Convertible Note Agent (together with its permitted successors and assigns in such capacity, the “Convertible Note Agent”), the IntercreditorAgreement and all other instruments, documents and agreements delivered by the Company or any Subsidiaries in order to grant to Convertible Note Agent forthe benefit of the holders of the Convertible Notes, a Lien on any real, personal or mixed property as security for the obligations of Company pursuant to theSecurities Purchase Agreement. “Convertible Note Documents” means collectively, (i) the Securities Purchase Agreement, (ii) the Convertible Notes, (iii) the Warrants, (iv) theConvertible Note Guaranty, (v) the Registration Rights Agreement and (vi) the Convertible Note Collateral Documents. “Convertible Note Security Agreement” means the Pledge and Security Agreement entered into between Company and Convertible Note Agent in theform of Exhibit I, with such amendments, modifications or supplements as may be approved by the Administrative Agent, Collateral Agent and ConvertibleNote Agent and subject to the terms and provisions of the Intercreditor Agreement. “Convertible Note Guaranty” means that certain Guaranty dated December 31, 2002 made by Equinix Operating Co., Inc., Equinix Europe, Inc.and Equinix-DC, Inc., in favor of each Holder under and as defined in the Securities Purchase Agreement and subject to the terms and provisions of theIntercreditor Agreement. “Convertible Notes” means collectively, the A-1 Notes and A-2 Notes. “Counterpart Agreement” means a Counterpart Agreement substantially in the form of Exhibit H. “Credit Document” means any of this Agreement, the Notes, if any, the Collateral Documents, and all other documents, instruments or agreementsexecuted and delivered by a Credit Party for the benefit of the Agents, or any Lender in connection herewith, including Hedge Agreements with any LenderCounterparty, in each case, as may be amended, supplemented or otherwise modified from time to time. “Credit Extension” has the meaning assigned in the Existing Credit Agreement. “Credit Party” means Company, OpCo and any of its Subsidiaries from time to time party to a Credit Document. 11 “Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or othersimilar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Company’s and its Subsidiaries’operations. “Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. “Deferral Amount” means with respect to any proceeds received by Company pursuant to STT’s exercise of the STT Additional Equity Option, (i) inan initial aggregate amount of up to $10,000,000, for each $1 of equity received by Company or any of its Subsidiaries, $3 of amortization scheduled in 2005shall be deferred to 2006 pursuant to the terms of Section 2.10; and (ii) in a subsequent aggregate amount of up to $5,000,000, for each $1 of equity receivedby Company or any of its Subsidiaries, $2 of amortization scheduled for 2005 shall be deferred to 2006 pursuant to the terms of Section 2.10. In no eventshall the total Deferral Amount exceed $40,000,000. “Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or likeorganization, other than an account evidenced by a negotiable certificate of deposit. “Disposition” as defined within the definition Asset Sale. “Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it isexchangeable, in each case at the option of the holder thereof), or upon the happening of any event, (a) matures or is mandatorily redeemable, pursuant to asinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to April 15, 2006; provided, however,that any Equity Interest that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase suchEquity Interest upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Equity Interest providethat the Company may not repurchase or redeem such Equity Interest pursuant to such provisions unless such repurchase or redemption complies withSection 6.4 or (b) requires the payment of cash dividends or other payments to the holder thereon, unless through December 15, 2005 such cash dividends orother payments are only required to be paid and are only paid from the proceeds of the issuance of such Equity Interest and sums of such proceeds are at thetime of such issuance placed in escrow for the purpose of making such payments sufficient to make such payments through such date and are at all timesprior to such date sufficient therefor. “Dollars” and the sign “$” mean the lawful money of the United States of America. “Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof or the District ofColumbia. 12 “Effective Date” means September 30, 2001, the date on which the conditions set forth in Section 3.1 of the Existing Credit Agreement were satisfied. “Effective Date Mortgage” means a mortgage substantially in the form of Exhibit J annexed hereto. “Effective Date Mortgage Modification” has the meaning given to such term in the Existing Credit Agreement. “Eligible Assignee” means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a singleEligible Assignee for all purposes hereof), and (ii) any commercial bank, financial institution, insurance company, investment or mutual fund or other entitythat is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses;provided, no Affiliate of Company shall be an Eligible Assignee. “Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained orcontributed to by, or required to be contributed by, Company, any of its Subsidiaries or any of their respective ERISA Affiliates. “Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other orderor directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or allegedviolation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) inconnection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. “Environmental Laws” means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes,ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authoritiesrelating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposalof Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, inany manner applicable to Company or any of its Subsidiaries or any Facility. “Equity Interests” means Capital Stock of Company and all warrants, options or other rights to acquire Capital Stock of Company (but excludingany debt security that is convertible into, or exchangeable for, Capital Stock of Company). “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. “ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning ofSection 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or 13not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal RevenueCode of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal RevenueCode of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any formerERISA Affiliate of Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Company or any such Subsidiary within themeaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities arisingafter such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA. “ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to anyPension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimumfunding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of theInternal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to anyPension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant toSection 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawalby Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or thetermination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings toterminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or theappointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISAAffiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, anyof its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISAAffiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends toterminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition onCompany, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the InternalRevenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of amaterial claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or againstCompany, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the InternalRevenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the InternalRevenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify forexemption from taxation 14under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code orpursuant to ERISA with respect to any Pension Plan. “Eurodollar Rate Loan” means a Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate. “European Subsidiaries” means the Subsidiaries owned by Equinix Europe, Inc. “Event of Default” means each of the conditions or events set forth in Section 8.1. “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. “Exchange Offer” means the exchange by Company of Senior Notes for Qualifying Equity and Cash pursuant to the terms and conditions of theExchange Offer Documents. “Exchange Offer Documents” means the Offer to Exchange and Consent Solicitation Statement, dated November 26, 2002, and the Letters ofTransmittal/Consent referred to therein. “Existing Indebtedness” means the Indebtedness listed on Schedule 6.1. “Existing Credit Agreement” has the meaning assigned to that term in the recitals hereto. “Existing Loans” means Loans outstanding under the Existing Credit Agreement immediately prior to satisfaction and/or waiver of the conditions toeffectiveness set forth in Section 3.1 of this Agreement. “Existing Mortgages” means the Mortgages granted prior to the date of the Existing Credit Agreement as security for the Obligations under the OriginalCredit Agreement. “Facility” means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased,operated or used by Company or any of its Subsidiaries or any of their respective predecessors or Affiliates. “Fair Share” as defined in Section 7.2. “Fair Share Contribution Amount” as defined in Section 7.2. “Fair Share Shortfall” as defined in Section 7.2. “Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the 15Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day nextsucceeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the nextpreceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day,the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactionsas determined by Administrative Agent. “Financial Officer Certification” means, with respect to the financial statements for which such certification is required, the certification of thechief financial officer of Company that such financial statements fairly present, in all material respects, the financial condition of Company and itsSubsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from auditand normal year-end adjustments. “Financial Plan” as defined in Section 5.1(k). “First Amendment” means that certain Waiver and First Amendment to Amended and Restated Credit and Guaranty Agreement among,Company, OpCo and the lenders and agents party thereto, which waived certain provisions and made certain amendments to the Existing Credit Agreement. “First Amendment Effective Date” means July 31, 2002, the date of the satisfaction of the conditions precedent set forth in the FirstAmendment. “First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien isthe only Lien to which such Collateral is subject, other than Permitted Liens. “Fiscal Quarter” means a fiscal quarter of any Fiscal Year. “Fiscal Year” means the fiscal year of Company and its Subsidiaries ending on December 31st of each calendar year. “Flood Hazard Property” means any Real Estate Asset subject to a mortgage in favor of the Collateral Agent, for the benefit of the SecuredParties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. “Foreign Accounts Receivable” means, any receivable of Company and its Subsidiaries for products and services billed to customers which arenot located in the United States or which are not denominated in US dollars receivables. “Foreign Subsidiary” means, with respect to any Person, any Subsidiary that is not a Domestic Subsidiary. “Funding Guarantors” as defined in Section 7.2. 16 “GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accountingprinciples in effect as of the date of determination thereof. “Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government orGovernmental Authority. “Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board,bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States,or a foreign entity or government. “Governmental Authorization” means any permit, license, authorization, plan, directive, consent order or consent decree of or from anyGovernmental Authority. “Grantor” as defined in the Pledge and Security Agreement. “Guaranteed Obligations” as defined in Section 7.1. “Guarantor” means Company and each Subsidiary of Company other than OpCo and the Singapore Subsidiaries. “Guarantor Subsidiary” means each Guarantor other than Company. “Guaranty” means the guaranty of each Guarantor set forth in Section 7. “Hazardous Materials” means any chemical, material or substance, exposure to which is prohibited, limited or regulated by anyGovernmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facilityor to the indoor or outdoor environment. “Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any HazardousMaterials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement,generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any HazardousMaterials, and any corrective action or response action with respect to any of the foregoing. “Hedge Agreement” means an Interest Rate Agreement or a Currency Agreement entered into with a Lender Counterparty in order to satisfy therequirements of this Agreement or otherwise in the ordinary course of Company’s or any of its Subsidiaries’ businesses and not for speculative purposes. “Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged,or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under 17such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. “IBX Facilities” means Internet Business Exchange facilities, including, without limitation, the Permitted IBX Facilities, which are designed,developed (or acquired by) and operated by Company or one of its Subsidiaries for the purpose of providing Internet access, colocation services,telecommunications access, mechanical and power systems and operations and customer service and support and is either owned in fee by Company or one ofits Subsidiaries or operated under a distinct long term lease agreement between Company or one of its Subsidiaries and a landlord. “Increased-Cost Lender” as defined in Section 2.22. “Indebtedness”, as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligationswith respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts acceptedrepresenting extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferredpurchase price of property or services (excluding any such obligations incurred under ERISA and ordinary course trade payables), which purchase price is (a)due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) allindebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall havebeen assumed by that Person or is nonrecourse to the credit of that Person; (vi) the greater of the face amount of any letter of credit issued for the account ofthat Person or as to which that Person is otherwise liable for reimbursement of drawings and the maximum amount for which such Person may otherwise beliable under such letters of credit; (vii) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purposeor intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto willbe complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (ix) any liability of such Person for the obligationof another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or toprovide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or(b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described undersubclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above; and (x) obligations of such Person inrespect of any exchange traded or over the counter derivative transaction, including, without limitation, any Interest Rate Agreement or Currency Agreement,whether entered into for hedging or speculative purposes; provided, in no event shall obligations under any Interest Rate Agreement or any Currency Agreementbe deemed “Indebtedness” for any purpose under Sections 6.6 or 6.7, as applicable. “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages),penalties, actions, judgments, suits, claims 18(including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation orother response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or naturewhatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicialproceeding commenced or threatened by any Person, whether or not any such indemnities shall be designated as a party or a potential party thereto, and anyfees or expenses incurred by indemnities in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state orforeign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common lawor equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such indemnities, in any manner relating to orarising out of (i) this Agreement (which for the avoidance of doubt shall include the Existing Credit Agreement) or the other Credit Documents or thetransactions contemplated hereby or thereby (including (i) all prior negotiations and prior acts of Lenders in connection therewith and (ii) the Lenders’agreement to make Credit Extensions or the use or intended use of the proceeds of thereof, or any enforcement of any of the Credit Documents (including anysale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty)); (ii) the statements contained in the commitmentletter delivered by any Lender to Company with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or anyHazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Companyor any of its Subsidiaries. “Indemnitees” as defined in Section 10.3. “Intellectual Property” as defined in the Pledge and Security Agreement. “Intellectual Property Collateral” means all of the Intellectual Property subject to the Lien of the Pledge and Security Agreement. “Intercreditor Agreement” means that certain Intercreditor Agreement dated December 31, 2002 by and among Administrative Agent, CollateralAgent and Convertible Note Agent substantially in the form of Exhibit Q. “Interest Coverage Ratio” means the ratio, as of the last day of any Fiscal Quarter, of (i) Annualized Consolidated EBITDA for the FiscalQuarter then ended, to (ii) Consolidated Cash Interest Expense for the four-Fiscal Quarter period then ended. “Interest Payment Date” means with respect to (i) any Base Rate Loan, the last day of each month commencing on the first such date to occurafter the Effective Date, the date of repayment or prepayment of any portion of such Loan and the Maturity Date; and (ii) any Eurodollar Rate Loan, the lastday of each month, the last day of each Interest Period applicable to such Loan, the date of repayment or prepayment of any portion of such Loan and theMaturity Date. “Interest Period” means, in connection with a Eurodollar Rate Loan, an interest period of one, two, or three months, as selected by the Borrowerin the applicable 19Conversion/Continuation Notice, (i) initially, commencing on the Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencingon the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a BusinessDay, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such InterestPeriod shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a dayfor which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c), of this definition, endon the last Business Day of a calendar month; and (c) no Interest Period with respect to any portion of any Term Loans shall extend beyond the Maturity Date. “Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest ratehedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with Company’sand its Subsidiaries’ operations. “Interest Rate Determination Date” means, with respect to any Interest Period, the date that is two (2) Business Days prior to the first day ofsuch Interest Period. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and anysuccessor statute. “Investment” means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interestin, any of the Securities of any other Person (other than by Company or any wholly-owned Guarantor Subsidiary with respect to any wholly-owned GuarantorSubsidiary); (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person (otherthan Company or any wholly-owned Guarantor Subsidiary), of any Capital Stock of such Subsidiary; and (iii) any direct or indirect loan, advance (otherthan advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) orcapital contribution by Company or any of its Subsidiaries to any other Person (other than by Company or any wholly-owned Guarantor Subsidiary to anywholly-owned Guarantor Subsidiary), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arisefrom sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost ofall additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. “Investment Related Property” as defined in the Pledge and Security Agreement. “Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership, limited liability company, orother legal form; provided, in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. 20 “Landlord Agreement” means an agreement duly executed by the landlord of any Leasehold Property substantially in the form of Exhibit Kwith such amendments or modifications as may be approved by Collateral Agent and its counsel. “Lead Arranger” as defined in the preamble hereto. “Leasehold Property” means any leasehold interest (other than San Jose Ground Lease) of Company or any of its Subsidiaries as lessee underany lease of real property, other than any such leasehold interest designated from time to time by Collateral Agent in its sole discretion as not being required tobe included in the Collateral. “Lender” means each financial institution that became a Lender under this Agreement as of the Closing Date, together with each suchinstitution’s successors and permitted assigns. “Lender Counterparty” means each Lender or any Affiliate of a Lender Counterparty to a Hedge Agreement, including, without limitation, eachsuch Affiliate that enters into a joinder agreement with the Collateral Agent. “Lien” means (i) any lien, claim, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreementto give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferentialarrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party withrespect to such Securities. “Loan” means (y) prior to the Second Amendment Effective Date, any Term Loan outstanding pursuant to the Existing Credit Agreement and (z)on and after the Second Amendment Effective Date, a Term Loan. “Margin Stock” as defined in Regulation T, U or X of the Board of Governors of the Federal Reserve System as in effect from time to time. “Material Adverse Effect” means a material adverse effect on (i) the business, operations, properties, assets, condition (financial or otherwise)or prospects (with respect to prospects only, based upon the Second Amendment Effective Date Financial Plan) of Company and its Subsidiaries taken as awhole; (ii) the ability of any Credit Party to fully and timely perform the Obligations; (iii) the legality, validity, binding effect or enforceability against a CreditParty of a Credit Document to which it is a party; (iv) the rights, remedies and benefits available to, or conferred upon, any Agent and any Lender under anyCredit Document; or (v) the Collateral Agent’s Liens, on behalf of Secured Parties, on the Collateral or the priority of such Liens. “Material Contract” means any contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the CreditDocuments) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect including,without limitation, those contracts listed on Schedule 4.17(a). 21 “Material Real Estate Asset” means (i) (a) any fee-owned Real Estate Asset located in the United States or Canada having a fair market valuein excess of $250,000 as of the date of the acquisition thereof, (b) any Leasehold Property which is a IBX Facility listed on Schedule 1.1(a) and all LeaseholdProperties which are IBX Facilities that acquired after the Second Amendment Effective Date in which the Collateral Agent in its reasonable judgmentdetermines to be material and (c) all Leasehold Properties which are not IBX Facilities (other than the San Jose Ground Lease and headquarter buildings) otherthan those with respect to which the aggregate payments under the term of the lease are less than $100,000 per annum or (ii) any Real Estate Asset (other thanthe San Jose Ground Lease and existing headquarters) located in the United States or Canada that the Requisite Lenders have determined is material to thebusiness, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any Subsidiary thereof taken as a whole. “Maturity Date” means the earlier of (i) March 31, 2006, (ii) in the event that Company receives proceeds from the exercise by STT of anySTT Additional Equity Option, then the Maturity Date shall be extended in accordance with Section 2.10, (iii) the date the Obligations are paid in fullpursuant to any prepayment made in accordance with Sections 2.11, 2.12 or 2.13, and (iv) the date on which the Loans shall become due and payable,whether by acceleration or otherwise. “Moody’s” means Moody’s Investor Services, Inc. “Mortgage” means, collectively, the Existing Mortgages, as modified by the Effective Date Mortgage Modifications, and the Effective DateMortgages, together with any amendments, restatements, supplements or other modifications entered into from time to time in accordance herewith. “Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA. “NAIC” means The National Association of Insurance Commissioners, and any successor thereto. “Narrative Report” means, with respect to the financial statements for which such narrative report is required, a narrative report describingany material events affecting the operations of Company and its Subsidiaries (including, the details with respect to the Singapore Subsidiaries) for the FiscalQuarter or Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such period to which such financial statements relatein a form reasonably satisfactory to the Administrative Agent. “Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by wayof deferred payment pursuant to, or by monetization of, a note receivable or as a result of the release of any amounts subject to any reserve described in clause(c) below or otherwise, but only as and when so received) received by Company or any of its Subsidiaries from such Asset Sale, minus (ii) any bona fidedirect costs incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized inconnection with such Asset Sale, (b) 22payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lienon the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (c) attorneys’ fees, accountants’ fees,investment banking fees and other customary costs, fees and expenses and commissions actually incurred in connection therewith, and (d) a reasonablereserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect ofsuch Asset Sale undertaken by Company or any of its Subsidiaries in connection with such Asset Sale. “Net Insurance/Condemnation Proceeds” means an amount equal to: (i) any Cash payments or proceeds received by Company or any of itsSubsidiaries (a) under any casualty insurance policy in respect of a covered loss thereunder or (b) as a result of the taking of any assets of Company or any ofits Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaserwith such power under threat of such a taking, minus (ii) (a) any actual and reasonable costs incurred by Company or any of its Subsidiaries in connectionwith the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof, and (b) any bona fide direct costs incurred in connectionwith any sale of such assets as referred to in clause (i)(b) of this definition, including (1) income or gains taxes payable by the seller as a result of any gainrecognized in connection with the foregoing, (2) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness(other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of anysale of such assets, (3) attorneys’ fees, accountants’ fees, investment banking fees and other customary costs, fees and expenses and commissions actuallyincurred in connection therewith, and (4) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities andrepresentations and warranties to purchaser in respect of such asset sale undertaken by Company or any of its Subsidiaries in connection with such assetsale. “Net Revenues” means, for any period, the net revenues of Company and its Subsidiaries on a consolidated basis for such period taken as asingle accounting period determined in conformity with GAAP (it being understood that, in any event such net revenue shall be net of sales charges anddiscounts). “Non-Consenting Lender” as defined in Section 2.22. “Non-US Lender” as defined in Section 2.19(c). “Note” means a Tranche A Term Loan Note or a Term Loan Note. “Notice” means an Issuance Notice, or a Conversion/Continuation Notice. “Obligations” means all obligations of every nature of each Credit Party from time to time owed to the Agents, the Lenders or any of them or theirrespective Affiliates (including, without limitation, all former Agents, Lenders or Lender Counterparties), under any Credit Document (including, withoutlimitation, with respect to a Hedge Agreement, net obligations owed thereunder to any person who was a Lender or an Affiliate of a Lender at the 23time such Hedge Agreement was entered into and, with respect to any period prior to the Second Amendment Effective Date, any obligations under the ExistingCredit Agreement), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party,would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding),payments for early termination of Hedge Agreements, fees, expenses, indemnification or otherwise. “Obligee Guarantor” as defined in Section 7.7. “Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation, as amended, and its by-laws,as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii)with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its certificate offormation or articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any otherCredit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such“Organizational Document” shall only be to a document of a type customarily certified by such governmental official. “Original Credit Agreement” means that certain Credit and Guaranty Agreement dated as of December 20, 2000 by and among Credit Partiesand the Lenders and Agents party thereto. “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto. “Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal RevenueCode or Section 302 of ERISA. “Permitted Acquisition” means any acquisition whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of theCapital Stock of, or a business line or unit or a division of, any Person; provided, (i) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or wouldresult therefrom; (ii) all transactions in connection therewith shall be consummated in accordance with all applicable laws and in conformity with allapplicable Governmental Authorizations; (iii) in the case of the acquisition of Capital Stock, all of the Capital Stock (except for any such Securities in the nature of directors’qualifying shares required pursuant to applicable law) issued by such Person or any newly formed Subsidiary of Company in connection with suchacquisition shall be owned by Company or a Guarantor Subsidiary thereof, and Company shall have taken, or caused to be taken, as of 24the date such Person becomes a Subsidiary of Company, each of the actions set forth in Sections 5.9 and/or 5.10, as applicable; (iv) whether the consideration paid in such acquisition is cash or stock, Company shall deliver to Agents a Financial Officer’sCertificate and other financial statements and projections demonstrating (to the reasonable satisfaction of Agents) that Company and its Subsidiariesshall be in compliance, as of the first day of the most recently ended Fiscal Quarter and after giving pro forma effect on a going-forward basisthrough the Maturity Date to such acquisition with the covenants contained in this Agreement; (v) Company shall have delivered to the Agents (A) at least ten (10) Business Days prior to such proposed acquisition, a ComplianceCertificate evidencing compliance with Sections 6.6, 6.7 or 6.8, as applicable, as required under clause (iv) above, together with all relevantfinancial information with respect to such acquired assets, including, without limitation, the aggregate consideration for such acquisition and anyother information required to demonstrate compliance with Sections 6.6, 6.7 or 6.8, as applicable; (vi) any Person or assets or division as acquired in accordance herewith shall be in the same business or lines of business in whichCompany and/or its Subsidiaries are engaged as of the Second Amendment Effective Date, a Complementary Business, an IBX Facility or suchother lines of business as may be consented to by Requisite Lenders; (vii) any Person or assets or division as acquired in accordance herewith shall be acquired by OpCo; and (viii) Company shall have satisfied the other requirements set forth in Section 6.9(d). “Permitted Equipment Financing” means (A) the secured equipment financing facilities listed, and designated as such, on Schedule 6.1 as ofEffective Date and (B) one or more purchase money, vendor or other equipment financing facilities or leases (i) in an aggregate principal amount not in excessof $15,000,000 outstanding at any time, (ii) pursuant to which Company or its Subsidiaries may be advanced funds principally to purchase or lease IBXFacility equipment or headquarters equipment or services and to pay the costs of the engineering, construction, installation, importation, development andimprovement of such equipment incurred after the Effective Date, (iii) which may be secured only by the assets being financed directly with the proceeds ofsuch financing (it being understood that equipment acquired no earlier than ninety (90) days prior to the incurrence of such Permitted Equipment Financingmay be determined to be financed with the proceeds thereof); provided, such equipment was acquired and installed after the Effective Date, (iv) until suchtime as the Collateral Agent has received a First Priority Lien on such Subsidiary, with respect to any such financings incurred by any Subsidiary, suchfinancings shall be without recourse to Company, and (v) with respect to which no scheduled repayments or prepayments of principal are required prior to theMaturity Date; provided, that with respect to no more than $5,000,000 aggregate principal amount of Permitted 25Equipment Financing (excluding those Permitted Equipment Financings listed on Schedule 6.1), equal monthly repayments of principal may be made for athree year period commencing no earlier than March 31, 2003. “Permitted IBX Facilities” means (i) those IBX Facilities listed on Schedule 1.1(a) and (ii) those IBX Facilities acquired after the SecondAmendment Effective Date pursuant to a Permitted Acquisition. “Permitted Liens” means each of the Liens permitted pursuant to Section 6.2. “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limitedliability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or otherorganizations, whether or not legal entities, and Governmental Authorities. “Pledge and Security Agreement” means the Amended and Restated Pledge and Security Agreements in the form of Exhibit I as it may beamended, supplemented or otherwise modified from time to time by Company, the Borrower and/or each Guarantor. “Pihana” means Pihana Pacific, Inc., a Delaware corporation. “PIK Notes” means notes representing interest payments on the Convertible Notes and issued in accordance with Section 9.8 of the SecuritiesPurchase Agreement. “Prime Rate” means the rate of interest per annum that the Administrative Agent announces from time to time as its prime lending rate, as ineffect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. TheAdministrative Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. “Principal Office” means, the Administrative Agent’s “Principal Office” as set forth on Appendix B, or such other office as Administrative Agentmay from time to time designate in writing to the Borrower and each Lender. “Principal Stockholders” means STT and its Related Persons. “Pro Forma Consolidated Debt Service” means, as of any date of determination, the sum, without duplication, of (i) Consolidated CashInterest Expense and (ii) all scheduled amortization (including any payment or prepayment of principal of, premium, if any, or interest on, or redemption,purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment) in respect of Indebtedness, in each casepayable by Company and its Subsidiaries during the immediately succeeding four Fiscal Quarters assuming, for purposes of calculating Consolidated CashInterest Expense for any such succeeding four Fiscal Quarter period, Indebtedness outstanding as of the date of such calculation shall remain outstandingduring such four Fiscal Quarter period (except to the extent of any scheduled amortization, redemption, retirement or similar payment scheduled during such 26four Fiscal Quarter period) and that the average interest rate applicable to outstanding Indebtedness of the Credit Parties as of the date of such calculationapplies with respect to Indebtedness outstanding during such four Fiscal Quarter period. “Pro Forma Debt Service Coverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Annualized Consolidated EBITDAfor the Fiscal Quarter then ended to (ii) Pro Forma Consolidated Debt Service, in each case as set forth in the most recent Compliance Certificate delivered byCompany to Administrative Agent pursuant to Section 5.1(d). “Pro Rata Share” means with respect to all payments, computations and other matters relating to the Term Loan of any Lender, the percentageobtained by dividing (x) the Term Loan Exposure of that Lender by (y) the aggregate Term Loan Exposure of all Lenders, as the applicable percentage may beadjusted by assignments permitted pursuant to Section 10.6. The Pro Rata Share of each Lender as of the Second Amendment Effective Date for is set forthopposite the name of that Lender in Appendix A-2. “Purchase Money Loan” shall have the meaning ascribed to such term in the Original Credit Agreement. “Qualifying Equity” means any Equity Interest other than Disqualified Stock issued by Company after the Effective Date. “Real Estate Asset” means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any realproperty. “Recapitalization Transactions” means the transactions contemplated by the Combination Agreement, including without limitation, (w) the saleby Company to STT of common and preferred equity, (x) the stock purchase by Eagle Jaguar Acquisition Corp. of all of the outstanding capital stock of i-STT Pte Ltd, a corporation organized under the laws of the Republic of Singapore, (y) the merger of Pihana with and into Eagle Panther Acquisition Corp and(z) the reorganization of the Pihana and i-STT Pte Ltd Subsidiaries in accordance with Section 6.16 of the Combination Agreement. “Record Document” means, with respect to any Leasehold Property, (i) the lease evidencing such Leasehold Property or a memorandum thereof,executed and acknowledged by the owner of the affected real property, as lessor, or (ii) if such Leasehold Property was acquired or subleased from the holderof a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficientto give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Collateral Agent. “Recorded Leasehold Interest” means a Leasehold Property with respect to which a Record Document has been recorded in all places necessaryor desirable, in Administrative Agent’s reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers andencumbrancers of the affected real property. 27 “Register” as defined in Section 2.5(b). “Registration Rights Agreement” means that certain Registration Rights Agreement by and among Company and the initial purchasers namedtherein and in the form of Exhibit 7,1(j)(iv) to the Securities Purchase Agreement. “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. “Related Fund” means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans andthat is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. “Related Person” means any Person who controls, is controlled by or is under common control with STT; provided that for purposes of thisdefinition “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 with respect to any natural Person, each member of such Person’s immediate familyshall be deemed to be a Related Person of such Person. “Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels,containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surfacewater or groundwater. “Replacement Lender” as defined in Section 2.22. “Requisite Lenders” means one or more Lenders having or holding Term Loan Exposure, representing more than 50% of the aggregate TermLoan Exposure of all Lenders. “Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock ofCompany or OpCo now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) anyredemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock ofCompany now or hereafter outstanding except to the extent payable in exchange for shares of Capital Stock of Company, (iii) any payment made to retire, or toobtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company or OpCo now or hereafteroutstanding except to the extent paid with shares of Capital Stock of Company or OpCo or warrants, options or other rights to acquire any such shares, (iv)any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legaldefeasance), sinking fund or similar payment with respect to, the Convertible Notes, (v) any payment or prepayment of principal of, premium, if any, orinterest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, theSenior Notes, and any 28Permitted Equipment Financing; provided that Restricted Junior Payments shall not include (x) the issuance of the Warrants on the Second AmendmentEffective Date, or the exercise of Warrants from and after the Second Amendment Effective Date in accordance with the terms and conditions thereof, (y) theconversion of the Convertible Notes for Qualifying Equity of Company, or the conversion of any such Qualifying Equity, made after the Second AmendmentEffective Date in accordance with the terms and conditions of the Convertible Note Documents and (z) the acquisition by STT of common stock and series Apreferred equity of Company pursuant to STT’s exercise of the STT Additional Equity Option. “S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation. “San Jose Ground Lease” means the Ground Lease by and between iStar San Jose, LLC, as Lessor, and Company, as Lessee, dated June 21,2000 as amended or restated from time to time but not, in any event, such that the amounts payable with respect thereto exceed amounts payable with respectthereto as contemplated by the Second Amendment Effective Date Financial Plan or otherwise materially increase the obligations of Company thereunder. “Second Amendment Effective Date” means the date on which the conditions to effectiveness set forth in Section 3.1 have been satisfied orwaived by the Lenders. “Second Amendment Effective Date Certificate” means a certificate in the form of Exhibit G annexed hereto dated as of the SecondAmendment Effective Date and duly executed by an Authorized Officer of Company. “Second Amendment Effective Date Financial Plan” as defined in Section 4.8. “Second Amendment Effective Date Financial Statements” means as of the Second Amendment Effective Date, (i) the audited financialstatements of Company and its Subsidiaries for Fiscal Year 2001, consisting of balance sheets and the related consolidated statements of income,stockholders’ equity and cash flows for such Fiscal Year and (ii) the unaudited financial statements of Company and its Subsidiaries as of the Fiscal Quarterending September 30, 2002, consisting of a balance sheet and the related consolidated statements of income and cash flows for the nine-month period ending onsuch date, and, in the case of clauses (i) and (ii), certified by the chief financial officer of Company that they fairly present, in all material respects, thefinancial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated,subject to changes resulting from audit and normal year-end adjustments. “Secured Parties” as defined in the Pledge and Security Agreement. “Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharingagreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated orotherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in 29temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. “Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute. “Securities Purchase Agreement” means that certain Securities Purchase Agreement dated as of October 2, 2002 by and among Company, theguarantors party thereto from time to time and the purchasers named therein. “Senior Leverage Ratio” means the ratio, as of the last day of any Fiscal Quarter, of (i) Consolidated Senior Secured Debt as of such date to(ii) Annualized Consolidated EBITDA. “Senior Notes” means the 13% Senior Notes due 2007 issued by Company in the aggregate principal amount of $200,000,000 pursuant to theSenior Notes Indenture, as in effect on the Closing Date and as such notes may thereafter be amended, restated, supplemented or otherwise modified from timeto time to the extent permitted under Section 6.16. “Senior Notes Indenture” means the Senior Notes Indenture dated as of December 1, 1999 between Company and State Street Bank and TrustCompany of California, N.A., as trustee, pursuant to which the Senior Notes have been issued, as in effect on the Closing Date and as such indenture maythereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. “Singapore Subsidiaries” means each of the Subsidiaries listed on Schedule 1.1(b). “Singapore Subsidiaries Investment Certificate” means the certificate in the form of Exhibit P hereto. “Solvent” means, with respect to any Person, that as of the date of determination both (i) (a) the sum of such Person’s debt (including contingentliabilities) does not exceed all of its property, at a fair valuation; (b) the present fair saleable value of the property of such Person is not less than the amountthat will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and matured; (c) such Person’s capital is notunreasonably small in relation to its business or any contemplated or undertaken transaction; and (d) such Person does not intend to incur, or believe (norshould it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is “solvent” within themeaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amountof any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents theamount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrualunder Statement of Financial Accounting Standard No. 5). 30 “Stand-Alone Cash Flow” means, for any period, an amount determined for any Permitted Acquisition acquired pursuant to Section 6.9(d)equal to “Operating Cash Flow” as defined in accordance with GAAP less, “Investing Cash Flow” as defined in accordance with GAAP. “Stage 1” means the period from the Second Amendment Effective Date to and including June 30, 2004. “Stage 2” means the period from July 1, 2004 through the Maturity Date. “STT” means i-STT Investments Pte Ltd., a corporation organized under the laws of the Republic of Singapore. “STT Additional Equity Option” means the option of STT to purchase additional common equity and series A preferred equity above theequity contemplated to be acquired by the conversion of the Convertible Notes held by STT, and pursuant to the terms of the Warrants, in an aggregateamount not to exceed $30,000,000. “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or otherbusiness entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence ofany contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) havingthe power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or oneor more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Personcontrolled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding. “Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called,by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, “Tax on the overall net income” of a Person shall beconstrued as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, inthe case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business onall or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to aparticular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office). “Term Loan” means a Term Loan outstanding pursuant to Section 2.1(b) of this Agreement. “Term Loan Exposure” means, with respect to any Lender, the outstanding principal amount of the Term Loan of such Lender. “Term Loan Installments” as defined in Section 2.10. 31 “Term Loan Installment Date” as defined in Section 2.10. “Term Loan Note” means a promissory note in the form of Exhibit B-1, as it may be amended, restated, supplemented or otherwise modifiedfrom time to time. “Terminated Lender” as defined in Section 2.22. “Total Leverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (a) Consolidated Total Debt to (b) Annualized ConsolidatedEBITDA. “Tranche A Term Loan” has the meaning assigned to that term in the Existing Credit Agreement. “Tranche A Term Loan Note” means a promissory note in the form of Exhibit B-1, as it may be amended, restated, supplemented or otherwisemodified from time to time. “Type of Loan” means with respect to any of the Loans, a Base Rate Loan or a Eurodollar Rate Loan. “UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. “UCC Questionnaire” means any certificate in form satisfactory to the Collateral Agent and its counsel that provides information with respect toany personal or mixed property of each Credit Party. “Unadjusted Eurodollar Rate Component” means that component of the interest costs to Company in respect of a Eurodollar Rate Loan that isbased upon the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate. “Warrants” means collectively, the following warrants issued in connection with the Securities Purchase Agreement: (i) the Cash TriggerWarrants, (ii) the Common Warrants, (iii) the Preferred Warrants and (iv) the Change of Control Warrants, as all such terms are defined in the SecuritiesPurchase Agreement. 1.2 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meaningsassigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to Section5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliationstatements provided for in Section 5.1(f)), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and otherprovisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements. 32 1.3 Interpretation, etc. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending onthe reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case maybe, hereof unless otherwise specifically provided. The use herein of the word “include” or “including”, when following any general statement, term or matter,shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items ormatters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto,but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. SECTION 2. LOANS 2.1 Confirmation and Redesignation of Existing Loans as Term Loans. (a) Each Credit Party acknowledges and confirms that, immediately prior to giving effect to the prepayment made on the Second AmendmentEffective Date pursuant to Section 3.1, each Lender held Existing Loans in the respective principal amounts set forth opposite their names on Schedule A-1annexed hereto. Each Credit Party hereby represents, warrants, agrees, and covenants that there are no defenses, rights of set off, claims or counterclaimsagainst any Agent or Lender in regard to its Obligations in respect of such Existing Loans with respect to the Existing Credit Agreement or otherwise. (b) Immediately following the prepayment of Existing Loans contemplated by Section 3.1 the remaining aggregate principal balance of ExistingLoans shall be automatically redesignated pursuant to this Section 2.1(b) as Term Loans and shall thereafter be treated as Term Loans made to Borrower forall purposes under this Agreement. Immediately after giving effect to the foregoing, the aggregate principal amount of outstanding Term Loans shall be$91,509,562.50, and each Lender’s Pro Rata Share of the outstanding Term Loans shall be as set forth on Schedule A-2. Any Term Loan repaid or prepaidmay not be reborrowed. Subject to Sections 2.10, 2.11(a) and 2.12, all amounts owed hereunder with respect to the Term Loans shall be paid in full no laterthan the Maturity Date. 2.2 [Reserved] 2.3 Pro Rata Shares. All Term Loans shall be deemed made. 2.4 Use of Proceeds. The proceeds of the Loans have been used in accordance with the terms of Section 2.4 of the Existing Credit Agreement. 2.5 Evidence of Debt; Register; Lenders’ Books and Records; Notes. (a) Lenders’ Evidence of Debt. Each Lender shall maintain on its internal records an account or accounts evidencing the Indebtedness of Borrowerto such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall beconclusive and binding on the Borrower, absent manifest error; provided, failure to make any such recordation, or any error in such recordation, shall not 33 affect Borrower’s Obligations in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and anyLender’s records, the recordations in the Register shall govern. (b) Register. Administrative Agent shall maintain at its Principal Office a register for the recordation of the names and addresses of Lenders (the“Register”). The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable priornotice. Administrative Agent shall record in the Register the Loans, and each repayment or prepayment in respect of the principal amount of the Loans, andany such recordation shall be conclusive and binding on the Borrower and each Lender, absent manifest error; provided, failure to make any suchrecordation, or any error in such recordation, shall not affect Borrower’s Obligations in respect of any Loan. Borrower hereby designates the AdministrativeAgent to serve as Borrower’s agent solely for purposes of maintaining the Register as provided in this Section 2.5, and Borrower hereby agrees that, to theextent the Administrative Agent serves in such capacity, the Administrative Agent and its officers, directors, employees, agents and affiliates shall constitute“Indemnitees.” (c) Notes. If so requested by any Lender by written notice to the Borrower (with a copy to Administrative Agent), at any time, Borrower shallexecute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant toSection 10.6) on the Effective Date (or, if such notice is delivered after the Effective Date, promptly after the Borrower’s receipt of such notice) a Note or Notesto evidence such Lender’s Loans. 2.6 Interest on Loans. (a) Except as otherwise set forth herein, each Loan shall bear interest on the unpaid principal amount thereof from the date made throughrepayment (whether by acceleration or otherwise) thereof as follows: (i) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or (ii) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the Applicable Margin. (b) The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any Eurodollar Rate Loan, shallbe selected by the Borrower and notified to Administrative Agent and Lenders pursuant to the applicable Conversion/Continuation Notice, as the case may be.If on any day a Loan is outstanding with respect to which a Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance withthe terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan. (c) In connection with Eurodollar Rate Loans there shall be no more than ten (10) Interest Periods outstanding at any time. In the event Borrowerfails to specify between a Base Rate Loan or a Eurodollar Rate Loan in the applicable Conversion/Continuation Notice, 34 such Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Periodfor such Loan (or if outstanding as a Base Rate Loan will remain as a Base Rate Loan). In the event the Borrower fails to specify an Interest Period for anyEurodollar Rate Loan in the applicable Conversion/Continuation Notice, the Borrower shall be deemed to have selected an Interest Period of one month. As soonas practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determinationshall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which aninterest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) tothe Borrower and each Lender. (d) Interest payable pursuant to Section 2.6(a) shall be computed in the case of Base Rate Loans on the basis of a 365-day or 366-day year, asthe case may be, and in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the periodduring which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loanor, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base RateLoan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, withrespect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as thecase may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan. (e) Except as otherwise set forth herein, interest on each Loan shall be payable in arrears (i) on each Interest Payment Date applicable to that Loan;(ii) in the case of any prepayment of that Loan, whether voluntary or mandatory, on the date of prepayment (to the extent accrued on the amount beingprepaid); and (iii) at the Maturity Date. 2.7 Conversion/Continuation. (a) Subject to Section 2.17 and so long as no Default or Event of Default shall have occurred and then be continuing, the Borrower shall have theoption: (i) to convert at any time all or any part of any Loan equal to $1,000,000 and integral multiples of $500,000 in excess of that amount fromone Type of Loan to another Type of Loan; provided, a Eurodollar Rate Loan may only be converted on the expiration of the Interest Period applicable tosuch Eurodollar Rate Loan unless the Borrower shall pay all amounts due under Section 2.17 in connection with any such conversion; or (ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to$1,000,000 and integral multiples of $500,000 in excess of that amount as a Eurodollar Rate Loan. 35 (b) The Borrower shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 10:00 a.m. (New York City time) at leastone (1) Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three (3) Business Days inadvance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwiseprovided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shallbe irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to effect a conversion or continuation in accordancetherewith. 2.8 Default Interest. Upon the occurrence and during the continuance of an Event of Default, the principal amount of all Loans and, to the extentpermitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder not paid when due, in each case whether atstated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under theBankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 5.0% per annum in excess of the interest rate otherwise payablehereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 5.0% per annum in excess of the interestrate otherwise payable hereunder for Base Rate Loans); provided, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at thetime any such increase in interest rate is effective, such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interestpayable upon demand at a rate which is 5.0% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptanceof the increased rates of interest provided for in this Section 2.8 is not a permitted alternative to timely payment and shall not constitute a waiver of any Eventof Default or otherwise prejudice or limit any rights or remedies of Administrative Agent, any other Agent or any Lender. 2.9 Fees. (a) In the event that STT exercises the STT Additional Equity Option, Company agrees to pay to the Administrative Agent for distribution to theLenders in accordance with each Lender’s Pro Rata Share, a fee equal to 1.0% of the principal amount of Loans outstanding at the time Company receives theproceeds from such exercise of the STT Additional Equity Option. All fees referred to in this Section 2.9(a) shall be paid to Administrative Agent at itsPrincipal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereto. (b) In addition to any of the foregoing fees, Company agrees to pay to Agents such other fees in the amounts and at the times separately agreedupon by Company and such Agents. 2.10 Scheduled Payments Scheduled Term Loan Installments. The principal amounts of the Term Loans shall be repaid in the aggregate amounts set forth below (each, a“Term Loan Installment”) on the corresponding date set forth below (each, a “Term Loan Installment Date”): 36 Term LoanInstallment Dates Term LoanInstallmentsSeptember 30, 2004 $2,500,000December 31, 2004 $2,500,000March 31, 2005 $10,000,000June 30, 2005 $15,750,000September 30, 2005 $21,500,000December 31, 2005 $35,250,000March 31, 2006 $5,000,000 Notwithstanding the foregoing, (i) such Term Loan Installments shall be reduced in connection with any voluntary or mandatory prepayments of the Loans,in accordance with Sections 2.11, 2.12 and 2.13, as applicable; (ii) the Loans, together with all other amounts owed hereunder with respect thereto, shall, inany event, be paid in full no later than the Maturity Date; and (iii) in the event that as of any Term Loan Installment Date (A) either (y) Company is not incompliance with the minimum Cash covenant set forth in Schedule 6.6 or (z) an Event of Default pursuant to Section 8.1(a) shall have occurred and iscontinuing; (B) Company is unable to raise equity proceeds from any Person other than STT or its affiliates; and (C) STT exercises the STT AdditionalEquity Option, then, the Term Loan Installments for each Fiscal Quarter in Fiscal Year 2005 set forth above shall be deferred on a pro rata basis by anamount equal to the Deferral Amount to the corresponding Fiscal Quarter in Fiscal Year 2006, and in connection therewith, the Maturity Date shall be extendedto December 31, 2006. 2.11 Voluntary Prepayments. (a) Voluntary Prepayments. (i) Any time and from time to time: (1) with respect to Base Rate Loans, the Borrower may prepay, subject to Section 2.17(c), any such Loans on any Business Day inwhole or in part, in an aggregate minimum amount of $2,000,000 and integral multiples of $1,000,000 in excess of that amount; and (2) with respect to Eurodollar Rate Loans, the Borrower may prepay, subject to Sections 2.11(c) and 2.17, any such Loans on anyBusiness Day in whole or in part in an aggregate minimum amount of $2,000,000 and integral multiples of $1,000,000 in excess of that amount. (ii) All such prepayments shall be made: (1) upon not less than one (1) Business Days’ prior written or telephonic notice in the case of Base Rate Loans; and (2) upon not less than three (3) Business Days’ prior written or telephonic notice in the case of Eurodollar Rate Loans, 37 in each case given to Administrative Agent, as the case may be, by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptlyconfirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice by telefacsimile or telephoneto each Lender). Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on theprepayment date specified therein. 2.12 Mandatory Prepayments. (a) Asset Sales. If, within the period of one hundred eighty (180) days after the receipt by Company or any of its Subsidiaries of Net Asset SaleProceeds, OpCo (or to the extent such Net Asset Sale Proceeds are proceeds of the sale of assets of Company, Company) has not invested (or committed toinvest within 180 days and actually invested within a period of 270 days) such Net Asset Sale Proceeds in long term productive assets of the general type usedin the business of Company and its Subsidiaries, as certified to Administrative Agent by Company, then, to the extent the Borrower has not previously doneso, the Borrower shall prepay Loans as set forth in Section 2.13 in an amount equal to the excess of such Net Asset Sale Proceeds over amounts invested asaforesaid. (b) Insurance/Condemnation Proceeds. If, within the period of one hundred eighty (180) days after the receipt by Company or any of itsSubsidiaries of Net Insurance/Condemnation Proceeds, OpCo (or to the extent such Net Asset Sale Proceeds are proceeds of the sale of assets of Company,Company) has not invested (or committed to invest within 180 days and actually invested within a period of 270 days) such Net Insurance/CondemnationProceeds in long term productive assets of general type used in the business of Company and its Subsidiaries, as certified to Administrative Agent byCompany then, to the extent the Borrower has not previously done so, the Borrower shall prepay Loans as set forth in Section 2.13, in an amount equal to theexcess of such Net Insurance/Condemnation Proceeds over amounts invested as aforesaid. (c) Aggregate Excess Cash. In the event that there shall be Aggregate Excess Cash for any Fiscal Quarter, commencing with the Fiscal Quarterending March 31, 2004, the Borrower shall, no later than forty-five (45) days after the end of such Fiscal Quarter, prepay the Loans as set forth in Section2.13 in an aggregate amount equal to 50% of such Aggregate Excess Cash. (d) Issuance of Equity Securities. If Company or any of its Subsidiaries shall receive any Cash proceeds from a capital contribution to, or theissuance of any Capital Stock of, Company or any of its Subsidiaries (other than pursuant to the STT Additional Equity Option, the Exchange Offer, theconversion of the Convertible Notes or any employee stock or stock option compensation plan), Borrower shall prepay the Loans as set forth in Section 2.13in an aggregate amount equal to (y) one hundred percent (100%) of such proceeds, net of underwriting discounts and commissions and other reasonable costsand expenses associated therewith, including reasonable legal fees and expenses if such issuance of Capital Stock is to Columbia and any member of theColumbia Syndicate and (z) fifty percent (50%) of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expensesassociated therewith, including reasonable legal fees and expenses if such issuance of Capital Stock is to 38 any other Person; provided, that the maximum aggregate prepayment amount pursuant to this Section 2.12(d), together with prepayments made pursuant toSections 2.12(e) and 2.12(g), shall not exceed $5,000,000; provided, further, that with respect to the prepayment set forth in (z) above, such prepaymentrequirement shall expire on June 30, 2003. (e) Excess of Projected Cash. In the event Company and its Subsidiaries hold Cash and Cash Equivalents for the Fiscal Quarters ending March31, 2004 and June 30, 2004 in excess of the minimum projected Cash and Cash Equivalents for such Fiscal Quarters as set forth in the Second AmendmentEffective Date Financial Plan (the “Projected Cash”), then Borrower shall prepay the Loans as set forth in Section 2.13 in an aggregate amount equal to 100%of such Cash and Cash Equivalents in excess of the Projected Cash; provided, that the maximum aggregate prepayment amount pursuant to this Section2.12(e), together with any prepayments made pursuant to Sections 2.12(d) and 2.12(g), shall not exceed $5,000,000. (f) Cash Payments on Senior Notes. In the event that Company, Borrower or any of their Subsidiaries makes any cash payment of interest,principal or any other amount on the Senior Notes (other than any cash amounts paid pursuant to the Exchange Offer and fees and expenses required to bepaid pursuant to the Senior Note Indenture), then Borrower shall simultaneously prepay the Loans as set forth in Section 2.13 in an amount equal fifty percent(50%) of such payment made on the Senior Notes. (g) Issuance of Additional Convertible Notes. In the event that Company issues any Convertible Notes in excess of the $30,000,000 contemplatedto be issued on the Second Amendment Effective Date, then Borrower shall prepay the Loans as set forth in Section 2.13 in an amount equal to (y) onehundred percent (100%) of the proceeds received by Company in connection with such issuance if such additional Convertible Notes are issued to Columbiaand any member of the Columbia Syndicate and (z) fifty percent (50%) of the proceeds received by Company in connection with such issuance of additionalConvertible Notes to any other Person; provided, that the maximum aggregate prepayment amount pursuant to this Section 2.12(g), together with anyprepayments made pursuant to Section 2.12(d) and 2.12(e), shall not exceed $5,000,000. (h) Excess Consolidated Capital Expenditures. In the event that Company incurs any Excess Consolidated Capital Expenditures pursuant toSection 6.8, then, Borrower shall simultaneously prepay the Loans as set forth in Section 2.13 in an amount equal to fifty percent (50%) of the amount ofsuch Excess Consolidated Capital Expenditures. (i) Other Prepayments. Company shall from time to time prepay the Loans as set forth in Section 2.13 in an amount equal to the amounts set forthin Sections 6.9(d) and 6.18(c). (j) Prepayment Certificate. Concurrently with any prepayment of the Loans pursuant to Sections 2.12(a) through 2.12(i), Borrower shall deliverto Administrative Agent a certificate of an Authorized Officer (a copy of which Administrative Agent shall promptly provide to each Lender) demonstrating thecalculation of the amount of the applicable proceeds, 39 Aggregate Excess Cash (which, in such case, shall demonstrate total Cash and Cash Equivalents in excess of $20,000,000 on the consolidated balance sheet ofCompany and its Subsidiaries), excess Projected Cash, Excess Consolidated Capital Expenditures or any cash payments made to the holders of Senior Notes,as the case may be. In the event that in connection with any prepayment made pursuant to this Section 2.12 (other than with respect to Sections 2.12(c),2.12(e), 2.12(h) or 2.12(i)), the Borrower shall subsequently determine that the actual amount of proceeds received exceeded the amount set forth in suchcertificate, the Borrower shall promptly make an additional prepayment of the Loans in an amount equal to such excess, and Borrower shall concurrentlytherewith deliver to Administrative Agent (a copy of which Administrative Agent shall promptly provide to each Lender) a certificate of an Authorized Officerdemonstrating the derivation of such excess. 2.13 Application of Prepayments/Reductions. (a) Application of Voluntary Prepayments by Type of Loans. Any prepayment of any Loan pursuant to Section 2.11(a) shall be applied to prepayoutstanding Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof). Any prepayment of Loans pursuant toSection 2.11(a) shall be further applied, on a pro rata basis, to the remaining scheduled Term Loan Installments. (b) Application of Mandatory Prepayments by Type of Loans. (i) Any amount required to be prepaid pursuant to Section 2.12(a) through 2.12(c)shall be applied to prepay outstanding Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof), (ii) any amountrequired to be prepaid pursuant to Section 2.12(f), Section 2.12(h) and Section 2.12(i) shall be applied to prepay outstanding Loans in inverse order ofmaturity, commencing with the payment due on December 31, 2005 and (iii) any amount required to be prepaid pursuant to Sections 2.12(d), 2.12(e) and2.12(g) shall be applied to reduce outstanding Loans due on March 31, 2006; provided, that in the event such prepayment event pursuant to such sectionsoccurs (x) on or prior to March 31, 2004, then, one-half of the amount required to be prepaid shall be paid on March 31, 2004 and one-half of the amountrequired to be prepaid shall be paid on June 30, 2004; (y) after March 31, 2004 but prior to June 30, 2004, then, one-half of the amount required to be prepaidshall be paid on the date that the prepayment event occurs and one-half of the amount required to be prepaid shall be paid on June 30, 2004; and (z) on or afterJune 30, 2004, then, all of the amount required to be prepaid shall be paid on the date that the prepayment event occurs. (c) Application of Prepayments of Loans to Base Rate Loans and Eurodollar Rate Loans. Any prepayment of the Loans shall be applied first toBase Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any paymentsrequired to be made by Borrower pursuant to Section 2.17(c). 2.14 Allocation of Certain Payments and Proceeds. If an Event of Default shall have occurred and not otherwise be waived, and the maturity of theObligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by Agents hereunder in respect of any of the Obligations,shall be applied by Agents in accordance with the application arrangements described in Section 6.5 of the Pledge and Security Agreement. 40 2.15 General Provisions Regarding Payments. (a) All payments by the Borrower of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense,setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the datedue at the Administrative Agent’s Principal Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall bedeemed to have been paid by the Borrower on the next succeeding Business Day. (b) All payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid orprepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to suchLoan) shall be applied to the payment of interest before application to principal. (c) Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’sapplicable Pro Rata Share, giving effect to any adjustment from Pro Rata Shares on and after the Closing Date, of all payments and prepayments of principaland interest due hereunder, together with all other amounts due thereto, including, without limitation, all fees payable with respect thereto, to the extent receivedby Administrative Agent. (d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if anyAffected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto inapportioning payments received thereafter. (e) Subject to the provisos set forth in the definition of “Interest Period”, whenever any payment to be made hereunder shall be stated to be due on aday that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in thecomputation of the payment of interest hereunder. (f) The Borrower hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to cause timely payment to bemade to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for thatpurpose). (g) Administrative Agent shall deem any payment by or on behalf of the Borrower hereunder that is not made in same day funds prior to 12:00p.m. (New York City time) on or before the due date to be a non-conforming payment. Any such payment shall not be deemed to have been received byAdministrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shallgive prompt telephonic notice to the Borrower and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conformingpayment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on anyprincipal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of suchpayment 41 to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.8 from the date such amount was due and payable until the datesuch amount is paid in full. 2.16 Ratable Sharing. Lenders hereby agree among themselves that, except as otherwise provided in the Collateral Documents with respect to amountsrealized from the exercise of rights with respect to Liens on the Collateral, if any of them shall, whether by voluntary payment (other than a voluntaryprepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker’s lien, by counterclaim orcross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral underthe Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, fees and other amounts then due and owingto such Lender hereunder or under the other Credit Documents (collectively, the “Aggregate Amounts Due” to such Lender) which is greater than theproportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greaterpayment shall notify Administrative Agent and each other Lender of the receipt of such payment and apply a portion of such payment to purchaseparticipations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion ofsuch payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders inproportion to the Aggregate Amounts Due to them; provided, if all or part of such proportionately greater payment received by such purchasing Lender isthereafter recovered from such Lender upon the bankruptcy or reorganization of a Credit Party or otherwise, those purchases shall be rescinded and thepurchase prices paid for such participations shall be promptly returned to such purchasing Lender ratably to the extent of such recovery, but without interest.The Borrower expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights ofbanker’s lien, set-off or counterclaim with respect to any and all monies owing by the Borrower to that holder with respect thereto as fully as if that holder wereowed the amount of the participation held by that holder. 2.17 Making or Maintaining Eurodollar Rate Loans. (a) Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined (which determination shall be finaland conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason ofcircumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on thebasis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephoneconfirmed in writing) to the Borrower and each Lender of such determination, whereupon no Loans may be converted to, Eurodollar Rate Loans until suchtime as Administrative Agent notifies the Borrower and Lenders (by telefacsimile or by telephonic notice confirmed in writing) that the circumstances givingrise to such notice no longer exist, and any Conversion/Continuation Notice given by the Borrower with respect to the Loans in respect of which suchdetermination was made shall be deemed to be, in the case of a Conversion Notice, rescinded by the Borrower. 42 (b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determinationshall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with the Borrower and Administrative Agent) thatthe maintaining or continuation of its Eurodollar Rate Loans has become unlawful as a result of compliance by such Lender in good faith with any law, treaty,governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the forceof law even though the failure to comply therewith would not be unlawful), or has become impracticable, as a result of contingencies occurring after the datehereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, suchLender shall be an “Affected Lender” and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to the Borrower andAdministrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender and by telefacsimile or telephonicnotice confirmed in writing). Thereafter the obligation of the Affected Lender to convert Loans to, Eurodollar Rate Loans shall be suspended until such noticeshall be withdrawn by the Affected Lender, to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested bythe Borrower pursuant to a Conversion/Continuation Notice, the Affected Lender shall continue such Loan as or convert such Loan to, as the case may be aBase Rate Loan, the Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier tooccur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and the Affected Loans shallautomatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lenderas described above relates to a Eurodollar Rate Loan then being requested by the Borrower pursuant to a Conversion/Continuation Notice, the Borrower shallhave the option, subject to the provisions of Section 2.17(c), to rescind such Conversion/Continuation Notice as to all Lenders by giving notice (bytelefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of itsdetermination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender by telefacsimile or bytelephonic notice confirmed in writing). Except as provided in the immediately preceding sentence, nothing in this Section 2.17(b) shall affect the obligation ofany Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof. (c) Compensation for Breakage or Non-Commencement of Interest Periods. The Borrower shall compensate each Lender, upon written request bysuch Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interestpaid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by suchLender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain (i) if forany reason as a result of the Borrower’s action or omission a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specifiedtherefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment or anyconversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an 43 Interest Period applicable to that Loan; or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice ofprepayment given by the Borrower or as a consequence of any default by the Borrower in the repayment of its Eurodollar Rate Loans when required by theterms thereof. (d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of itsbranch offices or the office of an Affiliate of such Lender. (e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this Section 2.17 andunder Section 2.18 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollardeposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of suchEurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshoreoffice of such Lender to a domestic office of such Lender in the United States of America; provided, however, each Lender may fund each of its EurodollarRate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section2.17 and under Section 2.18. 2.18 Increased Costs; Capital Adequacy. (a) Compensation For Increased Costs and Taxes. Subject to the provisions of Section 2.19 (which shall be controlling with respect to the matterscovered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon allparties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof(including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, ineach case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereofby any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): subjects such Lender (or its applicablelending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of its obligationshereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder or thereunder;imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsoryloan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or othercredit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect toEurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or imposes any other condition (other than with respect to a Tax 44 matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or under any other Credit Document or the London interbankmarket; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Eurodollar Rate Loanshereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, theBorrower shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form ofan increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary tocompensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder or under any other Credit Document. SuchLender shall deliver to the Borrower (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating theadditional amounts owed to such Lender under this Section 2.18(a), which statement shall be conclusive and binding upon all parties hereto absent manifesterror. (b) Capital Adequacy Adjustment. In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicabilityafter the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation oradministration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, orcompliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the forceof law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital ofsuch Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans, or participations therein or otherobligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for suchadoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporationwith regard to capital adequacy), then from time to time, within five (5) Business Days after receipt by the Borrower from such Lender of the statementreferred to in the next sentence, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controllingcorporation on an after-tax basis for such reduction. Such Lender shall deliver to the Borrower (with a copy to Administrative Agent) a written statement,setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.18(b), which statement shall beconclusive and binding upon all parties hereto absent manifest error. (c) Limitation on Retroactive Effect. Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.18 shall notconstitute a waiver of such Lender’s right to demand such compensation; provided, however, that the Borrower shall not be required to compensate a Lenderpursuant to this Section 2.18 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of thechange giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that if the changegiving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactiveeffective thereof. 45 2.19 Taxes; Withholding, etc. (a) Payments to Be Free and Clear. All sums payable by any Credit Party hereunder and under the other Credit Documents shall (except to theextent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net incomeof any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the UnitedStates of America or any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or organization ofwhich the United States of America or any such jurisdiction is a member at the time of payment. (b) Withholding of Taxes. If any Credit Party or any other Person is required by law to make any deduction or withholding on account of anysuch Tax from any sum paid or payable by any Credit Party to Administrative Agent or any Lender under any of the Credit Documents: the Borrower shallnotify Administrative Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it; the Borrower shallpay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for itsown account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agentor such Lender; the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment is required shall be increased to theextent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receiveson the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and within thirty (30)days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of paymentof any Tax which it is required by clause (ii) above to pay, the Borrower shall deliver to Administrative Agent and the other affected parties evidencesatisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority;provided, no such additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the date hereof(in the case of each Lender listed on the signature pages hereof on the Closing Date) or after the effective date of the Assignment Agreement pursuant to whichsuch Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shallresult in an increase in the rate of such deduction, withholding or payment from that in effect at the date hereof or at the date of such Assignment Agreement, inrespect of payments to such Lender. (c) Evidence of Exemption From U.S. Withholding Tax. Each Lender that is not a United States Person (as such term is defined in Section7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”) shall deliver (to the extent not previously delivered) toAdministrative Agent for transmission to Borrower, on or prior to the Effective Date (in the case of each Lender listed on the signature pages hereof on theEffective Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at suchother times as may be necessary in the determination of the Borrower or Administrative Agent (each in the reasonable exercise of its discretion), two originalcopies of Internal Revenue Service Form W-8BEN or W- 46 8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal RevenueCode and reasonably requested by the Borrower to establish that such Lender is not subject to deduction or withholding of United States federal income taxwith respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Credit Documents, or if such Lender is nota “bank” or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successorform), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonablyrequested by the Borrower to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to anypayments to such Lender of interest payable under any of the Credit Documents. Each Lender required to deliver any forms, certificates or other evidence withrespect to United States federal income tax withholding matters pursuant to this Section 2.19(c) hereby agrees, from time to time after the initial delivery bysuch Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or otherevidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to Administrative Agent for transmission to the Borrower twonew original copies of Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank Status and two original copies of Internal RevenueService Form W-8, as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the InternalRevenue Code and reasonably requested by the Borrower to confirm or establish that such Lender is not subject to deduction or withholding of United Statesfederal income tax with respect to payments to such Lender under the Credit Documents, or notify Administrative Agent and the Borrower of its inability todeliver any such forms, certificates or other evidence. The Borrower shall not be required to pay any additional amount to any Non-US Lender under Section2.19(b)(iii) if such Lender shall have failed to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.19(c), or (2)to notify Administrative Agent and the Borrower of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided, if suchLender shall have satisfied the requirements of the first sentence of this Section 2.19(c) on the Effective Date or on the date of the Assignment Agreementpursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.19(c) shall relieve the Borrower of its obligation to pay anyadditional amounts pursuant to Section 2.18(a) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation ororder, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or otherevidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein. 2.20 Obligation to Mitigate. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering itsLoans, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that wouldentitle such Lender to receive payments under Section 2.17, 2.18 or 2.19, it will, to the extent not inconsistent with the internal policies of such Lender andany applicable legal or regulatory restrictions, (i) use reasonable efforts to maintain its Loans, including any Affected Loans, through another office of suchLender, or (ii) take such other 47 measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would ceaseto exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.17, 2.18 or 2.19 would be materiallyreduced and if, as determined by such Lender in its sole discretion, the maintaining of such Loans through such other office or in accordance with such othermeasures, as the case may be, would not otherwise adversely affect such Loans or the interests of such Lender; provided, such Lender will not be obligated toutilize such other office pursuant to this Section 2.20 unless the Borrower agrees to pay all incremental expenses incurred by such Lender as a result ofutilizing such other office as described in clause (i) above. A certificate as to the amount of any such expenses payable by the Borrower pursuant to thisSection 2.20 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Borrower (with a copy to AdministrativeAgent) shall be conclusive absent manifest error. 2.21 [Reserved]. 2.22 Removal or Replacement of a Lender. Anything contained herein to the contrary notwithstanding, in the event that: (i) any Lender (an“Increased-Cost Lender”) shall give notice to the Borrower that such Lender is an Affected Lender or that such Lender is entitled to receive payments underSection 2.17, 2.18 or 2.19, the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such paymentsshall remain in effect, and such Lender shall fail to withdraw such notice within five (5) Business Days after the Borrower’s request for such withdrawal; or(ii) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated bySection 10.5(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a “Non-ConsentingLender”) whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender or Non-Consenting Lender (the“Terminated Lender”), the Borrower may, by giving written notice to Administrative Agent and any Terminated Lender of its election to do so, elect to causesuch Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans, if any, in full to one or more EligibleAssignees (each a “Replacement Lender”) in accordance with the provisions of Section 10.6 and Terminated Lender shall pay any fees payable thereunderin connection with such assignment; provided, (1) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal tothe sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to allunreimbursed drawings that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (C) anamount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.9; (2) on the date of such assignment,Borrower shall pay any amounts payable to such Terminated Lender pursuant to Section 2.17(c), 2.18 or 2.19 or otherwise as if it were a prepayment; and(3) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter inrespect of which such Terminated Lender was a Non-Consenting Lender. Upon the prepayment of all amounts owing to any Terminated Lender, suchTerminated Lender shall no longer constitute a “Lender” for purposes 48 hereof; provided, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender. SECTION 3. CONDITIONS PRECEDENT 3.1 Conditions to Effectiveness. This Agreement shall become effective only upon the satisfaction of all of the following conditions precedent byDecember 31, 2002; provided, that if the following conditions have not been satisfied by December 31, 2002 solely as a result of the failure by Company toobtain all regulatory approvals required to consummate the Recapitalization Transactions or the Exchange Offer (including, without limitation, the SECclearing the proxy statement regarding the Recapitalization Transactions for mailing and any extensions of the tender offer period as provided for in theExchange Offer), then, the Second Amendment Effective Date shall automatically be extended for three successive thirty (30) calendar day periods; provided,further, that in no event shall the Second Amendment Effective Date extend beyond March 31, 2003: (a) Execution. OpCo, Company, the Credit Parties, Lenders and Agents shall have executed this Agreement. (b) Organizational Documents; Incumbency. Administrative Agent shall have received (i) if not previously delivered to the Administrative Agent,sufficient copies of each Organizational Document executed (original in the case of Bylaws) and delivered by each Credit Party, as applicable, and, to theextent applicable, certified as of a recent date by the appropriate governmental official, for each Lender and its counsel, each dated the Second AmendmentEffective Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of such Person executing the Credit Documents to which itis a party; (iii) resolutions of the Board of Directors or similar governing body of each Credit Party approving and authorizing the execution, delivery andperformance of this Agreement, the Recapitalization Transaction and the other Credit Documents to which it is a party or by which it or its assets may bebound as of the Second Amendment Effective Date, certified as of the Second Amendment Effective Date by its secretary or an assistant secretary as being infull force and effect without modification or amendment; (iv) if not previously delivered to the Administrative Agent and to the extent available, a good standingcertificate from the applicable Governmental Authority of each Credit Party’s jurisdiction of incorporation, organization or formation and in each jurisdictionin which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Second Amendment Effective Date; and (v)such other documents as Administrative Agent or Collateral Agent may reasonably request. (c) Recapitalization Transactions. With respect to the consummation of the Recapitalization Transactions, (i) all conditions to the RecapitalizationTransactions set forth in the Combination Agreement and related documents shall have been satisfied or the fulfillment of any such conditions shall have beenwaived with the consent of the Administrative Agent (other than any waiver with respect to the minimum amount of Senior Notes to be retired or tendered); and(ii) the Recapitalization Transactions shall have become effective in accordance with the terms of the Combination Agreement and related documents. Companyshall deliver to the Administrative Agent copies of all documents, agreements, opinions and certificates executed in connection with the RecapitalizationTransactions. 49 (d) Exchange Offer. With respect to the Exchange Offer, (i) all conditions to the Exchange Offer set forth in the Exchange Offer Documents andrelated documents shall have been satisfied or the fulfillment of any such conditions shall have been waived with the consent of the Administrative Agent; (ii)on or prior to the date hereof, no less than $110,000,000 of outstanding Senior Notes shall have been retired or shall have been tendered for retirement pursuantto the terms of the Exchange Offer Documents; and (iii) the Exchange Offer shall have become effective in accordance with the terms of the Exchange OfferDocuments and related documents. Company shall deliver to the Administrative Agent copies of all documents, agreements, opinions and certificates executedin connection with the Exchange Offer. (e) Convertible Notes. On or prior to the Second Amendment Effective Date, (i) Company shall have received the gross proceeds from the issuanceof the Convertible Notes in an aggregate amount in cash of not less than $30,000,000; (ii) all conditions to the issuance of the Convertible Notes set forth in theConvertible Note Documents shall have been satisfied or the fulfillment of any such conditions shall have been waived with the consent of the AdministrativeAgent; and (iii) Company shall have delivered to Administrative Agent complete, correct and conformed copies of the Convertible Note Documents which shallinclude terms reasonable and customary for loans and securities of such type, as mutually agreed upon between Company and Administrative Agent.Company shall deliver to the Administrative Agent copies of all documents, agreements, opinions and certificates executed in connection with the issuance ofthe Convertible Notes. (f) Organizational and Capital Structure. The organizational structure and capital structure of Company and its Subsidiaries after giving effect tothe Recapitalization Transactions shall be as set forth on Schedule 4.2. (g) Governmental Authorizations and Consents. Each Credit Party shall have obtained all Governmental Authorizations and all consents of otherPersons, in each case that are necessary or advisable in connection with the transactions contemplated by the Credit Documents and each of the foregoing shallbe in full force and effect and in form and substance reasonably satisfactory to Administrative Agent. All applicable waiting periods shall have expired withoutany action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the transactionscontemplated by the Credit Documents and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of theforegoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. (h) Intercreditor Agreement. Administrative Agent, Collateral Agent and Convertible Note Agent shall have entered into the Intercreditor Agreementand Administrative Agent and Collateral Agent shall be satisfied with the terms and conditions of the security documents entered into between Convertible NoteAgent, Company and the Credit Parties in connection with Convertible Note Agent’s second priority security interest in the Collateral. (i) Amendment Fee. Administrative Agent shall have received, for distribution to all Lenders, an amendment fee equal to 1.00% of such Lenders’outstanding Loans immediately prior to the Second Amendment Effective Date and after taking into effect the principal repayment contemplated by Section3.1(j) below. 50 (j) Prepayment of Existing Loans. The Administrative Agent shall have received from Company for distribution to the Lenders a prepayment inthe amount of $7,500,000, plus any matching principal payment resulting from payments of interest on Senior Notes due December 1, 2002, such amount tobe applied to prepay outstanding Loans on a pro rata basis. (k) Collateral. Except as set forth in Section 5.15(a), Company shall have (i) delivered all documents to the Collateral Agent on terms andconditions reasonably satisfactory to the Agents and (ii) made all filings necessary or advisable in order to grant to the Collateral Agent for the benefit of theLenders a First Priority Lien in all assets located in the United States that have been acquired by Company directly or indirectly in connection with theRecapitalization Transactions, with, in each case of (i) and (ii), any exceptions that the Collateral Agent determines are reasonable; provided that in the case ofany exceptions, Company shall in any event fully comply with this Section 3.1(k) within ten (10) Business Days following the Second Amendment EffectiveDate. (l) Second Amendment Effective Date Financial Plan. The Administrative Agent shall have received from Company for distribution to the Lendersthe final Second Amendment Effective Date Financial Plan. (m) Officer’s Certificate. Administrative Agent and Lenders shall have received from Company an executed Second Amendment Effective DateCertificate from an Authorized Officer certifying (i) the amount of cash on Pihana’s balance sheet after giving effect to the Recapitalization Transactions; (ii)the total amount of fees paid or accrued on the Second Amendment Effective Date by Company in connection with the Recapitalization Transactions; (iii) theamount and details with respect to the cash paid to the holders of the Senior Notes in connection with the Exchange Offer; (iv) that after giving effect to theRecapitalization Transactions the representations and warranties set forth in Section 4 of this Agreement are true and correct in all material respects on and asof the Second Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warrantiesspecifically relate to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date; and (v) that after givingeffect to the Recapitalization Transactions, as of the Second Amendment Effective Date, no event has occurred and is continuing that would constitute anEvent of Default or a Default. (n) Legal Opinion. Administrative Agent and Lenders shall have received originally executed copies of the favorable written opinions of Willkie,Farr & Gallagher, special counsel for the Credit Parties, and the General Counsel of Equinix, Inc., as to such matters as Administrative Agent may reasonablyrequest, dated the Second Amendment Effective Date and otherwise in form and substance reasonably satisfactory to Administrative Agent. (o) Other Fees. The Administrative Agent and Lenders shall have received all fees and other amounts due and payable pursuant to any CreditDocument on or prior to the Second Amendment Effective Date, including, (i) the reasonable fees and expenses of Skadden, Arps, Slate, Meagher & FlomLLP, (ii) the reasonable fees and expenses of Ernst & Young Corporate Finance LLC and (iii) to the extent invoiced, reimbursement or other payment of all 51 reasonable out-of-pocket expenses required to be reimbursed or paid by Company hereunder or under any other Credit Document. (p) Completion of Proceedings. All partnership, corporate and other proceedings taken or to be taken in connection with the transactionscontemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent and its counsel shall be satisfactory inform and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originalsor certified copies of such documents as Administrative Agent may reasonably request. Each Lender, by delivering its signature page to this Agreement as ofthe Second Amendment Effective Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and eachother document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable, on or prior to the Second Amendment Effective Date. 3.2 Notices by Borrower. Any Notice shall be executed by an Authorized Officer in a writing delivered to Administrative Agent. In lieu of delivering aNotice, the Borrower may give Administrative Agent telephonic notice by the required time of any conversion/continuation, as the case may be; provided eachsuch notice shall be promptly confirmed in writing by delivery of the applicable Notice to Administrative Agent on or before the applicable date ofcontinuation/conversion. Neither Administrative Agent, nor any Lender shall incur any liability to any Credit Party in acting upon any telephonic noticereferred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized on behalf of theBorrower or for otherwise acting in good faith. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders and Agents to enter into this Agreement, each Credit Party represents and warrants to each Lender and Agents, on the SecondAmendment Effective Date, that the following statements are true and correct: 4.1 Organization; Requisite Power and Authority; Qualification. Each of the Credit Parties (a) is duly organized, validly existing and in goodstanding under the laws of its jurisdiction of organization as identified in Schedule 4.1, (b) has all requisite power and authority to own and operate itsproperties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carryout the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located andwherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, andcould not be reasonably expected to have, a Material Adverse Effect. 4.2 Capital Stock and Ownership. The Capital Stock of each of the Credit Parties has been duly authorized and validly issued and is fully paid andnon-assessable. Except as set forth on Schedule 4.2, as of the date hereof, there is no existing option, warrant, call, right, commitment or other agreement towhich any of the Credit Parties, other than Company, is a party requiring, and there is no membership interest or other Capital Stock of any of the CreditParties, other than Company, outstanding which upon conversion or exchange would require, the 52 issuance by any of the Credit Parties, other than Company, of any additional membership interests or other Capital Stock of any of the Credit Parties, otherthan Company, or other Securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase, a membership interest or otherCapital Stock of any of the Credit Parties, other than Company. Schedule 4.2 correctly sets forth the ownership interest of the Credit Parties in their respectiveSubsidiaries as of the Second Amendment Effective Date and after giving effect to the Recapitalization Transactions. 4.3 Due Authorization. The execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on thepart of each Credit Party that is a party thereto. 4.4 No Conflict. The execution, delivery and performance by the Credit Parties of the Credit Documents to which they are parties and the consummationof the transactions contemplated by the Credit Documents do not and will not violate any provision of any law or any governmental rule or regulationapplicable to any of the Credit Parties, any of the Organizational Documents of any of the Credit Parties, or any order, judgment or decree of any court or otheragency of government binding on any of the Credit Parties; conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a defaultunder any Contractual Obligation of any of the Credit Parties; result in or require the creation or imposition of any Lien upon any of the properties or assets ofany of the Credit Parties (other than any Liens created under any of the Credit Documents in favor of Collateral Agent, on behalf of Secured Parties); or requireany approval of stockholders, members or partners or any approval or consent of any Person under any Contractual Obligation of any of the Credit Parties,except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders. 4.5 Governmental Consents. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and theconsummation of the transactions contemplated by the Credit Documents do not and will not require any registration with, consent or approval of, or notice to,or other action to, with or by, any Governmental Authority except as otherwise set forth on Schedule 4.5, and except for filings and recordings with respect tothe Collateral to be made, or otherwise delivered to Collateral Agent for filing and/or recordation, on or before the Effective Date. 4.6 Binding Obligation. Each Credit Document has been duly executed and delivered by each Credit Party that is a party thereto and is the legally validand binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited bybankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating toenforceability. 4.7 Second Amendment Effective Date Financial Statements. The Second Amendment Effective Date Financial Statements were prepared inconformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financialstatements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of 53the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. Asof the Second Amendment Effective Date, neither Company nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease orunusual forward or long-term commitment that is not reflected in the Second Amendment Effective Date Financial Statements or the notes thereto and which inany such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and any of itsSubsidiaries taken as a whole. 4.8 Projections. On and as of the Second Amendment Effective Date, the financial forecast of Company and its Subsidiaries delivered pursuant toSection 3.1(l) (the “Second Amendment Effective Date Financial Plan”) is based on good faith estimates and assumptions made by the management ofCompany; provided, the Second Amendment Effective Date Financial Plan is not to be viewed as representing facts and that actual results during the period orperiods covered by the Second Amendment Effective Date Financial Plan may differ from Second Amendment Effective Date Financial Plan and that thedifferences may be material; provided further, as of the Second Amendment Effective Date, management of Company believed that the Second AmendmentEffective Date Financial Plan was reasonable and attainable. 4.9 No Material Adverse Change. Since the Second Amendment Effective Date, no event or change has occurred that has caused or evidences, eitherin any case or in the aggregate, a Material Adverse Effect. 4.10 No Restricted Junior Payments. Since the Second Amendment Effective Date, none of the Credit Parties has directly or indirectly declared,ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted pursuant to Section 6.4. 4.11 Adverse Proceedings, etc. There are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a MaterialAdverse Effect. None of the Credit Parties is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, couldreasonably be expected to have a Material Adverse Effect, or is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules orregulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domesticor foreign, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.12 Payment of Taxes. Except as otherwise permitted under Section 5.3, all tax returns and reports of Company and its Subsidiaries required to befiled by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmentalcharges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable havebeen paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being activelycontested by Company or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other 54appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.13 Properties (a) Title. Each Credit Party has (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (inthe case of leasehold interests in real or personal property), and (iii) good title to (in the case of all other personal property), all of their respective properties andassets reflected in their respective Second Amendment Effective Date Financial Statements referred to in Section 4.7 and in the most recent financial statementsdelivered pursuant to Section 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or asotherwise permitted under Section 6.9. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. (b) Real Estate. As of the Second Amendment Effective Date, Schedule 4.13 contains a true, accurate and complete list of (i) all Real Estate Assets,(ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affectingeach Real Estate Asset of any Credit Party, regardless of whether such Credit Party is the landlord or tenant (whether directly or as an assignee or successor ininterest) under such lease, sublease or assignment and (iii) all basic rental lease payment obligations of the Company and its Subsidiaries with respect to theirdomestic IBX Facilities. Except as specified in Schedule 4.13, each agreement listed in clause (ii) of the immediately preceding sentence is in full force andeffect and Company does not have knowledge of any default that has occurred and is continuing thereunder, and each such agreement constitutes the legallyvalid and binding obligation of each applicable Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforcement may belimited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles. 4.14 Collateral.(a) Attachment and Perfection. The execution and delivery of the Collateral Documents by Credit Parties, together with the actions taken on orprior to the date hereof, are effective to create in favor of Collateral Agent, on behalf of Secured Parties, as security for their respective Obligations, a valid andperfected First Priority Lien on all of the Collateral, and all filings and other actions necessary or desirable to perfect and maintain the perfection and FirstPriority status of such Liens have been duly made or taken and remain in full force and effect, other than (i) the actions required under federal law to registerand record interests in intellectual property and (ii) the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or onbehalf of Collateral Agent. (b) Governmental Approvals, Etc. No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority orregulatory body is required for either (i) the pledge or grant by any Credit Party of the Liens purported to be created in favor of Collateral Agent pursuant to anyof the Collateral Documents or (ii) the exercise by Collateral Agent of any rights or remedies in respect of any Collateral (whether specifically granted or 55created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings as may be required inconnection with the disposition of any Investment Related Property, or by laws generally affecting the offering and sale of Securities. (c) Filings. Except with respect to any Permitted Lien and such as may have been filed in favor of Collateral Agent, no effective UCC financingstatement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (d) Disclosure. All information supplied to Collateral Agent by or on behalf of any Credit Party with respect to any of the Collateral (in each case takenas a whole with respect to any particular Collateral) is accurate and complete in all material respects. (e) Cash and Cash Equivalents. Without limiting the generality to the foregoing, representation and warranties, each Credit Party represents andwarrants that all of its Cash and Cash Equivalents shall be maintained in accounts in existence as of the Second Amendment Effective Date in which theCollateral Agent has a First Priority perfected security interest or such other accounts as may be pre-approved by the Collateral Agent, and in which CollateralAgent has a First Priority perfected security interest. 4.15 Environmental Matters. Neither any of the Credit Parties nor any of their respective Facilities or operations are subject to any outstanding writtenorder, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous MaterialsActivity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. None of the Credit Parties has received any letteror request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or anycomparable state law. There are and, to each of the Credit Parties’ knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities whichcould reasonably be expected to form the basis of an Environmental Claim against any of the Credit Parties that, individually or in the aggregate, couldreasonably be expected to have a Material Adverse Effect. Neither any of the Credit Parties nor, to any Credit Party’s knowledge, any predecessor of any of theCredit Parties has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of theCredit Parties’ operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270or any state equivalent. Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not bereasonably expected to have, individually or in the aggregate, a Material Adverse Effect. No event or condition has occurred or is occurring with respect to anyof the Credit Parties or their respective Facilities relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activitywhich individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect. 4.16 No Defaults. Except as set forth in Schedule 4.16, none of the Credit Parties is in default in the performance, observance or fulfillment of any ofthe obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists which, with 56the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, ifany, could not reasonably be expected to have a Material Adverse Effect. 4.17 Material Contracts. (a) Schedule 4.17(a) contains a true, correct and complete list of all the Material Contracts in effect on the Effective Date,and except as described thereon, all such Material Contracts are in full force and effect and no material defaults currently exist thereunder or under any leasegoverning Leasehold Property. (b) Each Credit Party owns or possesses all the patents, trademarks, service marks, trade names, copyrights and licenses, and all rights withrespect to the foregoing, necessary for the conduct of its business as presently conducted without any known conflict with the rights of others. Schedule4.17(b) accurately and completely lists all Intellectual Property owned or possessed by or licensed to such Credit Party. 4.18 Governmental Regulation. None of the Credit Parties is subject to regulation under the Public Utility Holding Company Act of 1935, the FederalPower Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness orwhich may otherwise render all or any portion of the Obligations unenforceable. None of the Credit Parties is a “registered investment company” or a company“controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in theInvestment Company Act of 1940. 4.19 Margin Stock. None of the Credit Parties is engaged principally, or as one of its important activities, in the business of extending credit for thepurpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans made to such Credit Party will be used to purchase or carry anysuch margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or isinconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 4.20 Employee Matters. None of the Credit Parties is engaged in any unfair labor practice that could reasonably be expected to have a MaterialAdverse Effect. There is (a) no unfair labor practice complaint pending against any of the Credit Parties, or to the best knowledge of the Credit Parties,threatened against any of them before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under any collectivebargaining agreement that is so pending against any of the Credit Parties or to the best knowledge of the Credit Parties, threatened against any of them, (b) nostrike or work stoppage in existence or threatened involving any of the Credit Parties that could reasonably be expected to have a Material Adverse Effect, and(c) to the best knowledge of the Credit Parties, no union representation question existing with respect to the employees of any of the Credit Parties and, to thebest knowledge of the Credit Parties, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or (c)above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 4.21 Employee Benefit Plans. Each of the Credit Parties and each of their respective ERISA Affiliates are in compliance with all applicable provisionsand requirements of ERISA 57and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed alltheir obligations under each Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal RevenueCode is so qualified. No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Employee Benefit Plan orany Trust established under Title IV of ERISA has been or is expected to be incurred by any of the Credit Parties or any of their ERISA Affiliates. No ERISAEvent has occurred or is reasonably expected to occur. Except to the extent required under Section 4980B of the Internal Revenue Code or similar state laws, noEmployee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of any of theCredit Parties or any of their respective ERISA Affiliates. As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities(as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any PensionPlans with respect to which assets exceed benefit liabilities), does not exceed $500,000. As of the most recent valuation date for each Multiemployer Plan forwhich the actuarial report is available, the potential liability of the Credit Parties and their respective ERISA Affiliates for a complete withdrawal from suchMultiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from allMultiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $1,500,000. Each of the Credit Parties and eachof their ERISA Affiliates have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material“default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan. 4.22 Solvency. Each Credit Party is and, upon the incurrence of any Obligation by such Credit Party on any date on which this representation andwarranty is made, will be, Solvent. 4.23 Compliance with Statutes, etc. Each of the Credit Parties is in compliance with all applicable statutes, regulations and orders of, and allapplicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (includingcompliance with all applicable Environmental Laws with respect to any Real Estate Asset or governing its business and the requirements of any permits issuedunder such Environmental Laws with respect to any such Real Estate Asset or the operations of Company or any of its Subsidiaries), except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.24 Disclosure. No representation or warranty of any Credit Party contained in any Credit Document or, except as set forth on Schedule 4.24, in anyother documents, certificates or written statements furnished to Lenders by or on behalf of any Credit Party for use in connection with the transactionscontemplated hereby contains any untrue statement of a material fact or omits to state a material fact (known to each Credit Party, in the case of any documentnot furnished by any of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which thesame were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptionsbelieved by each Credit Party to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed asfacts and 58that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or whichshould upon the reasonable exercise of diligence be known) to any Credit Party (other than matters of a general economic nature) that, individually or in theaggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificatesand statements furnished to Lenders for use in connection with the transactions contemplated hereby. 4.25 Fees to Management in Connection with the Recapitalization Transactions. None of Company nor any of its Subsidiaries has paid a special payment, fee or bonus to management which is contingent solely upon theconsummation and completion of the Recapitalization Transactions. SECTION 5. AFFIRMATIVE COVENANTS Each Credit Party covenants and agrees that until payment in full of all Obligations each Credit Party shall perform, and shall cause each of itsSubsidiaries to perform (or, in the case of i-STT Nation Ltd, shall use commercially reasonable efforts to cause i-STT Nation Ltd to perform), all covenantsin this Section 5. 5.1 Financial Statements and Other Reports. Company will deliver to Administrative Agent and Lenders: (a) Monthly Reports. As soon as available, and in any event within thirty (30) days after the end of each month ending after the Closing Date, (i) thefinancial statements and information set forth on Schedule 5.1(a)(i), (ii) a statement setting forth the location and amount of all Cash and Cash Equivalents ofCompany and its Subsidiaries, and (iii) a statement setting forth the location, amount and summary of transfers of all Cash and Cash Equivalents from theSingapore Subsidiaries to the Credit Parties and vice versa, in the form set forth on Schedule 5.1(a)(iii), together with Financial Officer Certification withrespect thereto; (b) Quarterly Financial Statements. As soon as available, and in any event within thirty (30) days after the end of the first three Fiscal Quarters ofeach Fiscal Year and within sixty (60) days after the end of the last Fiscal Quarter of each Fiscal Year, the financial statements and information set forth onSchedule 5.1(a)(i), together with (1) a Financial Officer Certification and a Narrative Report with respect thereto and (2) revised Schedules 4.1 and 4.2 (ifnecessary) reflecting all changes in the organizational structure and capital structure of Company and its Subsidiaries since the delivery of the last quarterlyfinancial information, which revised Schedules 4.1 and 4.2 will be deemed to amend the then-existing Schedules 4.1 and 4.2 for all purposes under thisAgreement; (c) Annual Financial Statements. As soon as available, and in any event within sixty (60) days after the end of each Fiscal Year, (i) the financialstatements and information set forth on Schedule 5.1(a)(i), together with a Financial Officer Certification and a Narrative Report with respect thereto; (ii) withrespect to each consolidated financial statements 59a report thereon of PricewaterhouseCoopers LLP or other independent certified public accountants of recognized national standing selected by Company, andreasonably satisfactory to Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that suchconsolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries, as at the datesindicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prioryears (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financialstatements has been made in accordance with generally accepted auditing standards) together with a written statement by such independent certified publicaccountants stating that their audit examination has included a review of the terms of Sections 6.6 and 6.7 the Credit Documents, whether, in connectiontherewith, any condition or event that constitutes a Default or an Event of Default under Section 6.6 or 6.7 has come to their attention and, if such a conditionor event has come to their attention, specifying the nature and period of existence thereof, and that nothing has come to their attention that causes them to believethat the information contained in any Compliance Certificate is not correct or that the matters set forth in such Compliance Certificate are not stated inaccordance with the terms hereof and (iii) revised Schedules 4.1 and 4.2 (if necessary) reflecting all changes in the organizational structure and capitalstructure of Company and its Subsidiaries since the delivery of the last quarterly financial information, which revised Schedules 4.1 and 4.2 will be deemedto amend the then-existing Schedules 4.1 and 4.2 for all purposes under this Agreement; provided, that Company and its Subsidiaries shall not change theirorganizational structure or state of organization, without the prior written consent of the Requisite Lenders. (d) Compliance Certificate. Together with each delivery of financial statements of Company and its Subsidiaries pursuant to Sections 5.1(a), 5.1(b)and 5.1(c), a completed Compliance Certificate duly executed by an Authorized Officer; (e) [Reserved]; (f) Statements of Reconciliation after Change in Accounting Principles. If, as a result of any change in accounting principles and policies from thoseused in the preparation of the Effective Date Financial Statements, the consolidated financial statements of Company and its Subsidiaries delivered pursuantto Section 5.1(b) or 5.1(c) will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to suchsubdivisions had no such change in accounting principles and policies been made, then, together with the first delivery of such financial statements after suchchange, one or more a statements of reconciliation for all such prior financial statements in form and substance satisfactory to Administrative Agent; (g) SEC Reports. Promptly upon their becoming available, copies of (i) all financial statements, reports, notices and proxy statements sent or madeavailable generally by Company to its security holders acting in such capacity or by any Subsidiary of Company to its security holders other than Companyor another Subsidiary of Company, (ii) all regular and periodic reports (but not including, unless requested by Administrative Agent, routine reports regularlyfiled with the FCC and state commissions with jurisdiction over telecommunications matters) and all registration statements (other than on Form S-8 or asimilar form) and 60prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or anygovernmental or private regulatory authority, and (iii) all press releases and other statements made available generally by Company or any of its Subsidiariesto the public concerning material developments in the business of Company or any of its Subsidiaries; (h) Notice of Default. Promptly upon any officer of Company obtaining knowledge (i) of any condition or event that constitutes a Default or an Event ofDefault or that notice has been given to Company with respect thereto; (ii) that any Person has given any notice to Company or any of its Subsidiaries or takenany other action with respect to any event or condition set forth in Section 8.1(b); (iii) of any condition or event of a type required to be disclosed in a currentreport on Form 8-K of the Securities and Exchange Commission; or (iv) of the occurrence of any event or change that has caused or evidences, either in anycase or in the aggregate, a Material Adverse Effect, a certificate of its Authorized Officers specifying the nature and period of existence of such condition, eventor change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, default, event orcondition, and what action Company has taken, is taking and proposes to take with respect thereto; (i) Notice of Litigation. Promptly upon any officer of Company obtaining knowledge of the institution of, or non-frivolous threat of, any AdverseProceeding not previously disclosed in writing by Company to Lenders, or any material development in any Adverse Proceeding that, in the case of either (i) or(ii) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or torecover any damages or obtain relief as a result of, the transactions contemplated hereby or any of the other Credit Documents, written notice thereof togetherwith such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; (j) ERISA. Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the naturethereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect theretoand, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and withreasonable promptness, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Company, any of its Subsidiariesor any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; all notices received by Company, any of itsSubsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and copies of such other documentsor governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; (k) Financial Plan. As soon as available and in any event no later than sixty (60) days following the beginning of each Fiscal Year, a consolidated planand financial forecast for such Fiscal Year and the lesser of the next three (3) succeeding Fiscal Years and the period remaining through the Maturity Date (a“Financial Plan”), including a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of Company and 61its Subsidiaries for each such Fiscal Year, together with pro forma Compliance Certificates for each such Fiscal Year and an explanation of the assumptionson which such forecasts are based and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each month of eachsuch Fiscal Year, together with an explanation of the assumptions on which such forecasts are based; (l) Insurance Report. As soon as practicable and in any event by the last day of each Fiscal Year, commencing on December 31, 2001, a report in formand substance satisfactory to Administrative Agent and Collateral Agent outlining all material insurance coverage maintained as of the date of such report byCompany and its Subsidiaries and all material insurance coverage planned to be maintained by Company and its Subsidiaries in the immediately succeedingFiscal Year; (m) Notice of Change in Board of Directors. With reasonable promptness, written notice of any change in the board of directors (or similar governingbody) of Company or OpCo; (n) Annual UCC Questionnaire. By the last day of each Fiscal Year, commencing on December 31, 2003, a completed UCC Questionnaire in form andsubstance satisfactory to Collateral Agent; (o) Notice Regarding Material Contracts. Promptly, and in any event within ten (10) Business Days (i) after any Material Contract of Company or anyof its Subsidiaries is terminated prior to its scheduled term or amended in a manner that is materially adverse to Company or such Subsidiary, as the casemay be, or (ii) any new Material Contract is entered into, a written statement describing such event, with copies of such material amendments or newcontracts, delivered to Administrative Agent (to the extent (1) such information is not disclosed or incorporated by reference in any filing with the Securitiesand Exchange Commission, and (2) such delivery is permitted by the terms of any such Material Contract, provided, no such prohibition on delivery shall beeffective if it were bargained for by Company or its applicable Subsidiary with the intent of avoiding compliance with this Section 5.1(o)), and an explanationof any actions being taken with respect thereto; (p) Environmental Reports and Audits. As soon as practicable following receipt thereof, copies of all environmental audits and reports with respect toenvironmental matters at any Facility or which relate to any environmental liabilities of Company or its Subsidiaries which, in any such case, individually orin the aggregate, could reasonably be expected to result in a Material Adverse Effect; (q) Additional Reporting Requirements. Within thirty (30) days after the last day of each month, such information described on Schedule 5.1 for themonth most recently ended. (r) Notice of Certain Payments; Cash Balances. On the date any Credit Party makes a payment or series of related payments or reimbursements or seriesof related reimbursements to any Person or related group of Persons (other than to landlords under leases existing on the Effective Date or to a Credit Party orthe Lenders pursuant to the terms of this 62Agreement) or otherwise transfers Cash or Cash Equivalents, in any such case, in an aggregate amount equal to or greater than $10,000,000 per transfer or ina series of related transfers, Company shall give notice thereof to Lenders. Upon the request of any Agent at any time, Company shall provide detailedinformation regarding Company’s and its Subsidiaries’ Cash and Cash Equivalents, including, without limitation amounts and locations of such Cash andCash Equivalents. (s) Other Information. With reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as fromtime to time may be reasonably requested by Administrative Agent, Collateral Agent or any Lender. 5.2 Existence. Except as otherwise permitted under Section 6.9, each Credit Party will, and will cause each of its Subsidiaries to, at all times preserveand keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business; provided, no Credit Party or any ofits Subsidiaries shall be required to preserve any such existence, right or franchise, licenses and permits if such Person’s board of directors (or similargoverning body) shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that theloss thereof is not disadvantageous in any material respect to such Person or to Lenders. 5.3 Payment of Taxes and Claims. Each Credit Party will, and will cause each of its Subsidiaries to, pay all Taxes imposed upon it or any of itsproperties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon, and all claims (including claims forlabor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties orassets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, no such Tax or claim need be paid if it is being contested ingood faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserve or other appropriate provision, as shall berequired in conformity with GAAP shall have been made therefor, and in the case of a charge or claim which has or may become a Lien against any of theCollateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim. No Credit Party will, norwill it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than Company or any of itsSubsidiaries). 5.4 Maintenance of Properties. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair,working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of any Credit Party and from time to timewill make or cause to be made all appropriate repairs, renewals and replacements thereof, and each Credit Party shall defend any Collateral against all Personsat any time claiming an interest therein. 5.5 Insurance. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such comprehensive general liabilityinsurance, third party property damage insurance, business interruption insurance, workers’ compensation and employer’s liability insurance and casualtyinsurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may be 63satisfactory to the Collateral Agent, but in any event not less than as shown on Schedule 5.5 hereto and made a part hereof, and in each case in such amounts(giving effect to self-insurance in amounts acceptable to the Collateral Agent), with such deductibles and limits, covering such risks and otherwise on suchterms and conditions as shall be acceptable to the Collateral Agent. Without limiting the generality of the foregoing, Company will maintain or cause to bemaintained: (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood InsuranceProgram, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, (b) insurance with respect toproperty owned by third parties and maintained at IBX Facilities with such insurance companies, in such amounts, with such deductibles, and covering suchrisks as are acceptable to the Collateral Agent and Administrative Agent and (c) replacement value casualty insurance on an all-risks basis on the Collateralunder such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks and otherwise on suchterms and conditions as are acceptable to the Collateral Agent; (d) with respect to each policy of insurance, a waiver of subrogation in favor of the CollateralAgent and the Lenders; and (e) policies of insurance that (i) insure the interests of the Collateral Agent and the Lenders and their respective Affiliates regardlessof any breach of or violation by any Credit Party of any warranties, declarations or conditions contained therein, (ii) contain cross liability clauses, (iii)provide that the insurance shall be primary and without right of contribution from any other insurance which may be available to any of the Collateral Agentor Lenders, (iv) provide that the Collateral Agent and the Lenders have no responsibility, obligation or liability for premiums, commissions, assessments orcalls in connection with such insurance. Each such policy of liability insurance shall name each of the Collateral Agent and the Lenders and their respectiveAffiliates, as additional insureds thereunder and in the case of each business interruption and casualty insurance policy, contain a standard lender’s losspayable clause or endorsement, satisfactory in form and substance to Collateral Agent, that names Collateral Agent, on behalf of Lenders, as the loss payeethereunder for any covered loss in excess of $500,000. Each such policy of insurance shall provide for at least thirty (30) days’ prior written notice toCollateral Agent of any reduction of coverage or cancellation of such policy. On the Closing Date and within thirty (30) days prior to each anniversary of thepolicies of insurance required to be maintained pursuant to this Section 5.5, the Borrower shall deliver or cause to be delivered to the Collateral Agent (whichshall promptly furnish a copy thereof to each of the Lenders) an insurance broker’s opinion letter from the Borrower’s independent insurance agent confirmingthat the insurance premiums with respect to the policies of insurance required to be maintained pursuant to this Section 5.5 have been paid, that such policiesare in full force and effect, and that such policies meet the insurance requirements set forth in this Section 5.5. The Borrower shall also furnish or cause to befurnished to the Collateral Agent (which shall promptly furnish a copy or copies thereof to each of the Lenders) a certificate or certificates of insurance (i)evidencing that all the coverages required to be maintained pursuant to this Section 5.5 have been renewed and continue to be in full force and effect for suchperiod as shall be then stipulated, (ii) specifying the insurers with whom the insurances are carried and (iii) containing such other certifications andundertakings as are customarily provided to Lenders, as reasonably requested by the Collateral Agent or any Lender. 5.6 Books and Records; Inspections; Lenders Meetings. (a) Each Credit Party will, and will cause each of its Subsidiaries and the San JoseSubsidiary to, keep proper books of 64record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each Credit Partywill, and will cause each of its Subsidiaries to, permit any authorized representatives, including, without limitation, third party industry consultantsdesignated or engaged by any Lender or the Collateral Agent (or, after the occurrence and during the continuance of any Event of Default, any Lender) to visitand inspect any of the facilities of any Credit Party and any of its respective Subsidiaries, to inspect, copy and take extracts from its and their financial andaccounting records, to audit their assets and equipment and to discuss its and their affairs, finances and accounts with its and their officers and independentpublic accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested.Company will either pay such authorized representative’s or consultant’s reasonable fees and expenses or reimburse such Lender or Collateral Agent withrespect to such authorized representative’s or consultant’s reasonable costs and expenses. Company will, upon the request of Administrative Agent or RequisiteLenders, participate in a meeting of Agents and Lenders once during each Fiscal Year to be held at Company’s corporate offices (or at such other location asmay be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent. (b) Credit Parties agree to cooperate with third party industry consultants engaged by Lenders or their representatives to analyze Company’sbusiness plan and at the election of Agents, either pay such consultant’s reasonable fees and expenses or reimburse Lenders or such representative with respectto such consultant’s reasonable costs and expenses. 5.7 Compliance with Laws. Each Credit Party will comply, and shall cause each of its Subsidiaries and all other Persons, if any, on or occupyingany Facility to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including all EnvironmentalLaws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.8 Environmental (a) Environmental Disclosure. Company will deliver to Administrative Agent and Lenders: (i) as soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind orcharacter, whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, Governmental Authorities or any otherPersons, with respect to significant environmental matters at any Facility or with respect to any Environmental Claims; (ii) promptly upon the occurrence thereof, written notice describing in reasonable detail (A) any Release required to be reported to anyfederal, state or local governmental or regulatory agency under any applicable Environmental Laws and any remedial action taken by Company or anyother Person in response thereto, (B) any Hazardous Materials Activities the existence of which has a reasonable possibility of resulting in one or moreEnvironmental Claims having, individually or in the aggregate, a Material Adverse Effect, (C) any Environmental Claims that, individually or in the 65aggregate, have a reasonable possibility of resulting in a Material Adverse Effect, and (D) Company’s discovery of any occurrence or condition on anyreal property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on theownership, occupancy, transferability or use thereof under any Environmental Laws; (iii) as soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all writtencommunications with respect to (A) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of giving rise to aMaterial Adverse Effect, (B) any Release required to be reported to any federal, state or local governmental or regulatory agency, and (C) any request forinformation from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentiallyresponsible for any Hazardous Materials Activity; (iv) prompt written notice describing in reasonable detail (A) any proposed acquisition of stock, assets, or property by Company or any of itsSubsidiaries that could reasonably be expected to (i) expose Company or any of its Subsidiaries to, or result in, Environmental Claims that couldreasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) affect the ability of Company or any of its Subsidiariesto maintain in full force and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations and(B) any proposed action to be taken by Company or any of its Subsidiaries to modify current operations in a manner that could reasonably be expectedto subject Company or any of its Subsidiaries to any additional material obligations or requirements under any Environmental Laws; and (v) with reasonable promptness, such other documents and information as from time to time may be reasonably requested by AdministrativeAgent or Collateral Agent in relation to any matters disclosed pursuant to this Section 5.8(a). (b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take, and shall cause each of its Subsidiaries promptly to take, anyand all actions necessary to cure any violation of applicable Environmental Laws by such Credit Party or its Subsidiaries that could reasonably be expected tohave, individually or in the aggregate, a Material Adverse Effect, and make an appropriate response to any Environmental Claim against such Credit Party orany of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect. 5.9 Subsidiaries. In the event that, after the Effective Date, any Person becomes a Subsidiary of Company or a first tier Foreign Subsidiary, Companyshall promptly (i) deliver, or cause to be delivered to Collateral Agent certificates (accompanied by irrevocable undated stock powers, duly endorsed in blankand otherwise satisfactory in form and substance to Collateral Agent) representing the Capital Stock of such Subsidiary, which shall be pledged pursuant tothe Pledge and Security Agreement and deliver, or cause to be delivered, to Collateral Agent such other additional agreements or instruments, each in form andsubstance, as may be necessary or 66desirable to create in favor of Collateral Agent, for the benefit of the Secured Parties, a valid and perfected First Priority security interest in all of the CapitalStock of such Subsidiary, (ii) cause each such Domestic Subsidiary to become a Guarantor hereunder and a Grantor under the Pledge and Security Agreementby executing and delivering to Administrative Agent and Collateral Agent a Counterpart Agreement duly executed by an Authorized Officer of such DomesticSubsidiary, and (iii) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, andcertificates as may be reasonably requested by any Agent. With respect to each such Subsidiary, Company shall promptly send to Administrative Agent andCollateral Agent written notice setting forth with respect to such Person (i) the date on which such Person became a Subsidiary of Company, and (ii) all of thedata required to be set forth in Schedule 4.1 with respect to all Subsidiaries of Company, and such written notice shall be deemed to supplement Schedule 4.1for all purposes hereof. 5.10 Post Closing Covenants With Respect to Real Estate Assets. (a) Other than in respect to the San Jose Ground Lease, in the event that anyCredit Party acquires a Material Real Estate Asset or a Real Estate Asset owned on the Closing Date becomes a Material Real Estate Asset and such interest hasnot otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Agent, for the benefit of Secured Parties, then such Credit Party,contemporaneously with acquiring such Material Real Estate Asset or (other than San Jose Ground Lease) with such real estate asset becoming a Material RealEstate Asset, shall take all such actions and execute and deliver, or cause to be executed and delivered, all such mortgages, documents, instruments,agreements, opinions and certificates with respect to each such Material Real Estate Asset that Collateral Agent shall reasonably request to create in favor ofCollateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interestin such Material Real Estate Assets and the personal property located thereon. Notwithstanding any of the foregoing to the contrary, if a Credit Party acquires aMaterial Real Estate Asset pursuant to a Permitted Acquisition, such Credit Party shall take all such actions to comply with this Section 5.10 within thirty(30) days after such Credit Party has acquired such Material Real Estate Asset pursuant to a Permitted Acquisition. (b) Company and its Subsidiaries shall at all times with respect to Leasehold Properties which are not Material Real Estate Assets, use reasonablecommercial efforts to comply with Section 5.10 as though such Leasehold Properties were Material Real Estate Assets. (c) In addition to the foregoing, Company and its Subsidiaries shall, at the request of Requisite Lenders, deliver, from time to time, toAdministrative Agent such appraisals as are required by law or regulation of Real Estate Assets with respect to which Collateral Agent has been granted a Lien,such best efforts to include, where possible, best efforts to obtain a Landlord Agreement with the exception of paragraphs 4, 5 and 7 of Exhibit K where alandlord refuses to consent to a leasehold mortgage. 5.11 [Reserved]. 675.12 Post Closing Covenants With Respect to Permitted Equipment Financing Collateral. Upon termination of all outstanding obligations ofCompany under any Permitted Equipment Financing, Company, contemporaneously with the repayment of such outstanding obligations, shall (i) terminateany and all Liens granted in connection with such Permitted Equipment Financing, (ii) be deemed to have granted to Collateral Agent, for the benefit of SecuredParties, a valid security interest and continuing lien on all of Company’s right, title and interest in, to and under such Collateral, (iii) grant to the CollateralAgent, for the benefit of Secured Parties, a security interest and continuing lien on all of Company’s right, title and interest in, to and under such Collateral,which shall be further evidenced by Company executing and delivering to the Collateral Agent a Confirmation of Grant, substantially in the form of Exhibit Mattached hereto, and (iv) deliver to Collateral Agent duly executed UCC financing statements and all other instruments, notices, releases or certificates asCollateral Agent may reasonably request from time to time. 5.13 Further Assurances. At any time or from time to time upon the request of Administrative Agent, each Credit Party will, at its expense, promptlyexecute, acknowledge and deliver such further documents and do such other acts and things as Administrative Agent or Collateral Agent may reasonablyrequest in order to effect fully the purposes of the Credit Documents. In furtherance and not in limitation of the foregoing, each Credit Party shall take suchactions as Administrative Agent or Collateral Agent may reasonably request from time to time (including, without limitation, the execution and delivery ofguaranties, security agreements, pledge agreements, mortgages, deeds of trust, landlord’s consents and estoppels, control agreements, stock powers, financingstatements and other documents, the filing or recording of any of the foregoing, title insurance with respect to any of the foregoing that relates to any Real EstateAsset, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that the Obligations areguarantied by the Guarantors and are secured by substantially all of the assets of Company, and its Subsidiaries (other than the Singapore Subsidiaries) andall of the outstanding Capital Stock of Company’s Subsidiaries (other than the Singapore Subsidiaries). 5.14 Notice of Default Under Lease. Upon receipt of any notice of default under any lease for domestic Leasehold Property, Company shallimmediately notify Collateral Agent thereof. 5.15 Certain Post Second Amendment Effective Date Obligations. (a) Company shall take all such actions as set forth on Schedule 5.15(a) on terms and conditions reasonably satisfactory to the Collateral Agentin order to grant to the Collateral Agent for the benefit of the Lenders a First Priority Lien in all assets located in jurisdictions other than the United States thathave been acquired by Company directly or indirectly in connection with the Recapitalization Transactions by the date which is the later of (i) March 31, 2003and (ii) thirty (30) days following the Second Amendment Effective Date; provided, however, that this Section 5.15 shall not apply to the SingaporeSubsidiaries or to any assets owned by the Singapore Subsidiaries; provided, further, however, that to the extent such documents necessary to grant a FirstPriority Lien (including leaseholds with respect to foreign Real Property Assets, but excluding bank accounts) require third-party consents (other than theparties to the Recapitalization Transactions), such obligations in this Section 5.15(a) shall be 68subject to a best commercial efforts standard; provided, further, however, that with respect to the leasehold property located in Australia, such security interestshall secure the Loans in an amount not to exceed $5,000,000 until such time as the Collateral Agent reasonably determines that the value of such leaseholdproperty exceeds $5,000,000. (b) Company shall take all such actions as set forth on Schedule 5.15(b) on terms and conditions reasonably satisfactory to the Collateral Agentin order to grant to the Collateral Agent for the benefit of the Lenders a First Priority perfected security interest in all domestic Real Property Assets and bankaccounts acquired by the Credit Parties pursuant to the Recapitalization Transactions by the date which is the later of (i) March 31, 2003 and (ii) thirty (30)days following the Second Amendment Effective Date; provided, however, that to the extent such documents necessary to grant a First Priority Lien (includingleaseholds with respect to Real Property Assets, but excluding bank accounts) require third-party consents (other than the parties to the RecapitalizationTransactions), such obligations in this Section 5.15(b) shall be subject to a best commercial efforts standard. SECTION 6. NEGATIVE COVENANTS Each Credit Party covenants and agrees that until payment in full of all Obligations such Credit Party shall perform, and shall cause each of itsSubsidiaries to perform (or in the case of i-STT Nation Ltd, shall use commercially reasonable efforts to cause i-STT Nation Ltd to perform), all covenantsin this Section 6. 6.1 Indebtedness. No Credit Party shall, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectlyliable with respect to any Indebtedness, except: (a) the Obligations, including any Indebtedness under any Hedge Agreement with any Lender Counterparty; (b) (x) Indebtedness of OpCo or any Subsidiary to Company or to OpCo or any other Subsidiary of Company that is a Domestic Subsidiary;provided, that all such Indebtedness shall be evidenced by promissory notes and all such notes shall be subject to a First Priority Lien pursuant to the Pledgeand Security Agreement, all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant tothe terms of the applicable promissory notes or an intercompany subordination agreement that in any such case, is reasonably satisfactory to AdministrativeAgent and the Collateral Agent, and any payment by any such Guarantor Subsidiary under any guaranty of the Obligations shall result in a pro tantoreduction of the amount of any Indebtedness owed by such Subsidiary to Company or to any of its Subsidiaries for whose benefit such payment is made and(y) Indebtedness of any Singapore Subsidiaries to any other Singapore Subsidiaries; (c) [Reserved]; (d) Indebtedness incurred by Company or any of its Subsidiaries arising from agreements providing for indemnification in connection with theCombination Agreement; 69 (e) Indebtedness which may be deemed to exist pursuant to any guaranties, letters of credit, performance, surety, statutory, appeal or similarobligations incurred in the ordinary course of business of Company and its Subsidiaries; (f) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with Deposit Accounts; (g) guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and itsSubsidiaries; (h) Indebtedness described in Schedule 6.1 (including reimbursement obligations with respect to letters of credit listed in Schedule 6.1) andrefinancings and extensions of any such Indebtedness if the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinancedor extended; provided, such Indebtedness refinanced or extended (A) does not include Indebtedness of an obligor that was not an obligor with respect to theIndebtedness being extended or refinanced, (B) does not exceed in principal amount the Indebtedness being extended or refinanced (except it may be increasedby an amount to cover the fees and expenses, including consent fees, placement fees and prepayment premiums, relating to such refinancing) and (C) may notbe incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (i) Permitted Equipment Financings (exclusive of those Permitted Equipment Financings listed on Schedule 6.1); provided, that with respect toPermitted Equipment Financings that have occurred during the period beginning after the Effective Date through to and including the Second AmendmentEffective Date, such Permitted Equipment Financings are listed on Schedule 6.1(i) attached hereto; (j) the Senior Notes; (k) [Reserved]; (l) debt acquired in connection with the Recapitalization Transactions and described on Schedule 6.1; and (m) Indebtedness incurred by Company and its Subsidiaries pursuant to the Convertible Notes in an aggregate principal amount not to exceed$40,000,000 plus any additional amounts incurred as a result of the issuances of PIK Notes. 6.2 Liens. No Credit Party shall, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset ofany kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned orhereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similarnotice of any Lien with respect to any such property, asset, income or profits under the UCC of any State or under any similar recording or notice statute,except: 70 (a) Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to any Credit Document; (b) Liens for Taxes not yet due or that are being contested in good faith by appropriate proceedings; provided adequate reserves with respect theretoare maintained on the books of the Credit Party as may be required with GAAP; (c) statutory Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, andother Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), ineach case incurred in the ordinary course of business for amounts not yet overdue or for amounts that are overdue and that (in the case of any suchamounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or otherappropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (d) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance andother types of social security, deposits made in the ordinary course of business with utility companies, and Liens incurred or deposits made in theordinary course of business to secure the performance of tenders, statutory or regulatory obligations, surety and appeal bonds, bids, leases, governmentcontracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowedmoney or other Indebtedness), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateralon account thereof; (e) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will notinterfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (f) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder; (g) Liens solely on any cash earnest money deposits made by Company or any of its Subsidiaries in connection with any letter of intent orpurchase agreement permitted hereunder entered into by it; (h) Purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal propertyentered into in the ordinary course of business as expressly permitted hereunder; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with theimportation of goods; (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; 71 (k) licenses of patents, trademarks and other intellectual property rights granted by Company or any of its Subsidiaries in the ordinary course ofbusiness and not interfering in any respect with the ordinary conduct of the business of Company or such Subsidiary; (l) Liens described in Schedule 6.2 or on a title report delivered to Agents on or prior to the Effective Date and agreed to by the Lenders; (m) Liens in favor of the trustee pursuant to Section 7.7 of the Senior Notes Indenture; (n) Liens consisting of judgment or judicial attachment Liens with respect to judgments that do not constitute an Event of Default; (o) Liens securing Permitted Equipment Financings; provided, any such Lien shall encumber only the assets financed with the proceeds of suchPermitted Equipment Financings as contemplated by the definition of Permitted Equipment Financing; (p) Liens incurred in connection with the purchase of shipping of goods or assets on the related assets and proceeds thereof in favor of the seller orshipper of such goods or assets; (q) Liens on escrowed Cash representing a portion of the proceeds of permitted sales of assets by Company or a Subsidiary established to satisfycontingent post-closing obligations that it owes (including earn-outs, indemnities and working capital adjustments); (r) Liens granted to the holders of the Convertible Notes on the Capital Stock and assets owned by the Singapore Subsidiaries; and (s) Liens granted to the Convertible Note Agent for the benefit of the holders of the Convertible Notes, in order to secure Company’s obligationsunder the Convertible Notes and granted pursuant to the Convertible Note Collateral Documents and subject to the terms and provisions of the IntercreditorAgreement. 6.3 No Further Negative Pledges. Except with respect to (i) specific property encumbered to secure payment of particular Indebtedness or to be soldpursuant to an executed agreement with respect to a permitted Asset Sale, (ii) restrictions by reason of customary provisions restricting assignments, sublettingor other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business (provided that such restrictions arelimited to the property or assets secured by such Liens or the property or assets subject to such leases, licenses or similar agreements, as the case may be) and(iii) restrictions set forth in the Convertible Note Documents, no Credit Party shall enter into any agreement prohibiting the creation or assumption of any Lienupon any of its properties or assets, whether now owned or hereafter acquired. 726.4 Restricted Junior Payments; Restrictions on Payments to European Subsidiaries. (a) No Credit Party shall, directly or indirectly, declare,order, pay, make or set apart any sum for any Restricted Junior Payment except that (i) Company may make prepayments with respect to, or acquisitions of,the Senior Notes in connection with the Exchange Offer; provided, that the cash amount of any such prepayments and acquisitions in excess of $15,000,000must be funded by (A) proceeds received by Company from additional capital infusions over and above the $30,000,000 received by Company in connectionwith the Convertible Notes and the Recapitalization Transactions, (B) excess cash provided by Pihana over the $23,000,000 minimum cash requirement onPihana’s balance sheet as set forth in the Combination Agreement or (C) a reduction of fees paid or accrued on the Second Amendment Effective Date byCompany in connection with the Recapitalization Transactions based on the original estimate of such fees of $13,400,000, (ii) regularly scheduled payments ofprincipal and interest (but not voluntary prepayments other than a voluntary prepayment made pursuant to a refinancing permitted under Section 6.1) inrespect of (A) any remaining portion of the Senior Notes outstanding following the Exchange Offer, and (B) Permitted Equipment Financings in accordancewith the terms of, and only to the extent required by, the indenture or other agreement pursuant to which such Indebtedness was issued or restructured oramended and (iii) regularly scheduled payments of non-cash interest, payable in PIK Notes in respect of the Convertible Notes in accordance with the termsof, and only to the extent required by, the Convertible Note Documents. (b) Neither Company nor any Subsidiary shall, directly or indirectly, make any guaranty on behalf of, declare, order, pay, make, transfer or setapart any sum or assets of, for or constituting any contribution of capital or assets to, or payment to or on behalf of (i) any European Subsidiary; except that,(i) Company or any Subsidiary may make (A) de minimis payments to European Subsidiaries in order to allow such Subsidiaries to pay legal fees of localcounsel, local taxes and statutory reporting or filing fees; and (B) European Subsidiaries may maintain cash balances in foreign bank accounts not to exceedUS $20,000 (or the foreign currency equivalent thereof) in the aggregate. 6.5 Investments. Except as provided in Section 6.4(b), neither Company nor any Subsidiary shall, directly or indirectly, make or own any Investmentin any Person, including without limitation any Joint Venture, except: (a) Cash Equivalents; (b) equity Investments owned as of the Second Amendment Effective Date in any Domestic Subsidiary and equity investments made in DomesticSubsidiaries after the Second Amendment Effective Date; provided, however, that until such time that the Collateral Agent has received a First Priority Lien onthe bank accounts of Pihana Pacific, Inc. and Pihana Business Recovery, Inc., such equity investments shall be limited to the amount necessary to fundoperating costs for such Subsidiaries in accordance with the Second Amendment Effective Date Financial Plan and in any event in an amount not to exceed$350,000 for such Subsidiaries in the aggregate; (c) Investments (i) in accounts receivable arising and trade credit granted in the ordinary course of business and in any Securities received insatisfaction or partial 73satisfaction thereof from financially troubled account debtors and (ii) deposits, prepayments and other credits to suppliers made in the ordinary course ofbusiness consistent with the past practices of Company and its Subsidiaries; (d) intercompany loans to the extent permitted under Section 6.1(b); (e) Consolidated Capital Expenditures permitted by Section 6.8; (f) Investments in Singapore Subsidiaries in any Fiscal Quarter in an amount not to exceed the amount necessary to fund the sum of (A) capitalexpenditures permitted in such Fiscal Quarter pursuant to Section 6.8(b) and (B) to the extent negative, the “Operating Cash Flow” (as such term is defined inaccordance with GAAP) for the Singapore Subsidiaries; provided; that to the extent the such Investments were made in order to fund negative “Operating CashFlow”, such Investments shall reduce the amount of Investments otherwise available to the Singapore Subsidiaries for capital expenditures for such Fiscal Yearas specified in Section 6.8(b); provided, further, that prior to making any such Investments, Administrative Agent shall have received a SingaporeSubsidiaries Investment Certificate from an Authorized Officer of Company (a copy of which Administrative Agent shall promptly provide to each Lender)certifying (i) that no Default or Event has occurred and is continuing and (ii) the proceeds of such Investments shall be made for the purposes of clauses (A)and (B) above; (g) equity investments made in Foreign Subsidiaries (other than the European Subsidiaries and Singapore Subsidiaries) after the SecondAmendment Effective Date; provided, however, that until such time that the Collateral Agent has received a First Priority Lien on the bank accounts of anyForeign Subsidiary, such equity investments shall be limited to the amount necessary to fund operating costs for such Foreign Subsidiary in accordance withthe Second Amendment Effective Date Financial Plan and in any event in an amount not to exceed $200,000 for all Foreign Subsidiaries in the aggregate; (h) Permitted Acquisitions entered into pursuant to the terms of Section 6.9(d); and (i) the Recapitalization Transactions. 6.6 Stage 1 Financial Covenants. Minimum Cash and Cash Equivalents. During Stage 1, Company shall not permit aggregate Cash and CashEquivalents of Company and its Subsidiaries as of the last day of each calendar month during Stage 1 to be less than the correlative amounts set forth onSchedule 6.6; provided, that for purposes of calculating the covenant set forth on Schedule 6.6, all amounts of Cash and Cash Equivalents held by theSingapore Subsidiaries shall be deducted from such calculation. 746.7 Stage 2 Financial Covenants. During Stage 2: (a) Senior Leverage Ratio. Company shall not permit the Senior Leverage Ratio as of the last day of any Fiscal quarter during Stage 2 to exceed thecorrelative ratio indicated as set forth on Schedule 6.7(a). (b) Total Leverage Ratio. Company shall not permit the Total Leverage Ratio as of the last day of any Fiscal Quarter during Stage 2 to exceed thecorrelative ratio indicated as set forth on Schedule 6.7(b). (c) Interest Coverage Ratio. Company shall not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter during Stage 2 to be lessthan the correlative ratio indicated as set forth on Schedule 6.7(c). (d) Pro Forma Debt Service Coverage Ratio. Company shall not at any time during the periods set forth on Schedule 6.7(d) permit the ratio of (i)Annualized Consolidated EBITDA (excluding restricted cash) to (ii) required consolidated pro forma amortization and principal payments and consolidatedcash interest expense for the next four consecutive quarters to be less than the correlative ratios set forth on Schedule 6.7(d). (e) Minimum Cash and Cash Equivalents. Company shall not permit aggregate Cash and Cash Equivalents of Company and its Subsidiaries asof the last day of each calendar month during Stage 2 to be less than the correlative amounts set forth on Schedule 6.7(e); provided, that for purposes ofcalculating the covenant set forth on Schedule 6.7(e), all amounts of Cash and Cash Equivalents held by the Singapore Subsidiaries shall be deducted fromsuch calculation. (f) Calculation on the Second Amendment Effective Date. Notwithstanding the foregoing set forth in Section 6.6 and 6.7, in the event that on theSecond Amendment Effective Date an amount greater than $110,000,000 of Senior Notes are exchanged for Qualifying Equity and Cash, Administrative Agentis authorized by Lenders to make changes to the covenants set forth in Schedule 6.6 and each Schedule 6.7 to give effect to such increased amount of SeniorNotes exchanged above $110,000,000 using the same methodology used to calculate the original covenant levels set forth in such Schedules, provided,Administrative Agent shall enter into an addendum with Company revising such Schedules. (g) Calculation of Cash and Cash Equivalents. For purposes of determining compliance with (i) the minimum Cash and Cash Equivalentsrequirements of Section 6.6 and 6.7(e) and (ii) the maximum Cash and Cash Equivalents requirement of Section 6.18(c), the amount of any Cash and CashEquivalents of Company which qualifies as “Restricted Cash” as such term is defined pursuant to GAAP shall be excluded; provided, that for purposes ofSection 6.18(c), such “Restricted Cash” shall be limited to that Cash and Cash Equivalents securing lease agreements of I-STT listed on Schedule 6.1;provided, further, that the face amount of such Indebtedness is not increased above the amounts set forth on Schedule 6.1. (h) Calculation of Financial Covenants In the Event STT Exercises the STT Additional Equity Option. In the event that Company received theproceeds from the STT 75Additional Equity Option and the Maturity Date is extended to December 31, 2006 pursuant to Section 2.10, then Administrative Agent is authorized byLenders to make changes to the covenants set forth in Schedule 6.6 and each Schedule 6.7 to give effect to the extension of the Maturity Date using the samemethodology used to calculate the original covenant levels set forth in such Schedules, provided, Administrative Agent shall enter into an addendum withCompany revising such Schedules. 6.8 Maximum Consolidated Capital Expenditures (a) Consolidated Capital Expenditures. Company shall not and shall not permit its Subsidiaries (other than the Singapore Subsidiaries) to makeor incur Consolidated Capital Expenditures, in any Fiscal Year indicated on Schedule 6.8(a), in an aggregate amount for Company and its Subsidiaries inexcess of the corresponding amount set forth on Schedule 6.8(a) increased by an amount equal to the excess, if any, of such amount for the previous FiscalYear over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year; provided, that Company and its Subsidiaries may incurConsolidated Capital Expenditures in excess of (i) those corresponding amounts set forth on Schedule 6.8(a) and (ii) any amount carried forward from theprevious Fiscal Year to the current Fiscal Year (such excess, the “Excess Consolidated Capital Expenditures”), provided, further, that simultaneouslywith the incurrence of such Excess Consolidated Capital Expenditures, Borrower shall repay the Loans in accordance with Section 2.12(h). (b) Capital Expenditures and Negative “Operating Cash Flow” of Singapore Subsidiaries. The Singapore Subsidiaries shall not make or incurcapital expenditures, in any Fiscal Year indicated on Schedule 6.8(b) in excess of the corresponding amount set forth on Schedule 6.8(b) plus amounts fundedpursuant to Permitted Equipment Financings for such Fiscal Year increased by an amount equal to the excess, if any, of the aggregate of such amount for anyprevious Fiscal Years over the actual amount of capital expenditures for such previous Fiscal Years (but in no event more than $2,000,000 per Fiscal Year);provided, that (i) to the extent the Singapore Subsidiaries make any expenditures in any Fiscal Quarter in order to fund negative “Operating Cash Flow”, suchexpenditures shall reduce the amount otherwise available to the Singapore Subsidiaries for capital expenditures indicated on Schedule 6.8(b) for such FiscalYear (such reduction to be made in any Fiscal Quarter), (ii) the aggregate capital expenditures made by such Singapore Subsidiaries during each FiscalQuarter since the Second Amendment Effective Date in excess of the amounts projected for such Fiscal Quarter in the Second Amendment Effective DateFinancial Plan shall not exceed $4,000,000, and (iii) in no event shall the aggregate amount of all such capital expenditures and all fundings of negative“Operating Cash Flow” made pursuant to this Section 6.8(b) exceed $19,859,000; provided, further, so long as Borrower prepays the Loans pursuant toSection 2.12(i), the amount of capital expenditures that the Singapore Subsidiaries are permitted to make or incur shall be increased by the amount of anyCash and Cash Equivalents held by the Singapore Subsidiaries in excess of the amount of Cash and Cash Equivalents permitted to be held by the SingaporeSubsidiaries pursuant to Section 6.18(c). 766.9 Fundamental Changes; Disposition of Assets; Acquisitions. Neither Company nor any Subsidiary shall, enter into any transaction of merger orconsolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor),transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, assets or property of any kind whatsoever,whether real, personal or mixed and whether tangible or intangible, whether now owned or hereafter acquired, or acquire by purchase or otherwise (other thanpurchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) the business, property or fixed assets of, or stock orother evidence of beneficial ownership of, any Person or any division or line of business or other business unit of any Person, except: (a) any Subsidiary of Company may be merged with or into any other Subsidiary, or be liquidated, wound up or dissolved, or all or any part ofits business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to anySubsidiary; provided, in the case of such a merger, a Subsidiary shall be the continuing or surviving Person; (b) sales or other dispositions of assets which do not constitute Asset Sales; (c) Asset Sales, the proceeds of which (valued at the principal amount thereof in the case of non-Cash proceeds consisting of notes or other debtSecurities and valued at fair market value in the case of other non-Cash proceeds) (i) are less than $250,000 with respect to any single Asset Sale or series ofrelated Asset Sales and (ii) when aggregated with the proceeds of all other Asset Sales made within the same Fiscal Year, are less than $1,000,000; provided (1)the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by the board ofdirectors of Company (or similar governing body)), (2) no less than 85% thereof shall be paid in Cash, and (3) the Net Asset Sale Proceeds thereof shall beapplied as required by Section 2.12(a); (d) Permitted Acquisitions; provided, that (y) the consideration for such Permitted Acquisitions shall be in the form of either Capital Stock orCash and Cash Equivalents; provided, further, that, with respect to each Permitted Acquisition on the date that is the last day of the first full four FiscalQuarter period ending after consummation of such Permitted Acquisition and each anniversary thereof (each, “Measurement Date”) Company shall make apayment to Lenders in an amount, if any, equal to the amount by which cumulative negative Stand-Alone Cash Flow of such Permitted Acquisition togetherwith the negative Stand-Alone Cash Flow of all other Permitted Acquisitions measured pursuant to this proviso on or prior to such date, exceeds $1,000,000;provided, further, that, on and after the first date of payment to the Lenders pursuant to this proviso, on each Measurement Date thereafter, Company shallpay an amount, if any, equal to cumulative negative Stand-Alone Cash Flow for all Permitted Acquisitions not measured through a prior Measurement Date. (e) Investments made in accordance with Section 6.5; (f) Company and its Subsidiaries may enter into the Recapitalization Transactions; and 77 (g) Company and its Subsidiaries may consummate the transactions contemplated by the Exchange Offer Documents. 6.10 Disposal of Subsidiary Interests. Except for any sale of 100% of the Capital Stock of any of its Subsidiaries made in compliance with theprovisions of Section 6.9, and except for the Recapitalization Transactions no Credit Party shall directly or indirectly sell, assign, pledge or otherwiseencumber or dispose of any Capital Stock of any of its Subsidiaries, except to qualify directors if required by applicable law; or permit any of itsSubsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to Companyor a wholly-owned Guarantor Subsidiary of Company (subject to the restrictions on such disposition otherwise imposed hereunder), or to qualify directors ifrequired by applicable law. 6.11 Sales and Lease-Backs. Except as set forth on Schedule 6.11 or in connection with a Permitted Equipment Financing, no Credit Party shall,directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal ormixed), whether now owned or hereafter acquired, which such Credit Party has sold or transferred or is to sell or to transfer to any other Person (other thanCompany or any of its Subsidiaries), or intends to use for substantially the same purpose as any other property which has been or is to be sold or transferredby such Credit Party to any Person (other than Company or any of its Subsidiaries) in connection with such lease. 6.12 Sale and Discount of Receivables. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, sell with recourse,or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable (it being understood that the restriction contained in thisSection 6.12 shall not apply to any write-off of bad debt in the ordinary course of business consistent with prior practice); provided, that Company or itsSubsidiaries may discount or sell without recourse Foreign Accounts Receivable for no less than 93% of its original face value. 6.13 Transactions with Shareholders and Affiliates. (a) No Credit Party shall, directly or indirectly, enter into or permit to exist any transaction(including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 10% or more of any class of Capital Stockof Company or any of its Subsidiaries (including, without limitation, any holder of Convertible Notes who would be entitled to hold 10% or more of any classof Capital Stock of Company upon the conversion of such Convertible Notes to Qualifying Equity of Company) or with any Affiliate of Company or of anysuch holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from a Personwho is not such a holder or Affiliate; provided, the foregoing restriction shall not apply to (a) any transaction between Company and any Subsidiary orbetween any of the Guarantor Subsidiaries or between any of the Singapore Subsidiaries; (b) reasonable and customary fees paid to members of the board ofdirectors (or similar governing body) of Company and its Subsidiaries; (c) compensation arrangements entered into in the ordinary course of business forofficers and other employees of Company and its Subsidiaries; (d) transactions described in Schedule 6.13; and (e) the Recapitalization Transactions. 78 (b) Each Credit Party will (i) maintain entity records and books of account separate from those of any other entity which is an Affiliate of suchCredit Party; (ii) not commingle its funds or assets with those of any other entity which is an Affiliate of such Credit Party, and (iii) provide that its board ofdirectors or other analogous governing body will hold all appropriate meetings to authorize and approve such Person’s entity actions, which meetings will beseparate from those of other Credit Parties. (c) Notwithstanding any of the foregoing to the contrary, in no event shall Company or any of its Subsidiaries pay any management, consultingor similar fee to any of STT or its affiliates, Pihana or the Singapore Subsidiaries; provided, that Company and its Subsidiaries may make payments oftransition services to STT Communications Ltd for an amount equal to the cost of such services plus 5%; provided, further, that the aggregate amount ofsuch services shall not exceed $250,000 per annum. 6.14 Conduct of Business. From and after the Second Amendment Effective Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to,engage in any business other than (i) the businesses engaged in by such Credit Party on the Second Amendment Effective Date (after giving effect to thetransactions contemplated by the Combination Agreement) and Complementary Businesses and (ii) such other lines of business as may be consented to byRequisite Lenders. 6.15 Permitted IBX Facilities. Company shall not, nor shall it permit any of its Subsidiaries to, build out, commence the construction of, operate oracquire a IBX Facility whether independently or by joint venture) other than Permitted IBX Facilities. 6.16 Amendments or Waivers of Certain Documents. No Credit Party shall, amend or otherwise change the terms of the Senior Notes (other thanamendments made on or prior to the Second Amendment Effective Date in connection with the Exchange Offer and Recapitalization Transactions), theConvertible Notes or any of Convertible Note Documents, the Combination Agreement, any of the Exchange Offer Documents or any Permitted EquipmentFinancing, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interestrate on such Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default orcondition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change theredemption, prepayment or defeasance provisions thereof, change the subordination provisions of such Indebtedness (or of any guaranty thereof), or if theeffect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder orto confer any additional rights on the holders of such Indebtedness (or a trustee or other representative on their behalf) which would be adverse to any CreditParty or Lenders. In addition, no Credit Party shall amend or otherwise change the terms of any lease with respect to any IBX Facilities if the effect of suchamendment or change is to increase the financial obligations with respect to such lease in an aggregate amount in excess of $50,000 over the term of such lease. Notwithstanding any of the foregoing to the contrary, the Lenders hereby consent to Company making a prepayment on that certain Master Loan andSecurity Agreement dated 79March 30, 2001 (“Wells Fargo Agreement”) between Company and Wells Fargo Bank (“Wells Fargo”) on or after the Second Amendment Effective Date;provided, that any such prepayment to Wells Fargo shall not exceed 100% of the total amount owed to Wells Fargo under the Wells Fargo Agreement. 6.17 Fiscal Year. No Credit Party shall change its Fiscal Year-end from December 31. 6.18 Foreign Subsidiaries.(a) No Credit Party shall at any time (x) provide any guaranty of any Indebtedness of any of the Singapore Subsidiaries or the EuropeanSubsidiaries, (y) be directly or indirectly liable for any Indebtedness of any of the Singapore Subsidiaries or the European Subsidiaries or (z) be directly orindirectly liable for any other Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon (or causesuch Indebtedness or the payment thereof to be accelerated, payable or subject to repurchase prior to its final scheduled maturity) upon the occurrence of adefault with respect to any other Indebtedness that is Indebtedness of any of the Singapore Subsidiaries or the European Subsidiaries. Notwithstanding any ofthe foregoing to the contrary, a Credit Party may guaranty the Indebtedness securing lease agreements of I-STT listed on Schedule 6.1, provided that the faceamount of such Indebtedness is not increased above the amounts set forth on Schedule 6.1. (b) Company shall not create or suffer to exist any additional Foreign Subsidiary that was not in existence on the Second Amendment EffectiveDate other (i) than the Singapore Subsidiaries and other Foreign Subsidiaries acquired pursuant to the Recapitalization Transactions, (ii) Foreign Subsidiariesacquired in connection with Permitted Acquisitions, and (iii) Foreign Subsidiaries organized in a manner reasonably satisfactory in order to facilitate anyreorganization of Pihana’s Foreign Subsidiaries; provided, that with respect to Foreign Subsidiaries created pursuant to (ii) and (iii) above, simultaneous withthe creation of such Foreign Subsidiaries, Company shall deliver all documents and make all filings necessary and on terms and conditions satisfactory to theCollateral Agent in order to provide to the Collateral Agent for the benefit of the Lenders a First Priority Lien on all of the assets of such Foreign Subsidiariesand in order for such Foreign Subsidiaries to provide a Guaranty of the Obligations. (c) Notwithstanding any of the foregoing to the contrary, Company shall not permit any of its Singapore Subsidiaries to hold at any time anamount of Cash and Cash Equivalents greater than the amount equal to the amount necessary to fund capital expenditures permitted pursuant to Section6.8(b) for the current Fiscal Quarter (without giving effect to the reduction for expenditures to fund “Operating Cash Flow” pursuant to Section 6.8(b)(i)) plus$50,000, (such amount, the “Permitted Cash Amount”); provided, that the aggregate amount of Cash and Cash Equivalents at Company’s SingaporeSubsidiaries may exceed the Permitted Cash Amount, if Borrower prepays or has prepaid the Loans pursuant to Section 2.12(i) in an amount equal to thedifference between the aggregate amount of Cash and Cash Equivalents at Company’s Singapore Subsidiaries, minus the Permitted Cash Amount. 6.19 Acquisition and Ownership of Assets by Company. Except to the extent contemplated under Section 6.4(a), Company shall not acquire or ownany operating assets other 80than (i) assets owned or acquired prior to the Effective Date, (ii) replacement assets, (iii) assets acquired with the proceeds of Permitted Equipment Financingand (iv) assets from a Subsidiary so long as such asset is not subject to a Lien under the Collateral Documents. 6.20 Company Subsidiaries. The Company shall not after the Second Amendment Effective Date (i) create any new Subsidiary or (ii) acquire anyequity interest in any other entity, unless in each case, all equity interests in such Subsidiaries and all such other equity interests are subject to First PriorityLiens in favor of the Collateral Agent for the benefit of Lenders. SECTION 7. GUARANTY 7.1 Guaranty of the Obligations. Subject to the provisions of Section 7.2, Guarantors jointly and severally hereby irrevocably and unconditionallyguaranty to Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations when the same shallbecome due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become duebut for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”). 7.2 Contribution by Guarantors. Each Guarantor desires to allocate among themselves (collectively, the “Contributing Guarantors”), in a fairand equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor(a “Funding Guarantor”) under this Guaranty that exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution fromeach of the other Contributing Guarantors in the amount of such other Contributing Guarantor’s Fair Share Shortfall as of such date, with the result that allsuch contributions will cause each Contributing Guarantor’s Aggregate Payments to equal its Fair Share as of such date. “Fair Share” means, with respect to aContributing Guarantor as of any date of determination, an amount equal to the ratio of the Fair Share Contribution Amount with respect to such ContributingGuarantor to the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by the aggregate amount paid ordistributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. “Fair Share Shortfall” means, withrespect to a Contributing Guarantor as of any date of determination, the excess, if any, of the Fair Share of such Contributing Guarantor over the AggregatePayments of such Contributing Guarantor. “Fair Share Contribution Amount” means, with respect to a Contributing Guarantor as of any date ofdetermination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligationshereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or anycomparable applicable provisions of state law; provided, solely for purposes of calculating the “Fair Share Contribution Amount” with respect to anyContributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights tosubrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of suchContributing Guarantor. “Aggregate Payments” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to theaggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this 81Guaranty (including, without limitation, in respect of this Section 7.2), minus the aggregate amount of all payments received on or before such date by suchContributing Guarantor from the other Contributing Guarantors as contributions under this Section 7.2. The amounts payable as contributions hereundershall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation amongContributing Guarantors of their obligations as set forth in this Section 7.2 shall not be construed in any way to limit the liability of any ContributingGuarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 7.2. 7.3 Payment by Guarantors. Subject to Section 7.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not inlimitation of any other right which any Beneficiary may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of the Borrowerto pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration,acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of theBankruptcy Code, 11 U.S.C. § 362(a)), Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative Agent for the ratable benefit ofBeneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest onsuch Guaranteed Obligations (including interest which, but for the Borrower’s becoming the subject of a case under the Bankruptcy code, would have accruedon such Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in the related bankruptcy case) and all otherGuaranteed Obligations then owed to Beneficiaries as aforesaid. 7.4 Liability of Guarantors Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditionaland shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of theGuaranteed Obligations in Cash. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows: (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and notmerely a contract of surety; (b) Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any disputebetween the Borrower and any Beneficiary with respect to the existence of such Event of Default; (c) the obligations of each Guarantor hereunder are independent of the obligations of the Borrower and the obligations of any other guarantor(including any other Guarantor) of the obligations of the Borrower, and a separate action or actions may be brought and prosecuted against such Guarantorwhether or not any action is brought against the Borrower or any of such other guarantors and whether or not the Borrower is joined in any such action oractions; (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge anyGuarantor’s liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality 82of the foregoing, if Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor’s covenant to pay a portion of the GuaranteedObligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not thesubject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor in Cash, limit, affect, modify or abridge any otherGuarantor’s liability hereunder in respect of the Guaranteed Obligations; (e) any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereofor giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew,extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle,compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or anyagreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of theGuaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, anyother guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the GuaranteedObligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligationsand direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case assuch Beneficiary in its discretion may determine consistent herewith or the applicable Hedge Agreement and any applicable security agreement, includingforeclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commerciallyreasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantoragainst the Borrower or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Credit Documents or the HedgeAgreements; and (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation,impairment, discharge or termination for any reason (other than the indefeasible payment in full of the Guaranteed Obligations in Cash), including theoccurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert orenforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise orenforcement of, any claim or demand or any right, power or remedy (whether arising under the Credit Documents or the Hedge Agreements, at law, in equity orotherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment ofthe Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions(including provisions relating to events of default) hereof, any of the other Credit Documents, any of the Hedge Agreements or any agreement or instrumentexecuted pursuant thereto, or of any other guaranty or security for 83the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Credit Document, such Hedge Agreement or any agreementrelating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid orunenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Credit Documentsor any of the Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateralfor indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Beneficiarymight have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary’s consent to the change, reorganization ortermination of the corporate structure or existence of Company or any of its Subsidiaries and to any corresponding restructuring of the GuaranteedObligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) anydefenses, set-offs or counterclaims which the Borrower or any Guarantor may allege or assert against any Beneficiary in respect of the Guaranteed Obligations,including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) anyother act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as anobligor in respect of the Guaranteed Obligations. 7.5 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of Beneficiaries: any right to require any Beneficiary, as a condition ofpayment or performance by such Guarantor, to proceed against the Borrower, any other guarantor (including any other Guarantor) of the GuaranteedObligations or any other Person, proceed against or exhaust any security held from the Borrower, any such other guarantor or any other Person, proceedagainst or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of the Borrower or any other Person, or pursueany other remedy in the power of any Beneficiary whatsoever; any defense arising by reason of the incapacity, lack of authority or any disability or otherdefense of the Borrower or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the GuaranteedObligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Borrower or any other Guarantor from any causeother than payment in full of the Guaranteed Obligations in Cash; any defense based upon any statute or rule of law which provides that the obligation of asurety must be neither larger in amount nor in other respects more burdensome than that of the principal; any defense based upon any Beneficiary’s errors oromissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; any principles or provisions of law, statutory orotherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor’s obligations hereunder, the benefit ofany statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, any rights to set-offs, recoupments and counterclaims, andpromptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto;notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices ofdefault hereunder, under the Hedge Agreements or under any agreement or instrument related thereto, notices of any renewal, extension or modification of theGuaranteed Obligations or any agreement related thereto, notices of any extension of credit to the Borrower and notices 84of any of the matters referred to in Section 7.4 and any right to consent to any thereof; and any defenses or benefits that may be derived from or afforded bylaw which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.7.6 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed Obligations shall have been indefeasibly paid in full, eachGuarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Borrower or any otherGuarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether suchclaim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation any right of subrogation,reimbursement or indemnification that such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed Obligations, anyright to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against the Borrower, and any benefit of,and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guaranteed Obligations shall havebeen indefeasibly paid in full in Cash and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right ofcontribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, withoutlimitation, any such right of contribution as contemplated by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withholdthe exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to bevoid or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against the Borrower or against anycollateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rightsany Beneficiary may have against the , to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right anyBeneficiary may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement,indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full in Cash, suchamount shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit ofBeneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 7.7 Subordination of Other Obligations. Any Indebtedness of any Borrower or any Guarantor now or hereafter held by any Guarantor (the “ObligeeGuarantor”) is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the ObligeeGuarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent on behalf of Beneficiaries and shallforthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations but withoutaffecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof. 7.8 Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have beenfinally and indefeasibly paid in 85full in Cash. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations. 7.9 Authority of Guarantors or Borrower. It is not necessary for any Beneficiary to inquire into the capacity or powers of any Guarantor or theBorrower or the officers, directors or any agents acting or purporting to act on behalf of any of them. 7.10 Financial Condition of Borrower. Any Credit Extension may be made to the Borrower or continued from time to time, and any Hedge Agreementsmay be entered into from time to time, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition ofCompany at the time of any such grant or continuation or at the time such Hedge Agreement is entered into, as the case may be. No Beneficiary shall have anyobligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of the Borrower. EachGuarantor has adequate means to obtain information from the Borrower on a continuing basis concerning the financial condition of the Borrower and itsability to perform its obligations under the Credit Documents and the Hedge Agreements, and each Guarantor assumes the responsibility for being and keepinginformed of the financial condition of the Borrower and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. EachGuarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the business, operations orconditions of the Borrower now known or hereafter known by any Beneficiary. 7.11 Bankruptcy, etc. So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent ofAdministrative Agent acting pursuant to the instructions of Requisite Lenders, commence or join with any other Person in commencing any bankruptcy,reorganization or insolvency case or proceeding of or against the Borrower or any other Guarantor. The obligations of Guarantors hereunder shall not bereduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy,insolvency, receivership, reorganization, liquidation or arrangement of the Borrower or any other Guarantor or by any defense which the Borrower or any otherGuarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (a) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after thecommencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue byoperation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the GuaranteedObligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors andBeneficiaries that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law ororder which may relieve the Borrower of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor inpossession, assignee for the benefit of creditors or similar person to pay Administrative Agent, or allow the claim of Administrative Agent in respect of, anysuch interest accruing after the date on which such case or proceeding is commenced. 86(b) In the event that all or any portion of the Guaranteed Obligations are paid by the Borrower, the obligations of Guarantors hereunder shallcontinue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovereddirectly or indirectly from any Beneficiary as a preference, fraudulent transfer or otherwise (whether by demand, settlement, litigation or otherwise), and anysuch payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. 7.12 Notice of Events. As soon as any Guarantor obtains knowledge thereof, such Guarantor shall give Administrative Agent written notice of anycondition or event which has resulted in a material adverse change in the financial conditions of any Guarantor or the Borrower or a breach of ornoncompliance with any term, condition or covenant contained herein, any other Credit Document, any Hedge Agreement or any other document deliveredpursuant hereto or thereto. 7.13 Discharge of Guaranty Upon Sale of Guarantor. If all of the Capital Stock of any Guarantor that is a Subsidiary of Company or any of itssuccessors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditionshereof, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released withoutany further action by any Beneficiary or any other Person effective as of the time of such Asset Sale; provided, as a condition precedent to such discharge andrelease, Administrative Agent shall have received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery to AdministrativeAgent of the applicable Net Asset Sale Proceeds of such disposition pursuant to Section 2.12(a). SECTION 8. EVENTS OF DEFAULT 8.1 Events of Default. If any one or more of the following conditions or events (each, an Event of Default) shall occur: (a) Failure to Make Payments When Due. Failure by the Borrower to pay (i) any installment of principal of any Loan, whether at stated maturity,by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise within five (5) days after the date due; or (ii) any interest on anyLoan or any fee or any other amount due hereunder or under any of the other Credit Documents within five (5) days after the date due; or (b) Default in Other Agreements. Failure of any Credit Party to pay when due any principal of or interest on or any other amount payable inrespect of one or more items of Indebtedness (other than Indebtedness referred to in Section 8.1(a)) in an individual principal amount of $250,000 or more orwith an aggregate principal amount of $1,000,000 or more, in each case beyond the grace period, if any, provided therefor; or (ii) breach or default by anyCredit Party with respect to any other material term of one or more items of Indebtedness in the individual or aggregate principal amounts referred to in clause(i) above or any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness; or (iii) breach or default by any Credit Partywith respect to any other term of Permitted Equipment Financing beyond the grace period, if any, provided therefor, if the effect of such breach or default is to 87cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause, that Indebtedness to become or bedeclared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or (c) Breach of Certain Covenants. Failure of any Credit Party to perform or comply with any term or condition contained in Section 2.4, Section2.12(c), Section 5.1(h), Section 5.2 or Section 6 (provided, that with respect to Sections 6.6 and 6.7(e), such default shall continue for a period of five (5)Business Days); or failure to comply with any material term or condition governing insurance of Company required pursuant to Section 5.5 for a period of15 days from the time of receipt of notice under the applicable insurance agreement; (d) Breach of Representations, etc. Any representation, warranty, certification or other statement made or deemed made by any Credit Party in anyCredit Document or in any statement or certificate at any time given by any Credit Party or any of its Subsidiaries in writing pursuant hereto or thereto or inconnection herewith or therewith shall be false in any material respect as of the date made or deemed made; or (e) Other Defaults Under Credit Documents. Any Credit Party shall default in the performance of or compliance with any term contained herein orany of the other Credit Documents, other than any such term referred to in any other Section of this Section 8.1, and such default shall not have been remediedor waived within thirty (30) days after the earlier of (i) an officer of such Credit Party becoming aware of such default or (ii) receipt by the Borrower of noticefrom Administrative Agent or any Lender of such default; or (f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court of competent jurisdiction shall enter a decree or order for relief in respect ofCompany or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar lawnow or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) aninvoluntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver,liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part ofits property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company orany of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against anysubstantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for sixty (60) dayswithout having been dismissed, bonded or discharged; or (g) Voluntary Bankruptcy; Appointment of Receiver, etc.. (i) Company or any of its Subsidiaries shall have an order for relief entered with respectto it or shall commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter ineffect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, 88under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of itsproperty; or Company or any of its Subsidiaries shall make any assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall beunable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governingbody) of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of theactions referred to herein or in Section 8.1(f); or (h) Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process (excluding any judgment obtained inconnection with the Wells Fargo Agreement) involving (i) in any individual case an amount in excess of $250,000 or (ii) in the aggregate at any time an amountin excess of $1,000,000 (in either case to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance Company hasacknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged,unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five days prior to the date of any proposed sale thereunder),; or (i) Dissolution. Any order, judgment or decree shall be entered against any Credit Party decreeing the dissolution or split up of such Credit Partyand such order shall remain undischarged or unstayed for a period in excess of thirty (30) days; or (j) Employee Benefit Plans. There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably beexpected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $1,500,000 during the term hereof; orthere shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans(excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $500,000; or (k) Change of Control. A Change of Control shall occur; (l) Guaranties, Collateral Documents and other Credit Documents. At any time after the execution and delivery thereof, (i) the Guaranty for anyreason, other than the satisfaction in full of all Obligations in Cash, shall cease to be in full force and effect (other than in accordance with its terms) or shallbe declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Collateral Document ceases to be in fullforce and effect (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or the satisfaction in full of the Obligations inCash in accordance with the terms hereof) or shall be declared null and void, or Collateral Agent shall not have or shall cease to have a valid and perfectedLien in any Collateral (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or willful misconduct or the part of theCollateral Agent) purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document, or (iii) any Credit Partyshall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further 89liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; or (m) The Company or any Subsidiary is in default on any obligation to make base rental payments under at least one lease with respect to either (i)each of any three Leasehold Properties which are Permitted IBX Facilities or (ii) any Leasehold Properties which are designated as “San Jose IBX” and“Secaucus IBX”, respectively, on Schedule 1.1(a). THEN, (1) upon the occurrence of any Event of Default described in Section 8.1(f) or 8.1(g), automatically, and (2) upon the occurrence of any other Eventof Default, at the request of (or with the consent of) Requisite Lenders, upon notice to Company by Administrative Agent, (A) each of the following shallimmediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expresslywaived by each Credit Party: (i) the unpaid principal amount of and accrued interest on the Loans, and (ii) all other Obligations; (B) the Administrative Agentmay cause the Collateral Agent to enforce any and all Liens and security interests created pursuant to the Collateral Documents; and (C) the Lenders andAgents may exercise all other remedies available under Applicable Law (or under the Credit Documents). SECTION 9. AGENTS 9.1 Appointment of Agents. (a) Appointment. Salomon Smith Barney Inc. is hereby appointed a Lead Arranger and a Book Runner. Citicorp USA, Inc. is hereby appointedAdministrative Agent (for purposes of this Section 9, the terms “Administrative Agent” and “Agent” shall also include Citicorp in its capacity as CollateralAgent pursuant to the Collateral Documents) hereunder and under the other Credit Documents and each Lender hereby authorizes Administrative Agent to actas its agent in accordance with the terms hereof and the other Credit Documents. Each Agent hereby agrees to act upon the express conditions contained hereinand the other Credit Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall haveany rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as anagent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Companyor any of its Subsidiaries. Each of Lead Arranger and Book Runner, without consent of or notice to any party hereto, may assign any and all of its rights orobligations hereunder to any of its Affiliates. As of the Closing Date, all the respective obligations of Salomon Smith Barney Inc., in its respective capacities asLead Arranger and Book Runner, shall terminate (except as otherwise expressly set forth herein). Citicorp is hereby appointed as the Collateral Agent under thePledge and Security Agreement and the other Collateral Documents and each Agent and each Lender hereby authorizes Citicorp to act as Collateral Agent for itsbenefit and for the benefit of the other Secured Parties hereunder and under the other Credit Documents and each Agent and each Lender hereby authorizesCollateral Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. Each Lender further authorizes the AdministrativeAgent to be the agent in connection with the Guaranty. 90(b) Authorization to Enter into Intercreditor Agreement. Each Lender hereby acknowledges that it has reviewed the terms and provisions of theIntercreditor Agreement to be entered into by and among Administrative Agent, Collateral Agent and Convertible Note Agent on the Second AmendmentEffective Date and each Lender hereby authorizes Administrative Agent and Collateral Agent to enter into the Intercreditor Agreement on its behalf. 9.2 Powers and Duties. Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers,rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof,together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that areexpressly specified herein and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or throughits agents or employees. No Agent shall have, by reason hereof or any of the other Credit Documents, a fiduciary relationship in respect of any Lender; andnothing herein or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligationsin respect hereof or any of the other Credit Documents except as expressly set forth herein or therein. 9.3 General Immunity..(a) No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity,enforceability, collectability or sufficiency hereof or any other Credit Document or for any representations, warranties, recitals or statements made herein ortherein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnishedor made by any of Agent to Lenders or by or on behalf of any Credit Party to any Agent or any Lender in connection with the Credit Documents and thetransactions contemplated thereby or for the financial condition or business affairs of any Credit Party or any other Person liable for the payment of anyObligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenantsor agreements contained in any of the Credit Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event ofDefault or Default. Anything contained herein to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations ofthe amount of outstanding Loans or the component amounts thereof. (b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any actiontaken or omitted by any Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent’s gross negligence or willfulmisconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith orany of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agentshall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section10.5) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (whereso instructed) refrain from acting, or to exercise such power, discretion or authority, in 91accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected inrelying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person orPersons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be in-house or attorneys for Companyand its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever againstany Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Credit Documents in accordance withthe instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5). 9.4 Agents Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose anyduties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit,each Agent, in its individual capacity, shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were notperforming the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent inits individual capacity. Any Agent, in its individual capacity, and its Affiliates may accept deposits from, lend money to and generally engage in any kind ofbanking, trust, financial advisory or other business with either Borrower or any of its Affiliates as if it were not performing the duties specified herein, andmay accept fees and other consideration from either Borrower for services in connection herewith and otherwise without having to account for the same toLenders. 9.5 Lenders’ Representations, Warranties and Acknowledgment. Each Lender represents and warrants that it has made its own independentinvestigation of the financial condition and affairs of Company and its Subsidiaries in connection with the transactions contemplated herein and that it hasmade and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility,either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit orother information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shallhave any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.6 Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shallnot have been reimbursed by any Credit Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits,costs, expenses (including reasonable counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on,incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other CreditDocuments or otherwise in its capacity as such Agent in any way relating to or arising out hereof or the other Credit Documents; provided, no Lender shall beliable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting fromsuch Agent’s gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, beinsufficient or become impaired, such Agent may call for additional 92indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall thissentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense ordisbursement in excess of such Lender’s Pro Rata Share thereof; and provided further, this sentence shall not be deemed to require any Lender to indemnifyany Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in theimmediately preceding sentence. For the avoidance of doubt, this Section 9.6 shall extend and apply to any Agent under the Existing Credit Agreement withrespect to any time period prior to their resignation. 9.7 Successor Administrative Agent and Collateral Agent (a) Successor Administrative Agent. Administrative Agent may resign at any time by giving thirty (30) days’ prior written notice thereof toLenders and the Borrower, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writingdelivered to the Borrower and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, RequisiteLenders shall have the right, with the Borrower’s consent (which shall not be unreasonably withheld or delayed and which shall not be required while aDefault or Event of Default exists), to appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunderby a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privilegesand duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly (i) transfer to such successorAdministrative Agent all records and other documents necessary or appropriate in connection with the performance of the duties of the successorAdministrative Agent under the Credit Documents, and (ii) take such other actions, as may be necessary or appropriate in connection with the assignment tosuch successor Administrative Agent, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunderand under the other Credit Documents. (b) Successor Collateral Agent. Collateral Agent may resign at any time by giving thirty (30) days’ prior written notice thereof toAdministrative Agent, Lenders and the Borrower, and Collateral Agent may be removed at any time with or without cause by an instrument or concurrentinstruments in writing delivered to the Borrower, Collateral Agent and Administrative Agent and signed by Requisite Lenders. Upon any such notice ofresignation or any such removal, Requisite Lenders shall have the right, upon five (5) Business Days’ notice to the Administrative Agent, following receipt ofthe Borrower’s consent (which shall not be unreasonable withheld or delayed and which shall not be required while an Event of Default exists), to appoint asuccessor Collateral Agent. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, that successor CollateralAgent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent and the retiringor removed Collateral Agent shall promptly (i) transfer to such successor Collateral Agent all sums, Securities and other items of Collateral held under theCollateral Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successorCollateral Agent under the Credit Documents, and (ii) execute and deliver to such successor Collateral Agent such 93 amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successorCollateral Agent of the security interests created under the Collateral Documents, whereupon such retiring or removed Collateral Agent shall be discharged fromits duties and obligations hereunder and under the other Credit Documents. 9.8 Collateral Documents and Guaranty (a) Agents under Collateral Documents and Guaranty. Each Lender hereby further authorizes Administrative Agent or Collateral Agent, asapplicable, on behalf of and for the benefit of Lenders, to be the agent for and representative of Lenders with respect to the Guaranty, the Collateral and theCollateral Documents. Subject to Section 10.5, without further written consent or authorization from Lenders, each of Administrative Agent and CollateralAgent, as applicable may execute any documents or instruments necessary to release any Lien encumbering any item of Collateral (i) that is the subject of (A) asale or other disposition of assets (B) a Lien securing a Permitted Equipment Financing or (ii) to which Requisite Lenders (or such other Lenders as may berequired to give such consent under Section 10.5) have otherwise consented or release any Guarantor from the Guaranty pursuant to Section 7.13 or withrespect to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented; providedthat in the case of clause (i)(B) above, such release of Lien shall only be effectuated by the delivery of a release, substantially in the form of Exhibit N attachedhereto (with such additions and deletions thereto in form and substance satisfactory to the Collateral Agent), together with any other documents or instrumentsdeemed reasonably necessary by the Collateral Agent, by the Collateral Agent to Company. No UCC filings may be made by Company with respect to theforegoing without the written consent of Collateral Agent. (b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Credit Documents to the contrary notwithstanding, eachCredit Party, each Agent and each Lender hereby agree that no Lender shall have any right individually to realize upon any of the Collateral or to enforce theGuaranty, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent for the benefit ofSecured Parties, in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by CollateralAgent, and in the event of a foreclosure by Collateral Agent on any of the Collateral pursuant to a public or private sale, Collateral Agent or any Lender may bethe purchaser of any or all of such Collateral at any such sale and Collateral Agent, as agent for and representative of Secured Parties (but not any Lender orLenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of biddingand making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of theObligations as a credit on account of the purchase price for any collateral payable by Collateral Agent at such sale. SECTION 10. MISCELLANEOUS 10.1 Notices . Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to a CreditParty, Lead Arranger, Book 94 Runner, Collateral Agent or Administrative Agent, shall be sent to such Person’s address as set forth on Appendix B or in the other relevant Credit Document,and in the case of any Lender, the address as indicated on Appendix B or otherwise indicated to Administrative Agent in writing. Each notice hereunder shallbe in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been givenwhen delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three (3) Business Days afterdepositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to any Agent shall be effective until received by suchAgent. 10.2 Expenses. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly all the actual andreasonable costs and expenses of Agents and Lenders associated with the expenses of preparation of the Credit Documents and any consents, amendments,waivers or other modifications thereto; all the costs of furnishing all opinions by counsel for any Credit Party; the reasonable fees, expenses anddisbursements of counsel to Agents (in each case including allocated costs of internal counsel) in connection with the negotiation, preparation, execution andadministration of the Credit Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requestedby any Credit Party; all the actual costs and reasonable expenses of creating, perfecting, maintaining and terminating Liens in favor of Collateral Agent, for thebenefit of Secured Parties pursuant hereto, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurancepremiums and reasonable fees, expenses and disbursements of counsel to each Agent and of counsel providing any opinions that any Agent or RequisiteLenders may request in respect of the Collateral or the Liens created pursuant to the Collateral Documents; all the actual costs and reasonable fees, expensesand disbursements of any auditors, accountants, consultants or appraisers; all the actual costs and reasonable expenses (including the reasonable fees,expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Administrative Agent or Collateral Agent and theirrespective counsel) in connection with the custody or preservation of any of the Collateral of the perfection of the Liens thereon; all other actual and reasonablecosts and expenses incurred by each Agent in connection with the negotiation, preparation and execution of the Credit Documents and any consents,amendments, waivers or other modifications thereto and the transactions contemplated thereby; and after the occurrence of a Default or an Event of Default, allcosts and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel) and costs of settlement, incurred by any Agent andLenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents by reason ofsuch Default or Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement ofthe Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or pursuant toany insolvency or bankruptcy cases or proceedings. 10.3 Indemnity. In addition to the payment of expenses pursuant to Section 10.2, whether or not the transactions contemplated hereby shall beconsummated, each Credit Party agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless, each Agent and Lenderand their respective Affiliates and each of their and their 95 respective Affiliates’ officers, partners, directors, trustees, employees and agents (each, an “Indemnitee”), from and against any and all IndemnifiedLiabilities; provided, no Credit Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent suchIndemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final,non-appealable judgment order or decree. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 10.3 may beunenforceable in whole or in part because they are violative of any law or public policy, the applicable Credit Party shall contribute the maximum portion thatit is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. 10.4 Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon theoccurrence of any Event of Default each Lender is hereby authorized by each Credit Party at any time or from time to time subject to the consent ofAdministrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Credit Party or to any other Person (other thanAdministrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special,including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness atany time held or owing by such Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of anyCredit Party to such Lender hereunder, the Letters of Credit and participations therein and under the other Credit Documents, including all claims of anynature or description arising out of or connected hereto, the Letters of Credit and participations therein or with any other Credit Document, irrespective ofwhether or not such Lender shall have made any demand hereunder or the principal of or the interest on the Loans or any amounts in respect of the Letters ofCredit or any other amounts due hereunder or under any other Credit Documents shall have become due and payable pursuant to Section 2 and although suchobligations and liabilities, or any of them, may be contingent or unmatured. Each Credit Party hereby further grants to Administrative Agent and each Lendera security interest in all Deposit Accounts maintained with Administrative Agent or such Lender as security for the Obligations. 10.5 Amendments and Waivers. (a) Requisite Lenders’ Consent. Subject to Sections 10.5(b) and 10.5(c), no amendment, modification, termination or waiver of any provision ofthe Credit Documents, or consent to any departure by any Credit Party therefrom, shall in any event be effective without the written concurrence of theRequisite Lenders. (b) Affected Lenders’ Consent. Without the written consent of each Lender that would be affected thereby, no amendment, modification,termination, or consent shall be effective if the effect thereof would: (i) extend the scheduled final maturity of any Loan or Note; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); 96 (iii) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant toSection 2.10) or any fee payable hereunder; (iv) extend the time for payment of any such interest or fees; (v) reduce the principal amount of any Loan; (vi) amend, modify, terminate or waive any provision of this Section 10.5(b) or Section 10.5(c) or Section 10.6(a); (vii) amend the definition of “Requisite Lenders” or “Pro Rata Share”; provided, with the consent of Requisite Lenders, additionalextensions of credit pursuant hereto may be included in the determination of “Requisite Lenders” or “Pro Rata Share” on substantially the samebasis as the Term Loans are included on the Second Amendment Effective Date; (viii) (A) release or otherwise subordinate all or substantially all of the Collateral or all or substantially all of the Guarantors (or Companyalone) from the Guaranty except as expressly provided in the Credit Documents or (B) otherwise make an amendment or waiver which changes the orderof priority of payments among Lenders; or (ix) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document. (c) Other Consents. No amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to anydeparture by any Credit Party therefrom, shall amend, modify, terminate or waive any provision of Section 9 or Section 10 as the same applies to any Agent,or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent. (d) Execution of Amendments, etc. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, executeamendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for thespecific purpose for which it was given. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice ordemand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.5 shallbe binding upon each Lender at the time outstanding, each future Lender and, if signed by a Credit Party, on such Credit Party. 10.6 Successors and Assigns; Participations (a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefitof the parties hereto and the successors and assigns of Lenders. No Credit Party’s rights or obligations hereunder nor any 97 interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. (b) Register. The Borrower, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders andowners of the corresponding Loans listed therein for all purposes hereof, and no assignment or transfer of any such Loan shall be effective, in each case,unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been delivered to and accepted by Administrative Agent andrecorded in the Register as provided in Section 10.6(e). Prior to such recordation, all amounts owed with respect to the applicable Loan shall be owed to theLender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving suchauthority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the correspondingLoans. (c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under thisAgreement, including, without limitation, all or a portion of its Loans owing to it, Note or Notes held by it, or other Obligation: (i) to any Person meeting the criteria of clause (i) of the definition of the term of “Eligible Assignee” upon the giving of notice to Borrower andAdministrative Agent; and (ii) to any Person meeting the criteria of clause (ii) of the definition of the term of “Eligible Assignee” and to any such Person (except in thecase of assignments made by or to another Lender), consented to by Borrower and Administrative Agent (such consent not to be (x) unreasonablywithheld or delayed or, (y) in the case of Borrower, required at any time an Event of Default shall have occurred and then be continuing; provided that,in any event, notice of such assignment shall be given promptly to Borrower if its consent is not otherwise required); provided, further each suchassignment pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less than $1,000,000 (or such lesser amount as may be agreed toby Borrower and Administrative Agent or as shall constitute the aggregate amount of the Obligations of the assigning Lender). (d) Mechanics. The assigning Lender and the assignee thereof shall execute and deliver to Administrative Agent an Assignment Agreement, togetherwith (i) a processing and recordation fee of $2,000 in the case of all assignments (except that only one fee shall be payable in the case of contemporaneousassignments to Related Funds), and (ii) such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding mattersas the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.19(c). (e) Notice of Assignment. Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordationfee referred to in Section 10.6(d) (and any forms, certificates or other evidence required by this Agreement in connection 98 therewith), Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof toBorrower and shall maintain a copy of such Assignment Agreement. (f) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon executing and delivering an AssignmentAgreement, as the case may be, represents and warrants as of the Closing Date or as of the applicable Effective Date (as defined in the applicable AssignmentAgreement) that it is an Eligible Assignee; it has experience and expertise in the making of or investing in loans such as the Loans; and it will make or investin, as the case may be, its Loans for its own account in the ordinary course of its business and without a present view to distribution of such Loans within themeaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, thedisposition of such Loans or any interests therein shall at all times remain within its exclusive control). (g) Effect of Assignment. Subject to the terms and conditions of this Section 10.6, as of the “Effective Date” specified in the applicableAssignment Agreement: the assignee thereunder shall have the rights and obligations of a “Lender” hereunder to the extent such rights and obligations hereunderhave been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a “Lender” for all purposes hereof; the assigningLender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish itsrights (other than any rights which survive the termination hereof under Section 10.8) and be released from its obligations hereunder (and, in the case of anAssignment Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations hereunder, such Lender shall cease to be a partyhereto; provided, anything contained in any of the Credit Documents to the contrary notwithstanding, (i) such assigning Lender shall continue to be entitled tothe benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lenderhereunder; and (ii) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender shall, upon the effectiveness of suchassignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon Borrower shallissue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriateinsertions, to reflect the outstanding Loans of the assignee and/or the assigning Lender. (h) Participations. Each Lender shall have the right at any time to sell one or more participations to any Person (other than Company, any of itsSubsidiaries or any of its Affiliates) in all or any part of its Loans or in any other Obligation. The holder of any such participation, other than an Affiliate ofthe Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to anyamendment modification or waiver that would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reducethe rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates)or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that awaiver of any Default or Event of Default shall not constitute a change in the 99 terms of such participation, and that an increase in any Loan shall be permitted without the consent of any participant if the participant’s participation is notincreased as a result thereof), (ii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or (iii)release or subordinate all or substantially all of the Collateral under the Collateral Documents or the Guarantors (except as expressly provided in the CreditDocuments) supporting the Loans hereunder in which such participant is participating. All amounts payable by any Credit Party hereunder, includingamounts payable to such Lender pursuant to Section 2.17(c), 2.18 or 2.19, shall be determined as if such Lender had not sold such participation. EachCredit Party and each Lender hereby acknowledge and agree that, solely for purposes of Sections 2.16 and 10.4, any participation will give rise to a directobligation of each Credit Party to the participant and the participant shall be considered to be a “Lender.” (i) Certain Other Assignments. In addition to any other assignment permitted pursuant to this Section 10.6, (i) any Lender may assign and pledgeall or any portion of its Loans, the other Obligations owed to such Lender, and its Notes, if any, to secure obligations of such Lender, including, withoutlimitation, any pledge or assignment to secure obligations to any Federal Reserve Bank or as collateral security for any loan or other financing transaction as inor in connection with any securitization or similar transaction, and this Section 10.6 shall not apply to any such pledge or assignment of a security interest orother transaction described herein; provided, (x) no Lender, as between Borrower and such Lender, shall be relieved of any of its obligations hereunder as aresult of any such assignment and pledge, and provided further, (y) in no event shall the applicable Federal Reserve Bank or trustee or other financing partybe considered to be a “Lender” or be entitled to require the assigning Lender to take or omit to take any action hereunder and (z) any transfer of the rights andobligations of a “Lender” hereunder to any Person upon the foreclosure of any pledge or security interest referred to in this Section 10.6(i) may only be madepursuant to the provisions of Sections 10.6(c) through (e) governing assignments of interests in the Loans. 10.7. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permittedby any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall notavoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. 10.8 Survival of Representations, Warranties and Agreements. All representations, warranties and agreements made herein shall survive theexecution and delivery hereof and the making of any Credit Extension. Notwithstanding anything herein or implied by law to the contrary, the agreements ofeach Credit Party set forth in Sections 2.17(c), 2.18, 2.19, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.16 and 9.6 shallsurvive the payment of the Loans. 10.9 No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilegehereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein,nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.The rights, powers and remedies given to each Agent and each Lender hereby are 100 cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the otherCredit Documents or any of the Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereundershall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power orremedy. 10.10 Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of anyCredit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments toAdministrative Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or Collateral Agent, Administrative Agent or Lenders enforce any securityinterests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequentlyinvalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law,any other state or federal law, common law or any equitable cause (whether by demand, settlement, litigation or otherwise), then, to the extent of such recovery,the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued infull force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.11 Severability. In case any provision in or obligation hereunder or any Note shall be invalid, illegal or unenforceable in any jurisdiction, thevalidity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in anyway be affected or impaired thereby. 10.12 Entire Agreement. This Agreement (together with the Exhibits hereto, the Schedules hereto and the other agreements, documents and instrumentsdelivered in connection herewith) and the Credit Documents constitute the entire agreement among the parties with respect to the subject matter hereof andthereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subjectmatter hereof. 10.13 Obligations Several; Independent Nature of Lenders’ Rights. The obligations of Lenders hereunder are several and no Lender shall beresponsible for the obligations of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenderspursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amountspayable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arisinghereunder and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any otherpurpose or be given any substantive effect. 101 10.15 Acknowledgment and Consent. Each of Company and the Guarantors have (i) guaranteed the Obligations and (ii) created Liens in favor ofLenders on certain Collateral to secure their obligations under this Agreement and the Collateral Documents. Each of Company and the Guarantors arecollectively referred to herein as the “Credit Support Parties”, and the Collateral Documents are collectively referred to herein as the “Credit SupportDocuments”. Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of this Agreement and consents to the amendmentof the Existing Credit Agreement effected pursuant to this Agreement. Each Credit Support Party hereby confirms that each Credit Support Document to whichit is a party or otherwise bound and all Collateral encumbered thereby will continue to guarantee or secure, as the case may be, to the fullest extent possible inaccordance with the Credit Support Documents the payment and performance of all “Obligations” under this Agreement and each of the Credit SupportDocuments, as the case may be (in each case as such terms are defined in the applicable Credit Support Document), including without limitation the paymentand performance of all such “Obligations” under this Agreement and each of the Credit Support Documents, as the case may be, in respect of the Obligationsof Company now or hereafter existing under or in respect of the Existing Credit Agreement, as amended hereby and hereby pledges and assigns to the CollateralAgent, and grants to the Collateral Agent a continuing lien on and security interest in and to, all Collateral as collateral security for the prompt payment andperformance in full when due of the “Obligations” under this Agreement and each of the Credit Support Documents to which it is a party (whether at statedmaturity, by acceleration or otherwise). Each Credit Support Party acknowledges and agrees that any of the Credit Support Documents to which it is a partyor otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired orlimited by the execution or effectiveness of this Agreement. Each Credit Support Party represents and warrants that all representations and warranties containedin this Agreement and the Credit Support Documents to which it is a party or otherwise bound are true and correct in all material respects on and as of theSecond Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warrantiesspecifically relate to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date. Each Credit Support Partyacknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Agreement, such Credit Support Party is not required by theterms of the Existing Credit Agreement or any other Credit Document to consent to the amendments to the Existing Credit Agreement effected pursuant to thisAgreement and (ii) nothing in this Agreement or any other Credit Document shall be deemed to require the consent of such Credit Support Party to any futureamendments to this Agreement. 10.16 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALLBE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEWYORK (INCLUDING SECTION 5-1401, SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK)WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 10.17 CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUTOF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, 102MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OFNEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTIONWITH ITS PROPERTIES, IRREVOCABLY ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTIONAND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALLPROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURNRECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION10.1; AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVERTHE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTESEFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES AGENTS AND LENDERS RETAIN THE RIGHT TO SERVEPROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THECOURTS OF ANY OTHER JURISDICTION. 10.18 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTSTO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THEOTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOANTRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER ISINTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATETO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTYCLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THISWAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ONTHIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITSRELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWEDTHIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTSFOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BEMODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TOTHIS SECTION 10.17 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANYSUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDITDOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS 103MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIALBY THE COURT. 10.19 Confidentiality. Each Lender shall hold all non-public information obtained pursuant to the requirements hereof and sufficiently identified tosuch Lender as being non-public which has been identified as confidential by Borrower in accordance with such Lender’s customary procedures for handlingconfidential information of this nature and in accordance with prudent lending or investing practices, it being understood and agreed by each Borrower that inany event a Lender may make disclosures to Affiliates of such Lender (and to other persons authorized by a Lender or Agent to organize, present ordisseminate such information in connection with disclosures otherwise made in accordance with this Section 10.18), disclosures reasonably required by anybona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by such Lender of anyLoans and other Obligations or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) in HedgeAgreements (provided, such counterparties and advisors are advised of and agree to be bound by the provisions of this Section 10.18) or disclosures requiredor requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal process; provided, unless specifically prohibited byapplicable law or court order, each Lender shall make reasonable efforts to notify Borrower of any request by any governmental agency or representativethereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by suchgovernmental agency) for disclosure of any such non-public information prior to disclosure of such information; provided, further, that in no event shall anyLender be obligated or required to return any materials furnished by Company or any of its Subsidiaries; and provided, further, that notwithstanding theforegoing, each Lender and its Affiliates shall have the right to (i) list the name and logo of Borrower and the Guarantors, as provided by Borrower and theGuarantors from time to time, and describe the transaction that is the subject of this Agreement in their marketing materials and (ii) post such information,including, without limitation, a customary “tombstone”, on its web site. 10.20 Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations,including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate ofinterest (determined without regard to the preceding sentence) under this Agreement (which for the avoidance of doubt shall include any rate of interest under theExisting Credit Agreement) at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the HighestLawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest setforth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (takinginto account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest setforth in this Agreement had at all times been in effect, then to the extent permitted by law, Borrower shall pay to Administrative Agent, for the account of theLenders, an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest LawfulRate had at all times been in effect. Notwithstanding the 104foregoing, it is the intention of Lenders and each Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges,or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, ifpreviously paid, shall at such Lender’s option be applied to the outstanding amount of the Loans made hereunder or be refunded to Borrower. 10.21 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemedan original, but all such counterparts together shall constitute but one and the same instrument. 10.22 Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt byCompany and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 10.23 General Release. In consideration of the Agent’s and Lenders’ execution of this Agreement, each Credit Party unconditionally and irrevocablyacquits and fully and forever releases and discharges each Lender, and Agent and all their respective affiliates, partners, subsidiaries, officers, employees,agents, attorneys, principals, directors and shareholders of such Persons, and their respective heirs, legal representatives, successors and assigns (collectively,the “Releasees”) from any and all claims, demands, causes of action, obligations, remedies, suits, damages and liabilities of any nature whatsoever,whether now known, suspected or claimed, whether arising under common law, in equity or under statute, which such Credit Party ever had or now hasagainst any of the Releasees and which may have arisen at any time prior to the date hereof and which were in any manner related to the Existing CreditAgreement, this Agreement, any other Credit Document now or hereafter in existence or related documents, instruments or agreements or the enforcement orattempted or threatened enforcement by any of the Releasees of any of their respective rights, remedies or recourse related thereto (collectively, the “ReleasedClaims”). Each Credit Party covenants and agrees never to commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted againstany of the Releasees any action or other proceeding based upon any of the Released Claims. Notwithstanding the foregoing, in no event shall the foregoing beinterpreted, construed or otherwise deemed as an admission or suggestion by the Agents and Lenders of any wrong doing or liability owed to Company, anyCredit Party or any other Person. For the avoidance of doubt, this Section 10.23 shall extend and apply to any Agent under the Existing Credit Agreement withrespect to any time period prior to their resignation. 10.24 Amendment and Restatement. This Agreement is an amendment and restatement of the Existing Credit Agreement, and, as such, all terms andprovisions supersede in their entirety the Existing Credit Agreement. All other Collateral Documents previously delivered shall continue to secure theObligations as herein defined, and shall be in full force and effect as amended and restated by this Agreement and the other Credit Documents. The CreditParties by executing this Agreement hereby reaffirm all of the Obligations under the Existing Credit Agreement and the other Credit Documents, as amendedhereby. [Remainder of page intentionally left blank] 105 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto dulyauthorized as of the date first written above. EQUINIX, INC. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EQUINIX OPERATING CO., INC. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EQUINIX EUROPE, INC. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EQUINIX – DC, INC. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EQUINIX CAYMAN ISLANDS HOLDINGS By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: President EQUINIX DUTCH HOLDINGS N.V.  By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: President EQUINIX NETHERLANDS B.V. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Managing Director EQUINIX FRANCE SARL By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Managing Director EQUINIX GERMANY GMBH By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Managing Director EQUINIX UK LIMITED By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Director EQUINIX ASIA HQ PTE LTD By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Director PIHANA PACIFIC, INC. 2 By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer PIHANA PACIFIC BUSINESS RECOVERY, INC. By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer PIHANA PACIFIC BUSINESS RECOVERY HONGKONG LIMITED By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Representative Director PIHANA PACIFIC AUSTRALIA PTY LIMITED By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Representative Director PIHANA PACIFIC JAPAN KK By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Representative Director PIHANA PACIFIC HONG KONG LIMITED By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Representative Director 3 EAGLE ACQUISITION CORP 2A By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EAGLE ACQUISITION CORP 1A By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer EAGLE ACQUISITION CORP 1B By: /s/ PETER VAN CAMP Name: Peter Van CampTitle: Chief Executive Officer 4 SALOMON SMITH BARNEY INC.,as Lead Arranger and Book Runner By: /s/ CARLTON B. KLEIN Managing Director 5 CITICORP USA, INC.,as Administrative Agent, Collateral Agent and aLender By: /s/ MICHAEL C. BECKER Name: Michael C. BeckerTitle: Director 6 CIT LENDING SERVICES CORPORATION,as a Lender By: /s/ MICHAEL V. MONAHAN Name: Michael V. MonahanTitle: Vice President 7 LT HOLDCO I, LLCas a Lender By: /s/ MICHAEL GALLAGHER Name: Michael GallagherTitle: Vice President 8 BANK OF TOKYO-MITSUBISHI TRUSTCOMPANY,as a Lender By: /s/ TOD ANGUS Name: Tod AngusTitle: Authorized Signatory 9 THE BANK OF NOVA SCOTIA,as a Lender By: /s/ STEPHEN C. LEVI Name: Stephen C. LeviTitle: Director 10 THE JPMORGAN CHASE BANK(formely THE CHASE MANHATTAN BANK),as a Lender By: /s/ JOHN P. MCDONAGH Name: John P. McDonaghTitle: Managing Director 11 COMERICA BANK, CALIFORNIA,as a Lender By: /s/ KENNETH W. LEDEIT Name: Kenneth W. LeDeitTitle: First Vice President 12 ISTAR FINANCIAL, INC., as a Lender By: /s/ JAY S. SUGARMAN Name: Jay S. SugarmanTitle: Chairman and CEO 13Exhibit 10.60 GOVERNANCE AGREEMENT BY AND AMONG EQUINIX, INC., STT COMMUNICATIONS LTD., i-STT INVESTMENTS PTE. LTD., AND THE PIHANA STOCKHOLDERS NAMED HEREIN Dated as of December 31, 2002  GOVERNANCE AGREEMENT GOVERNANCE AGREEMENT, dated as of December 31, 2002 (the “Agreement”), by and among Equinix, Inc., a Delaware corporation (“Parent”),STT Communications Ltd., a corporation organized under the laws of the Republic of Singapore (“STT Communications”), i-STT Investments Pte. Ltd., acorporation organized under the laws of the Republic of Singapore and a wholly owned subsidiary of STT Communications (“i-STT Investments”) andcertain stockholders, named in the signature pages to this Agreement, of Pihana Pacific, Inc., a Delaware corporation (“Pihana”), as comprised immediatelybefore the closing of the Combination Agreement (as defined below) (“Pihana Stockholders”). STT Communications, i-STT Investments and PihanaStockholders are sometimes referred to herein as the “Stockholders.” WHEREAS, Parent, STT Communications, and Pihana have entered into that certain Combination Agreement, dated as of October 2, 2002 (the“Combination Agreement”), pursuant to which, among other things, a wholly-owned indirect subsidiary of Parent is merging with and into Pihana, the PihanaStockholders are receiving shares of Parent’s common stock, par value $0.001 per share (the “Common Stock”), and STT Communications is contributingone hundred percent (100%) of the capital stock of its wholly-owned subsidiary, i-STT Pte. Ltd., to a wholly-owned indirect subsidiary of Parent in exchangefor Common Stock and shares of Parent’s Series A Convertible Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”) to be issued to i-STT Investments; WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of October 2, 2002 (the “Purchase Agreement”), Parent will sell to i-STTInvestments, as an assignee of STT Communications, Parent’s 14% Series A-1 Convertible Secured Notes due 2007 and related warrants, which notes andwarrants are convertible into shares of Parent’s voting capital stock; WHEREAS, Parent and each of the Stockholders desire to make certain arrangements among themselves with respect to the matters set forth herein; and WHEREAS, it is a condition to the closing of the transactions contemplated by the Combination Agreement that this Agreement be executed and deliveredby the parties; NOW THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATION 1.1. Definitions. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the CombinationAgreement. As used in this Agreement, the following terms shall have the following meanings:  “Agreement” is defined in the preamble to this Agreement. “Black-Out Period” means a period of not more than thirty days with regard to which Parent shall have furnished to the Holders of Registrable Securitiesa certificate signed by an executive officer of Parent stating, in the good faith judgment of the board of directors of Parent, it would be (a) materially detrimentalto Parent and its stockholders for Parent to file a Registration Statement at such time or (b) a violation of the Securities Act for such Holders to sell sharespursuant to the applicable Registration Statement because of the existence of material non-public information that the board of directors has determined, in itsgood faith judgment, would be materially detrimental to Parent if disclosed. “Board” means the board of directors of Parent. “Business Day” means a day that is not a Saturday, a Sunday or a day on which banking institutions are required to be closed in City of New York,State of New York. “Bylaws” is defined in Section 2.1. “Certificate of Designation” means the Certificate of Designation attached to the Combination Agreement as Exhibit C. “Closing Date” means the date and time of the closing of the transactions contemplated by the Combination Agreement. “Combination Agreement” is defined in the recitals to this Agreement. “Common Stock” is defined in the recitals to this Agreement. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “GAAP” means generally accepted accounting principals as applied in the United States from time to time. “Holders” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 4.6 of thisAgreement. “Indemnified Person” is defined in Section 4.10. “Indemnifying Person” is defined in Section 4.10. “Initiating Holder” is defined in Section 4.1(b). “Insufficient Amount” is defined in Section 4.3(a). “i-STT Investments” is defined in the preamble to this Agreement “NASD” means the National Association of Securities Dealers, Inc. 2 “Original Equinix Directors” shall mean Peter Van Camp, Michelangello Volpi and Andrew Rachleff. “Pihana Stockholders” is defined in the preamble to this Agreement. “Parent” is defined in the preamble to this Agreement. “Participant” is defined in Section 4.8. “Person” means an individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association,union, business association, firm or other legal entity. “Purchase Agreement” is defined in the preamble to this Agreement. “Prospectus” means the prospectus included in any Registration Statement (including any prospectus subject to completion and a prospectus thatincludes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgatedunder the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of theRegistrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effectiveamendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. “Qualified Offer” is defined in Section 3.2. “Registrable Securities” means the shares of Common Stock issued under the Combination Agreement, or issued or issuable upon conversion of theSeries A Preferred Stock issued under the Combination Agreement, that cannot otherwise be sold without registration under the Securities Act in any ninety-day period under Rule 144. “Registration Statement” means any registration statement of Parent that covers any of the Registrable Securities pursuant to the provisions of thisAgreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and allmaterial incorporated by reference or deemed to be incorporated by reference in such registration statement. “Rule 144” means Rule 144 under the Securities Act or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing foroffers and sales of securities made in compliance therewith by subsequent holders that are not affiliates of an issuer of such securities being free of theregistration and prospectus delivery requirements of the Securities Act. “Rule 144A” means Rule 144A under the Securities Act. “Rule 145” means Rule 145 under the Securities Act. “Rule 405” means Rule 405 under the Securities Act. 3 “Rule 415” means Rule 415 under the Securities Act. “SEC” means the U.S. Securities and Exchange Commission. “Securities” is defined in Section 3.1. “Securities Act” means the Securities Act of 1933, as amended. “Series A Preferred Stock” is defined in the recitals to this Agreement. “Stockholders” is defined in the preamble to this Agreement. “STT Communications” is defined in the preamble to this Agreement. “Underwritten registration or underwritten offering” means a registration in which securities of Parent are sold to an underwriter for re-offering to thepublic. 1.2. Interpretation. (a) Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “withoutlimitation.” (b) The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreementas a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections,paragraphs, exhibits and schedules of and to this Agreement unless otherwise specified. (c) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include both gendersand the neuter. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. (d) A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns. (e) A reference to any legislation or to any provision of any legislation shall include any modification, amendment or re-enactment thereof, anylegislative provision substituted therefor and all rules, regulations and statutory instruments issued under or related to such legislation. All references toaccounting terms shall have the meanings determined under GAAP. (f) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent orinterpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring ordisfavoring any party by virtue of the authorship of any provisions of this Agreement. 4 (g) No prior draft nor any course of performance or course of dealing shall be used in the interpretation or construction of this Agreement. (h) The descriptive headings in this Agreement are intended for reference purposes only and shall not be used in the interpretation or construction ofthis Agreement. (i) The parties intend that each provision of this Agreement shall be given full separate and independent effect. Although the same or similar subjectmatters may be addressed in different provisions of this Agreement, the parties intend that, except as expressly provided in this Agreement, each suchprovision be read separately, be given independent significance and not be construed as limiting any other provision in this Agreement (whether or not moregeneral or more specific in scope, substance or context). ARTICLE 2 BOARD OF DIRECTORS 2.1. Board Representation. From and after the Closing Date, at each annual meeting of the stockholders of Parent, or at any meeting of the stockholdersof Parent at which members of the Board are to be elected or the authorized number of directors is to be fixed or altered, or whenever such actions are to betaken by written consent for such purposes, each of STT Communications and i-STT Investments agrees to vote or otherwise give its consent in respect of allshares of capital stock of Parent (whether now or hereafter acquired) beneficially owned by it that are entitled to vote at such meeting, (i) in favor of the electionto the board of those directors nominated pursuant to the provisions set forth in Article VII of Parent’s Bylaws in substantially the form attached hereto asExhibit A (the “Bylaws”), (ii) against any proposal that would increase the number of directors on the Board above nine, and (iii) against any amendment toArticle VII or Section 8.1 of the Bylaws. 2.2. Reconstitution of Board as of Closing Date. As of the Closing Date, the parties will take all actions necessary to cause the Board to be constituted inthe manner set forth in Article VII of the Bylaws, or by removing or causing to resign a sufficient number of directors to create vacancies, and by appointingindividuals to fill such vacancies in accordance with the designation rights set forth in Article VII of the Bylaws. 2.3. Grant of Irrevocable Proxy. Concurrently with the execution of this Agreement, STT Communications and i-STT Investments shall deliver to Parenta proxy with respect to all of Parent’s capital stock beneficially owned by STT Communications and i-STT Investments in the form attached hereto as ExhibitB (the “Proxy”), which shall be irrevocable to the fullest extent permissible by law. 2.4. Further Actions; Bylaws. From and after the Closing Date, Parent, STT Communications and i-STT Investments shall take all further actions asmay be necessary to carry out the purposes of this Article 2. Without limiting the generality of the foregoing, Parent shall cause the Bylaws to be adopted, andeach of STT Communications and i-STT Investments shall vote all of its shares, or execute consents in lieu thereof, in favor of all actions necessary toimplement the terms of this Article 2. 5 2.5. Independent Directors. If required by federal laws and regulations and/or the listing requirements of the Nasdaq National Market or any other stockexchange or trading system on which the Common Stock may be listed from time to time, including to satisfy any requirement that a majority of Boardmembers be “independent” within the meaning of such laws, regulations and requirements, the Stockholders agree that one Series A Director and the PihanaDirector shall qualify as “independent.” There shall be no requirement that any Equinix Directors be “independent” (other than as required by Section 7.2 ofthe Bylaws) until one Series A Director and the Pihana Director have been classified as “independent.” 2.6. Termination. The rights and obligations of the parties under this Article II shall terminate upon the termination of Article VII of the Bylaws. ARTICLE 3 STT COMMUNICATIONS RIGHT OF FIRST OFFER 3.1. Right of First Offer. Subject to the terms and conditions specified in this Article 3, Parent hereby grants to STT Communications a right of firstoffer with respect to future sales by Parent of its equity securities, or any security convertible into, exchangeable for, or exercisable for any equity securities(the “Securities”). STT Communications may designate as purchasers under such right itself or its partners, members, subsidiaries or assignees in suchproportions as it deems appropriate. Each time Parent proposes to offer any Securities, except for (i) Securities issued pursuant to an Excluded ConversionAdjustment (as defined in the Securities Purchase Agreement under which the Notes were issued), or (ii) Securities issued pursuant to a Registration Statement(a “Registered Offering”), Parent shall first make an offering of such Securities to STT Communications in accordance with the following provisions: (a) Parent shall deliver a notice (“Notice”) to STT Communications stating (i) its bona fide intention to offer such Securities, (ii) the number ofsuch Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Securities. (b) Within 15 days after receipt of the Notice, STT Communications may elect to purchase or obtain, at the price and on the terms specified in theNotice, up to that portion of such Securities which equals the proportion that the number of Securities held by STT Communications bears to the totalnumber of Securities then outstanding (the “STT Communications Pro Rata Shares”). (c) Parent may, during the 45-day period following the expiration of the period provided in subsection 3.1(b) hereof, offer the remainingunsubscribed portion of the Securities to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified inthe Notice. If Parent does not enter into an agreement for the sale of the Securities within such period, or if such agreement is not consummated within 60 daysof the execution thereof, the right provided hereunder shall be deemed to be revived and such Securities shall not be offered unless first reoffered to STTCommunications in accordance herewith. 6 3.2. Registered Offerings. Subject to compliance with applicable securities laws, in connection with a Registered Offering of Securities by Parent, Parentshall first make an offering of such Securities to STT Communications in accordance with the following provisions: (a) At least ten (10) business days prior to the anticipated effectiveness of any Registered Offering, Parent shall deliver a notice (the “RegistrationNotice”) to STT Communications stating (i) its bona fide intention to offer such Securities, (ii) the number of such Securities to be offered, and (iii) theanticipated price and terms, if any, upon which it proposes to offer such Securities. (b) Within five (5) days after receipt of the Registration Notice, STT Communications may indicate to Parent its interest in purchasing orobtaining, within the anticipated price range, up to the STT Communications Pro Rata Share. (c) Parent shall notify STT Communications one (1) business day prior to the anticipated occurrence of the following events: (i) the anticipatedpricing call at which the underwriters of the offering and Parent decide the final offering price (the “Pricing Call”), or (ii) if not an underwritten offering, atsuch time when Parent will set the final price for its offering (the “Parent Pricing”). (d) Within one (1) hour after the Pricing Call or the Parent Pricing, Parent shall notify STT Communications of the final price and number ofshares to be sold (including any over allotments) and STT Communications shall have one (1) hour to deliver to Parent written notice of the number of sharesit intends to purchase in the Registered Offering up to the STT Communications Pro Rata Share, including any shares of any over allotment that it elects topurchase, if exercised (the “STT Communications Notice”). The STT Communications Notice shall be evidence of STT Communications’ obligation topurchase that number of shares indicated in such STT Communications Notice. STT Communications’ failure to timely deliver the STT CommunicationsNotice shall relieve Parent from any obligations under this Section 3.2 with respect to the Registered Offering. 3.3. Sole Benefit of STT Communications. This Article 3 is for the sole benefit of STT Communications and nothing in this Article 3 shall create anyrights or remedies for Pihana Stockholders. ARTICLE 4 REGISTRATION UNDER THE SECURITIES ACT 4.1. Demand Registration. (a) Parent shall prepare and file with the SEC, not later than the 90th day following the Closing Date, a Registration Statement covering the resale ofall Registrable Securities, and shall use commercially reasonable efforts to cause such Registration Statement to become effective on or prior to the 180th dayfollowing the Closing Date and to remain effective until all Registrable Securities have been sold. 7 (b) If the holders of a majority of Registrable Securities intend to distribute Registrable Securities by means of an underwriting, they shall so adviseParent. The underwriter will be selected by Parent, subject to the consent of a majority in interest of the Holders (which will not be unreasonably withheld). Insuch event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in suchunderwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of theHolders and such Holder) to the extent provided in this Article 4. All Holders proposing to distribute Registrable Securities through such underwriting shall(together with Parent as provided in Section 4.4(e)) enter into an underwriting agreement in the form requested by the underwriter or underwriters selected forsuch underwriting. Notwithstanding any other provision of this Section 4.1, if the underwriter advises the Holders in writing that marketing factors require alimitation of the number of shares to be underwritten, then the number of shares of Registrable Securities that may be included in the underwriting shall beallocated among the Holders in proportion (as nearly as practicable) to the amount of Registrable Securities owned by each Holder. (c) Notwithstanding the foregoing, Parent shall have the right to defer the filing of the Registration Statement under this Section 2.1, or suspend theuse of the related prospectus, during a Black-Out Period occurring after receipt of the request of the Initiating Note Holders; provided that Parent may notutilize such deferral or suspension right more than once in any six-month period. (d) All expenses (other than underwriting discounts and commissions) incurred in connection with registration pursuant to Section 4.1, includingall registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for Parent and the reasonable fees anddisbursements of one counsel for the selling Holders (not to exceed $50,000 per registration or underwriting) selected by the Holders of a majority of theRegistrable Securities included in the offering shall be borne by Parent regardless of whether such Registration Statement is declared effective by the SEC. 4.2. Parent Registration. (a) If (but without any obligation to do so) Parent proposes to register (including for this purpose a registration effected by Parent for stockholdersother than the Holders) any of its stock or other securities under the Securities Act in connection with the public offering of such securities (other than aregistration relating solely to the sale of securities to participants in a Parent stock plan, a registration with respect to any transaction within the scope of Rule145 or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities), Parent shall give eachHolder thirty days prior written notice of such registration. Upon the written request of each Holder given within fifteen days after receipt of such notice byParent in accordance with Section 5.7, Parent shall, subject to the provisions of Section 4.2(c), use commercially reasonable efforts to cause all of theRegistrable Securities that each such Holder has requested to be registered to be so registered under the Securities Act. 8 (b) Parent shall have the right to terminate or withdraw any registration initiated by it under this Section 4.2 prior to the effectiveness of suchregistration whether or not any Holder has elected to include securities in such registration. (c) All expenses (other than underwriting discounts and commissions related to the Registrable Securities) incurred, in connection with anyregistration, pursuant to this Section 4.2, including all registration, filing, and qualification fees, printers and accounting fees, fees and disbursements ofcounsel for Parent and the fees and disbursements of one counsel for the selling Holders (not to exceed $50,000 per registration) selected by the holders of amajority of the Registrable Securities included in the offering shall be borne by Parent regardless of whether such Registration Statement is declared effective bythe SEC. (d) In connection with any offering involving an underwriting of shares of Parent’s capital stock, Parent shall not be required under this Section 2.2to include any of the Registrable Securities in such underwriting unless the Holders thereof accept the terms of the underwriting as agreed upon between Parentand the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in theirsole discretion will not, jeopardize the success of the offering by Parent. If the total amount of securities, including Registrable Securities, requested bystockholders to be included in such offering exceeds the amount of securities sold other than by Parent that the underwriters determine in their sole discretion iscompatible with the success of the offering, then Parent shall be required to include in the offering only that number of such securities, including RegistrableSecurities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportionedpro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in suchother proportions as shall mutually be agreed to by such selling stockholders) but in no event shall the amount of securities of the selling Holders ofRegistrable Securities included in the offering be reduced below thirty percent of the total amount of securities included in such offering. For purposes of thepreceding parenthetical concerning apportionment, for any selling stockholder which is a Holder of Registrable Securities and which is a partnership orcorporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners andany trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling stockholder,” and any pro-rata reduction with respect to such“selling stockholder” shall be based upon the aggregate amount of Registrable Securities owned by all entities and individuals included in such “sellingstockholder,” as defined in this sentence. 4.3. Form S-3 Registration. (a) Beginning 180 days following the Closing if at any time or from time to time Parent shall receive a written request or requests from any Holderthat Parent effect a registration on Form S-3, or, if Parent is not then eligible for a registration on Form S-3, on Form S-1 related to a Rule 415 offering, withrespect to all or a part of the Registrable Securities owned by such Holder, Parent will: (i) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and 9 (ii) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as wouldpermit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, togetherwith all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given withinfifteen days after receipt of such written notice from Parent; provided, however, that Parent shall not be obligated to effect any such registration, qualificationor compliance, pursuant to this Section 4.3: (A) if the Holders, together with the holders of any other securities of Parent entitled to inclusion in suchregistration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts orcommissions) of less than $250,000 (an “Insufficient Amount”); or (B) during a Black-Out Period. Parent shall have the right, in the case of an InsufficientAmount or Black-Out Period, to (x) defer the filing of the Form S-3 (or Form S-1) Registration Statement for a period of not more than sixty days, in the caseof an Insufficient Amount, or the duration of the Black-Out Period, whichever is shorter, after receipt of the request of the Holder or Holders under this Section2.3 or (y) suspend the use of the related prospectus for the Black-Out Period; provided further that Parent shall not utilize its deferral or suspension rightsbased on a Black-Out Period more than once in any six-month period; or (C) in any particular jurisdiction in which Parent would be required to qualify to dobusiness or to execute a general consent to service of process in effecting such registration, qualification or compliance; and (iii) keep such Registration Statement effective for the shorter of 18 months or until the distribution contemplated in the RegistrationStatement has been completed; provided, however, that such 18-month period shall be extended for a period of time equal to (A) the period in which anyHolder refrains from selling any securities included in such Registration Statement at the request of an underwriter of Common Stock (or other securities ofParent); (B) the period in which any Holder refrains from selling any securities included in such Registration Statement at the request of Parent to permitParent to amend such Registration Statement; (C) the duration of a Black-Out Period during which the use of a prospectus was suspended or sales ofRegistrable Securities by a Selling Holder were not permitted and (D) the periods for which effectiveness of the Registration Statement has been suspended aspermitted by this Agreement. (b) If a Holder or Holders requests that a Parent registration under Section 4.3(a) be made for an offering on a continuous basis pursuant to Rule415 under the Securities Act on Form S-3 (or Form S-1), Parent shall (i) register the Registrable Securities of such Holder or Holders, as the case may be, on acontinuous basis and (ii) use commercially reasonable efforts to keep such Registration Statement effective for 18 months or until all Registrable Securitiescovered by such Registration Statement have been sold. (c) All expenses (other than underwriters’ discounts or commissions associated with Registrable Securities) incurred in connection with aregistration requested pursuant to this Section 4.3, including all registration, filing and qualification fees, printer’s and accounting fees, fees anddisbursements of counsel for Parent and the reasonable fees and disbursements of one counsel for the selling Holder or Holders (not to exceed $50,000 perregistration) and counsel for Parent, shall be borne by Parent regardless of whether such 10 Registration Statement is declared effective by the SEC. Registrations effected pursuant to this Section 4.3 shall not be counted as demands for registrationpursuant to Section 4.1. 4.4. Obligations of Parent. Whenever required under this Article 4 to effect the registration of any Registrable Securities, Parent shall, as expeditiously asreasonably possible: (a) Registration Statement. Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its best effortsto cause such Registration Statement to become effective. (b) Amendments. Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used inconnection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of allsecurities covered by such Registration Statement. (c) Prospectuses. Furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity withthe requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securitiesowned by them. (d) Blue Sky. Use its best efforts to register and qualify the securities covered by such Registration Statement under such other securities or BlueSky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that Parent shall not be required in connection therewith or as acondition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless Parent is already subjectto service in such jurisdiction and except as may be required by the Securities Act. (e) Underwriting Agreement. If an offering is an underwritten public offering, enter into and perform its obligations under an underwritingagreement requested by the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform itsobligations under such an agreement. (f) Notice of Misstatement or Omission. Notify each Holder covered by such Registration Statement at any time when a prospectus relating theretois required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such Registration Statement,as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statementstherein not misleading in the light of the circumstances then existing. (g) Listing or Quotation. Cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange onwhich similar securities issued by Parent are then listed. (h) Transfer Agent: CUSIP. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP numberfor all such Registrable Securities, in each case not later than the effective date of such registration. 11 (i) Legal Opinion. Use commercially reasonable efforts to furnish, at the request of any Holder requesting registration of Registrable Securitiespursuant to this Article 4, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to thisArticle 4, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the RegistrationStatement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel for Parent, in form and substance as is customarilyrequested by the underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of RegistrableSecurities and (ii) a letter dated such date, from the independent certified public accountants of Parent and any acquired company, in form and substance as iscustomarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and tothe Holders requesting registration of Registrable Securities. 4.5. Obligations of Holders. (a) It shall be a condition precedent to the obligations of Parent to take any action pursuant to this Article 4 with respect to the Registrable Securitiesof any selling Holder that such Holder shall furnish to Parent such information regarding itself, the Registrable Securities held by it, and the intended methodof disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities. (b) Parent shall have no obligation with respect to any registration requested pursuant to Section 4.3 if the number of shares or the anticipatedaggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregateoffering price required to originally trigger Parent’s obligation to initiate such registration as specified in Section 4.3(a). 4.6. Assignment of Registration Rights. The rights to cause Parent to register Registrable Securities pursuant to this Article 4 may be assigned (but onlywith all related obligations) by a Holder to a transferee or assignee of such securities provided: (a) Parent is furnished with written notice of the name andaddress of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agreesin writing to be bound by and subject to the terms and conditions of this Agreement; and (c) such assignment shall be effective only if immediately followingsuch transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. 4.7. Limitations on Subsequent Registration Rights. Unless unanimously approved by the Parent board of directors, from and after the date of thisAgreement, Parent shall not, without the prior written consent of the Holders of a majority of the then-outstanding Registrable Securities, enter into any newagreement with any holder or prospective holder of any securities of Parent which would allow such holder or prospective holder (a) to include such securitiesin any registration filed under Section 4.1, unless under the terms of such agreement, such holder or prospective holder may include such securities in anysuch registration only to the extent that the inclusion of such holder’s prospective holder’s securities will not reduce the amount of the Registrable Securities ofthe Holders that is included or (b) to make a demand 12registration which could result in such Registration Statement being declared effective prior to the date of the first demand registration pursuant to Section4.1(a) or within 120 days of the effective date of any registration effected pursuant to Section 4.1. 4.8. Indemnification by Parent. Parent agrees to indemnify and hold harmless each Holder of Registrable Securities to be included in any RegistrationStatement, the officers, directors, partners and members of each such Person, and each Person, if any, who controls any such Holder within the meaning ofeither Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a “Participant”), from and against any and all losses, claims, damages andliabilities (including the reasonable legal fees and other reasonable expenses actually incurred in connection with any suit, action, proceeding, investigation orany claim asserted or threatened) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in anyRegistration Statement or Prospectus (as amended or supplemented if Parent shall have furnished any amendments or supplements thereto) or caused by,arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statementstherein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused byany untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participantfurnished to Parent in writing by or on behalf of such Participant expressly for use therein; provided, however, that Parent shall not be liable if such untruestatement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or anyamendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of amaterial fact that was the subject matter of the related proceeding and any such loss, liability, claim, damage or expense suffered or incurred by theParticipants resulted from any action, claim or suit by any Person who purchased Registrable Securities that are the subject thereof from such Participant andit is established in the related proceeding that such Participant had been provided with such Prospectus and failed to deliver or provide a copy of theProspectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Securities sold to such Person unlesssuch failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by Parent with this Agreement. 4.9. Several Indemnification by Participants. Each Participant agrees, severally and not jointly, to indemnify and hold harmless Parent, each otherParticipant, its directors and officers and each Person who controls Parent and each other Participant within the meaning of Section 15 of the Securities Act orSection 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including the reasonable legal fees and other reasonableexpenses actually incurred in connection with any suit, action, proceeding, investigation or any claim asserted or threatened) caused by, arising out of or basedupon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (as amended or supplemented ifParent shall have furnished any amendments or supplements thereto) or caused by, arising out of or based upon any omission or alleged omission to statetherein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, notmisleading, only insofar as such losses, claims, damages or liabilities are caused by any untrue 13statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnishedto Parent in writing by or on behalf of such Participant expressly for use therein; provided, however, that a Participant shall not be liable if such untruestatement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or anyamendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of amaterial fact that was the subject matter of the related proceeding and any such loss, liability, claim, damage or expense suffered or incurred by Parent or anyother Participant resulted from any action, claim or suit by any Person who purchased Registrable Securities that are the subject thereof from such otherParticipant and it is established in the related proceeding that Parent or such other Participant, as applicable, had been provided with such Prospectus andfailed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of suchRegistrable Securities sold to such Person unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result ofnoncompliance by such Participant with this Agreement. No Participant shall be liable under this Article 4 for any amounts in excess of such Participant’sproceeds from the sale of such Participant’s Registrable Securities. 4.10. Indemnification Procedures. (a) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted againstany Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the “Indemnified Person”) shallpromptly notify the Person against whom such indemnity may be sought (the “Indemnifying Person”) in writing, and the Indemnifying Person, upon requestof the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others theIndemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related tosuch proceeding; provided, however, that the failure to so notify the Indemnifying Person shall not relieve it of any obligation or liability which it may havehereunder or otherwise, except to the extent of any prejudice caused by such delay. In any such proceeding, any Indemnified Person shall have the right toretain its own counsel if it would be a conflict of interest for the Indemnified Person and the Indemnifying Person to be represented by the same counsel, but thereasonable fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (a) the Indemnifying Person and the IndemnifiedPerson shall have mutually agreed in writing to the contrary, (b) the Indemnifying Person has failed within a reasonable time to retain counsel reasonablysatisfactory to the Indemnified Person or (c) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Personand the Indemnified Person and there are one or more defenses available to the Indemnified Person that are not available to the Indemnifying Person. It isunderstood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees andexpenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such reasonable fees and expenses shall bereimbursed as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing byParticipants who sold a majority in interest of Registrable Securities sold by all such Participants 14and any such separate firm for Parent, its directors, officers and control Persons of Parent shall be designated in writing by Parent. The Indemnifying Personshall not be liable for any settlement of any proceeding effected without its written consent (which consent shall not be unreasonably withheld, conditioned ordelayed), but if settled with such consent or if there is a final non-appealable judgment for the plaintiff, the Indemnifying Person agrees to indemnify anyIndemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior writtenconsent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could havebeen a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (y) includes an unconditional release ofsuch Indemnified Person, in form and substance satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of suchproceeding and (z) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of an Indemnified Person. 4.11. Contribution. (a) If the indemnification provided for in the preceding sections of this Article 4 is unavailable to, or insufficient to hold harmless, an IndemnifiedPerson in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu ofindemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payableby such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of theIndemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions (or allegedstatements or omissions) that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitableconsiderations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of amaterial fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Person on the one hand or by theIndemnified Person, as the case may be, on the other, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent suchstatement or omission and any other equitable considerations appropriate under the circumstances. (b) The parties agree that it would not be just and equitable if contribution pursuant to this Article 4 were determined by pro rata allocation (even ifthe Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerationsreferred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages andliabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or otherexpenses actually incurred by such Indemnified Person in connection with investigating or defending any such suit, action, proceeding or investigation orclaim. Notwithstanding the provisions of this Article 4, in no event shall a Participant be required to contribute any amount in excess of the amount by whichproceeds received by such Participant from sales of Registrable Securities exceeds the amount of any damages that such Participant has otherwise beenrequired to pay by reason of such untrue or 15alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the SecuritiesAct) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 4.12. Additional Remedies. The indemnity and contribution agreements contained in this Article 4 will be in addition to any liability which theIndemnifying Persons may otherwise have to the Indemnified Persons referred to above. ARTICLE 5 MISCELLANEOUS 5.1. Rule 144. Parent covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules andregulations adopted by the SEC thereunder in a timely manner and, if at any time it is not required to file such reports, it will, upon the request of any Holderof Registrable Securities, make available other information so long as necessary to permit sales pursuant to Rule 144. 5.2. Legend. Upon the execution of this Agreement, the certificates representing all Common Stock and Series A Preferred Stock held by theStockholders shall be endorsed with the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS WITH RESPECT TO VOTINGAND OTHER MATTERS UNDER A GOVERNANCE AGREEMENT, DATED AS OF DECEMBER 31, 2002, BY AND AMONG EQUINIX,INC. AND CERTAIN OF ITS STOCKHOLDERS. In the event that any Stockholder sells, transfers or otherwise disposes of Shares, the foregoing legend shall, at the request of the holder, be removed from thecertificates representing the Shares so sold, transferred or disposed of, provided that the sale, transfer or disposition is effected subject to the adjustment ortermination of the board representation rights of the Stockholders pursuant to Article 2 hereof as a result of such sales, transfers or dispositions. 5.3. Remedies. If Parent breaches of any of its obligations under this Agreement, each Holder of Registrable Securities, in addition to being entitled toexercise all rights provided herein, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.Parent agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of thisAgreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedyat law would be adequate. 5.4. No Inconsistent Agreements. Parent has not entered, as of the date hereof, into any agreement with respect to any of its securities that is inconsistentwith, diminishes, or other limits the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. 16 5.5. Adjustments Affecting Registrable Securities. Parent shall not, directly or indirectly, take any action with respect to the Registrable Securities as aclass distinct from other holders of Parent Capital Stock that would adversely affect the ability of the Holders of Registrable Securities to include suchRegistrable Securities in a registration undertaken pursuant to this Agreement. 5.6. Amendments and Waivers. Except as set forth in Section 3.3, the provisions of this Agreement may not be amended, modified or supplemented,and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of Parent, STTCommunications and a majority in interest of the Pihana Stockholders. 5.7. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, internationallyrecognized overnight air courier or telecopier with verification of receipt addressed as set forth below, as set forth on the signature page of this Agreement, or atsuch other address as a party may designate by prior written notice to the other parties hereto: if to Parent: Equinix, Inc.2450 Bayshore ParkwayMountain View, CA 94043-1107Facsimile No.: (650) 316-6900Attention: General Counsel with a copy (which shall constitute notice) to: Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP155 Constitution DriveMenlo Park, California 94025Facsimile No.: (650) 321-2800Attention: Scott C. DettmerChristopher D. Dillon if to Pihana Stockholders, a copy (which shall not constitute notice) to: Brobeck Phleger & Harrison LLP550 South Hope StreetLos Angeles, CA 90071Facsimile No.: (213) 745-3345Attention: Richard S. Chernicoff if to STT Communications or i-STT Investments: 17 Chief Financial OfficerGeneral CounselSTT Communications Ltd.51 Cuppage Road#10-11/17Starhub CentreSingapore 229469Facsimile No.: (65) 6720 7277 with a copy (which shall not constitute notice) to: Tan Aye SeeAssistant Vice President – LegalSTT Communications Ltd.51 Cuppage Road#10-11/17Starhub CentreSingapore 229469Facsimile No.: (65) 6720 7277 with a copy (which shall constitute notice) to: Latham & Watkins135 Commonwealth DriveMenlo Park, CA 94025Facsimile No.: (650) 463-2600Attention: Robert Koenig All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; two Business Daysafter being timely delivered to an internationally recognized overnight delivery service (such as Federal Express); and when delivery is confirmed by atelephone call received by sender confirming receipt, if telecopied. 5.8. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties heretoand, with respect to Articles 4 and 5 hereof, the Holders, subject to the right of Stockholders to sell, transfer or dispose of Shares free of restriction under thisAgreement as set forth in Section 5.2. 5.9. Counterparts. This Agreement may be executed in one or more counterparts (whether delivered by facsimile or otherwise), each of which shall beconsidered one and the same agreement and shall become effective when one or more counterparts have been signed by each Party and delivered to the otherParties. 5.10. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 18 5.11. Governing Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed andenforced in accordance with the laws of the State of Delaware. 5.12. Arbitration. (a) All disputes, controversies or claims (whether in contract, tort or otherwise) arising out of, relating to or otherwise by virtue of, this Agreement,breach of this Agreement or the transactions contemplated by this Agreement shall be finally settled under the Rules of Arbitration (except as set forth below) ofthe London Court of International Arbitration (as amended from time to time, the “LCIA Rules”). EACH PARTY ACKNOWLEDGES THAT IT ISWAIVING ANY RIGHTS IT MAY HAVE TO TRIAL BY JURY. (b) The arbitration shall be seated in London, England, in the English language and shall be the exclusive forum for resolving such disputes,controversies or claims. The arbitrator shall have the power to order hearings and meetings to be held in such place or places as he or she deems in the interestsof reducing the total cost to the parties of the arbitration. (c) The arbitration shall be held in before a single arbitrator. Each party to the arbitration shall submit a list of three proposed arbitrators, whoeach meet the criteria set forth in Section 5.12(d) within ten Business Days of service of the request for arbitration on the last respondent. The LCIA Court (asreferred to in the LCIA Rules) shall select from among such nominations, with any person nominated by more than one party to the arbitration being per se thenominee of each party. (d) The arbitrator shall have practiced the field of law that is principally the subject of such dispute, controversy or claim in the State of Delawarefor at least ten years. The arbitrator may be of the same nationality as any party. The arbitrator shall have the power to order equitable remedies and not justthe payment of monies. Notwithstanding the LCIA Rules, no party shall have the right to seek a court order of interim or conservatory measures, other than acourt order confirming and enforcing an arbitral award of interim or conservatory measures. The arbitrator may hear and rule on dispositive motions as partof the arbitration proceeding (e.g. motions for judgment on the pleadings, summary judgment and partial summary judgment). (e) All timetables and deadlines (and criteria for granting extensions and waivers thereof) for the conduct of the arbitration shall be set inaccordance with the rules then interpreted and applied in the Court of Chancery of the State of Delaware of and for the County of New Castle. The Arbitratorshall not have the power to abridge such time requirements. (f) Discovery shall be permitted to the extent, and under the conditions, then in effect in the Court of Chancery of the State of Delaware of and forthe County of New Castle. The arbitrator may appoint an expert only with the consent of all of the parties to the arbitration. Testimony of witnesses may bechallenged to the extent, and under the conditions, then in effect in the Court of Chancery of the State of Delaware of and for the County of New Castle. 19 (g) All deposits required under the LCIA Rules shall be paid equally by all parties to the arbitration. Each party shall to the arbitration shall payits own costs and expenses (including, but not limited to, attorney’s fees) in connection with the arbitration. (h) The award rendered by the arbitrator shall be executory, final and binding on the parties. The award rendered by the arbitrator may be enteredinto any court having jurisdiction (including, the courts of the State of Delaware), or application may be made to such court for judicial acceptance of theaward and an order of enforcement, as the case may be. Such court proceeding shall disclose only the minimum amount of information concerning thearbitration as is required to obtain such acceptance or order. (i) Except as required by law, no party to this Agreement nor the arbitrator may disclose the existence, content or results of an arbitration broughtpursuant to this Agreement. 5.13. Severability. Any term or provision of this Agreement that is held to be invalid, void or unenforceable shall not affect the validity or enforceabilityof the remaining terms and provisions of this Agreement. If any term or provision of this Agreement is determined by the arbitrator to be invalid, void orunenforceable, the parties agree that the arbitrator shall have the power to and shall, subject to the arbitrator’s discretion, reduce the scope, duration, area orapplicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term orprovision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 5.14. Registrable Securities Held by Parent or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of RegistrableSecurities is required hereunder, Registrable Securities held by Parent or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not becounted in determining whether such consent or approval was given by the Holders of such required percentage. 5.15. Third Party Beneficiaries. All Persons who become Holders of Registrable Securities are intended third party beneficiaries of Articles 4 and 5 ofthis Agreement and such provisions may be enforced by such Persons. 5.16. Entire Agreement. This Agreement, together with the Combination Agreement and the Securities Purchase Agreement, dated as of October 2, 2002,by and among Parent, the subsidiaries of Parent that from time to time become guarantors of Parent’s obligations thereunder, and the Purchasers namedtherein, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject mattercontained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence,conversations and memoranda between STT Communications, the Pihana Stockholders, the Equinix Stockholders or Parent, or between or among anyagents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereofare merged herein and replaced hereby. 20 5.17. Aggregation of Securities. All Securities acquired pursuant to the Combination Agreement or the Purchase Agreement (and the associated notes andwarrants) by affiliated entities (including affiliated venture capital funds) or persons shall be aggregated together for the purpose of determining the availabilityof any rights under this Agreement. 21 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above. EQUINIX, INC.By: /s/ PETER F. VAN CAMP Name: Peter F. Van CampTitle: Chief Executive Officer  STT COMMUNICATIONS LTDBy: /s/ JEAN MANDEVILLE Name: Jean MandevilleTitle: Chief Financial Officer i-STT INVESTMENTS PTE LTDBy: /s/ JEAN MANDEVILLE Name: Jean MandevilleTitle: Chief Financial Officer 2 LONETREE III L.L.C.By: /s/ CHARLES M. LILLIS Name: Charles M. LillisTitle: Sole Member GPSF-F INC.By: /s/ MOLLY FERGUSSON Name: Molly FergussonTitle: Vice President COLUMBIA CAPITAL EQUITY PARTNERS II (QP), L.P.By: Columbia Capital Equity Partners, L.L.C., itsGeneral Partner By: /s/ DONALD A DOERING Name: Donald A. DoeringTitle: Chief Financial Officer COLUMBIA PIXC PARTNERS, LLCBy: Columbia Capital, L.L.C., its Manager By: /s/ DONALD A DOERING Name: Donald A. DoeringTitle: Chief Financial Officer COLUMBIA PIXC PARTNERS III, LLCBy: Columbia Capital III, LLC, its Manager By: /s/ DONALD A DOERING Name: Donald A DoeringTitle: Chief Financial Officer 3 RICHARD KALBRENERBy: /s/ RICHARD KALBRENER 4Exhibit 10.61 ST Telecommunications Pte Ltd 51 Cuppage Road#10-11/17, StarHub CentreSingapore 229469Tel: (65) 836 3988Fax: (65) 835 0200 LETTER OF ACCEPTANCE 31 January 2000 Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 Attn: Ms Vanessa Loh ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES. #06-01, #06-05 TO #06-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 1. We refer to your letter of offer and letter, Ref JTC(L)7329/30, dated 25 January 2000 for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. 2. We enclose herewith a cheque for the amount of $43,298.97 and the Banker’s Guarantee of $118,895.43 as security deposit as confirmation of ouracceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG Name of authorised signatory: } Sio Tat HiangDesignation: } Executive Vice Presidentfor and on behalf of } ST TELECOMMUNICATIONS PTE LTD. in the presence of: /s/ LEE YOONG KIN Name of witness: } Lee Yoong KinNRIC No: } 14925441 ST Telecommunications Pte Ltd 51 Cuppage Road#10-11/17, StarHub CentreSingapore 229469Tel: (65) 836 3988Fax: (65) 835 0200 LETTER OF ACCEPTANCE 31 January 2000 Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 Attn: Ms Vanessa Loh ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES. #05-05 TO #05-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 4. We refer to your letter of offer and letter, Ref JTC(L)7329/30, dated 25 January 2000 for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. 5. We enclose herewith a cheque for the amount of $36,079.88 and the Banker’s Guarantee of $99,069.72 as security deposit as confirmation of ouracceptance. 6. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG Name of authorised signatory: } Sio Tat HiangDesignation: } Executive Vice Presidentfor and on behalf of } ST TELECOMMUNICATIONS PTE LTD. in the presence of: /s/ LEE YOONG KIN Name of witness: } Lee Yoong KinNRIC No: } 14925441 Ref JTC(L)7329/30 CONFIDENTIAL JTC 25 Jan 2000 Mr. Lee Yoong KinGeneral Manager, OPS and PlanningST Telecommunications Pte Ltd.51 Cuppage Road #10-11/17 StarHub CentreSingapore 229469 (By Fax and mail) RE: CONDITIONS OF AGREEMENT FOR THE TWO LETTERS OF OFFER FOR1. BLK 20 AYER RAJAH CRESCENT #06-01, #06-08 TO 08 (2,012 SQM)2. BLK 20 AYER RAJAH CRESCENT #05-05 TO 08 (1,684 SQM) 1 We refer to the two Letters of Offer dated 25 Jan 2000 for the above factory space and state the special conditions below in addition to the terms andconditions in the Letters of Offer for the above 2 sites at 3,705 sqm. 2 ST Telecommunications PL will be granted a 9-month period for the Right-of-First Refusal (ROFR) for the remaining floor areas on 5th and 6th floors of20 ARC at approximately 2,295 sqm. The 9-month ROFR period will commence from the Lease Commencement Date of the above 2 sites i.e. from 1Aug 2000. ROFR will expire on 30 Apr 2001. 3 The 3-tier rental package for the first 3 year tenancy indicated in the two Letters of Offer are granted on the condition that your company will rent twowhole floors (5th and 6th floors) at 20 ARC by mid-2001. Failing which, the rental package will be adjusted to the prevailing posted rent and subject tothe normal bulk discount rate (i.e. 3% for aggregate floor area exceeding 1,000 sqm and 4% for exceeding 5,000 sqm). 4 For the property management services, the Property Management Department (PMD) of Customer Services Group (CTG) has confirmed that theestimated response time to the mechanical and electrical breakdown is: • During office hours (Mon to Fri from 8:30 am to 5:30 pm and Sat from 8:30 am to 1 pm) – within 1 hour • After office hours – within 2 hours 5 We await your written confirmation and agreement of the above by 31 Jan 2000. The acceptance of the above is in addition to the Letter of Acceptance inresponse to the two Letters of Offer. Thank you. Sincerely/s/ VANESSA LOH Vanessa LohMarketing & Sales DepartmentJurong Town Corporation Jurong Town CorporationJurong Town Hall301 Jurong Town Hall RoadSingapore 609431Republic of SingaporeTel: 5600056Fax: 5655301Website www.jtc.gov.sg JTC(L)7329/30/VL/AL 25 January 2000 DID: 5688943FAX: 5688593Email vanesssaloh@jtc.gov.sg JTCST TELECOMMUNICATIONS PTE LTDBlk 51 Cuppage Rd#10-11Singapore 229469Singapore 229469 BY FAX @ 8350200& AR REGISTERED (Attn: Mr Ng Hiang Cheok/Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and a letter [Ref JTC(L)7329/30]dated 25 Jan 2000 and in the annexed Memorandum of Tenancy (“the Offer”): 1.01 Location: Pte Lot A19857, Blk 20 (“the Building”) Ayer Rajah Cres #06-01 and Pte Lot A19857(a) at #06-05 to #06-08, Ayer Rajah Industrial EstateSingapore 139964 (“the Premises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 3 years (“the Term”) with effect from 1 August 2000 (“the Commencement Date”). 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause of this letter, you shall have entered into a tenancy agreement with us (“the Tenancy”)and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 2,021.0 square metres (subject to survey). 1.05 Rent and Service Charge: Rent: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 1 August 2000 to 31 July 2001; (ii) $14.80 per square metre per month for the period from 1 August 2001 to 31 July 2002; (iii) $15.11 per square metre per month for the period 1 August 2002 to 31 July 2003. (b) Normal rate of: $15.90 per square metre per month for the period from 1 August 2000 to 31 July 2001 (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February, March,etc.). The next payment shall be made on 1 September 2000. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same date andin the same manner as the Rent, subject to our revision from time to time. 1.05(a) Air-conditioning Charge: $0.008 per square metre per hour as charges for air-conditioning utility rendered by us, payable without demand on the same date and in thesame manner as the Rent, subject to our revision from time to time in the same manner as the Service Charge. 1.06 Security Deposit/Banker’s Guarantee: You will at the time of acceptance of the Offer be required to place with us a deposit of $118,895.43 equivalent to 3 months’ Rent (at thediscounted rate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in theTenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 1 February 2000to 31 January 2004) and/or such other form of security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned to yourfor cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be, subject toappropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all times beequal to 3 months’ Rent and Service Charge. 1.07 Mode of Payment: Except for the payment to be made with your letter of acceptance pursuant to clause 2 of this letter, during the Term, you shall pay Rent, ServiceCharge and GST by Interbank GIRO or any other mode to be determined by us. [Note: Accordingly, you are to provide us with the duly completed GIRO authorization form enclosed herewith. However, pending finalisation for the GIRO arrangement, you shall pay Rent, Service Charge and GST as they fall due by cheque]. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purposeof providing full internet-based related activities including data centre, call centre, regional network management, product and softwaredevelopment and facilities hosting etc only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities. 1.10 Possession of Premises: (a) Keys to the Premises will be given to you six (6) months prior to the Commencement Date subject to due acceptance of the offer(“Possession Date”). (b) From the Possession Date until the Commencement Date, you shall be deemed a licensee upon the same terms and conditions in theTenancy. (c) if you proceed with the Tenancy after the Commencement Date, the license fee payable from the Possession Date to the Commencement Dateshall be waived (“Rent-Free Period”) Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations areremoved and reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law: 1.11 Preparation and Submission of Plans: (a) No alternation, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein ispermitted without Building Control Unit [BCU(JTC)] prior written consent. Your attention is drawn to clauses 2.10 to 21.9 and 2.34 of theMemorandum of Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory in accordance with the terms of the tenancy and the ‘Guide’attached. It is important that you should proceed with the preparation and submission of the plans in accordance with the procedures set outin the said ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans should be submitted toBuilding Control Unit [BCU(JTC)] for approval on fire safety aspects. All fire alarm & sprinkler system plans must be signed by arelevant Professional Engineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparationof the plans required herein. (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC)]. (f) Kindly note that at present URA requires you to use and occupy at least sixty per cent (60%) of the gross floor area of the Premises forindustrial activities and ancillary warehousing activities; and you may use and occupy the remaining gross floor area, if any, for offices, showrooms, neutral areas or communal facilities and such other uses as may beapproved in writing by us and the relevant governmental and statutory authorities. Nonetheless, as provided in paragraph 1.08, you shallensure that the Premises: (i) are used primarily for the industrial activities stipulated in the authorised use approved by us; and (ii) are not used or occupied for the purpose of offices, showrooms, storage, warehousing, industrial activities unrelated to suchauthorised use or for any other use unless approved in writing by us and the relevant governmental statutory authorities. 1.12 Final Inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced. 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions. (a) maximum loading capacity of the goods lifts in the Building, and (b) maximum floor loading capacity of 10.0 kiloNewtons per square metre of the Premises on the 6th storey of the Building PROVIDED THATany such permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons ofthe Building. (2) You shall comply and ensure compliance with all notices, rules and regulations relating to the use of the Carpark (as defined in theMemorandum of Tenancy) including but not limited to: (i) parking or placing of container, vehicles, trailers or other carriages; and (ii) parking charges. (3) You are to connect the mechanical ventilation system in the Premises to the switchboard installed by you, subject to clauses 2.12, 2.13 and2.14 of the Memorandum of Tenancy. (4) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term of tenancy of the Premises upon mutual terms to be agreed between you and us subject to the following: (i) there shall be no breach of your obligations at the time you make your request for a further term; (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shall befinal; (iii) we shall have absolute discretion to determine such covenants, terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expiry of the Term 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 31 January 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix.) • Payment of the sum set out in clause 4. • Duly completed GIRO authorization form. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 4. The total amount payable is as follows: Amount +3% GST1st Year: Rent at $14.50 psm per month on 2,021 sqm for the period 1 August 2000 to 31 August 2000 $29,304.50 Service Charge at $4.50 psm per month on 2,021 sqm for the period 1 August 2000 to 31 August 2000 $9,094.50 $38,399.00 $1,151.97 Deposit equivalent to three months’ rent (at the discounted rate payable in the third year of the Term) andservice charge [or Banker’s Guarantee provided in accordance with sub-paragraph 106 above] $118,895.43 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $3,748.00 Sub-Total Payable $161,042.43 $1,151.97Add: GST + 3% $1,151.97 Total Payable inclusive of GST $162,194.40 5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy This letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the EastZone Office is: 2999405). Please note that the number of season parking ticket(s) that can be purchased by you will depend on eligibility rules set outby us. 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Comply with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment, Environment Building, 40 Scotts Road, Singapore 228231 (Telephone No.7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk25 Kallang Avenue #05-01 Kallang Basin Industrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTC)] for approval prior to the issue of a letter to Water Conservation Department, Public Utilities Board to assist you in yourapplication for a water sub-meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm drawings, indicating the existing fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc. to and in accordance with the requirements of our Building ControlUnit [BCU(JTC)]. Please contact our Building Control Unit [BCU(JTC)] at 301 Jurong Town Hall Road (3rd level) Singapore 609431 direct forfurther requirements. 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories.” Yours faithfully/s/ VANESSA LOH Vanessa LohMARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl Draft of Letter of Acceptance(Please use company’s letterhead and in Duplicate) Date: Marketing & Sales Department BY HANDJurong Town Corporation Jurong Town Hall 301 Town Hall Road Singapore 609431 (Attn: Vanessa Loh) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #06-01, #06-05 TO #06-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964. 1. We refer to your letter of offer and letter [Ref JTC(L)7329/30] dated [25 January 2000] for the Tenancy and hereby confirm our acceptance of allthe covenants, terms and conditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$162,194.40] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$43,298.97] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. [Name of authorised signatory: ] [Designation: ] for and on behalf of : [ST TELECOMMUNICATIONS PTE LTD] in the presence of: [Name of witness: ] [NRIC No. ] * Please omit if not applicableExhibit 10.62 LETTER OF ACCEPTANCE 31 January 2000 Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 Attn: Ms Vanessa Loh ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #05-05 To # 05-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 4. We refer to your letter of offer and letter Ref JTC(L)7329/30 dated 25 January 2000 for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. 5. We enclose herewith a cheque for amount of $36,079.88 and the Banker’s Guarantee of $99,069.72 as security deposit as confirmation of ouracceptance. 6. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG Name of authorised signatory: } Sio Tat HiangDesignation:for and on behalf of: }} Executive Vice PresidentST TELECOMMUNICATIONS PTE LTD in the presence of: /s/ LEE YOONG KIN Name of witness: } Lee Yoong KinNRIC No: } 14925441 LETTER OF ACCEPTANCE 31 January 2000 Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 Attn: Ms Vanessa Loh ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #06-01, # 06-05 TO #06-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 1. We refer to your letter of offer and letter Ref JTC(L)7329/30 dated 25 January 2000 for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. 2. We enclose herewith a cheque for the amount of $43,298.97 and the Banker’s Guarantee of $118,895.43 as security deposit as confirmation of ouracceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG Name of authorised signatory: } Sio Tat HiangDesignation:for and on behalf of: }} Executive Vice PresidentST TELECOMMUNICATIONS PTE LTD in the presence of: /s/ LEE YOONG KIN Name of witness: } Lee Yoong KinNRIC No: } 14925441 25 Jan 2000 CONFIDENTIAL Mr. Lee Yoong KinGeneral Manager, OPS and PlanningST Telecommunications Pte Ltd51 Cuppage Road #10-11/17 StarHub CentreSingapore 228469 (By Fax and mail) RE: CONDITIONS OF AGREEMENT FOR THE TWO LETTERS OF OFFER FOR1. BLK 20 AYER RAJAH CRESCENT #06-01, #06-05 TO 08 (2,021 SQM)2. BLK 20 AYER RAJAH CRESCENT #05-05 TO 08 (1,684 SQM) 1 We refer to the two Letters of Offer dated 25 Jan 2000 for the above factory space and state the special conditions below in addition to the terms andconditions in the Letters of Offer for the above 2 sites at 3,705 sqm: 2 ST Telecommunications PL will be granted a 9-month period for the Right-of-First-Refusal (ROFR) for the remaining floor areas on 5th and 6th floorsof 20 ARC at approximately 2,295 sqm. The 9-month ROFR period will commence from the Lease Commencement Date of the above 2 sites i.e. from 1 Aug2000. ROFR will expire on 20 Apr 2001. 3 The 3-tier rental package for the first 3-year tenancy indicated in the two Letters of Offer are granted on the condition that your company will rent twowhole floors (5th and 6th floors) at 20 ARC by mid-2001. Failing which, the rental package will be adjusted to the prevailing posted rent and subject to thenormal bulk discount rate (i.e. 3% for aggregate floor area exceeding 1,000 sqm end 4% for exceeding 5,000 sqm) 4 For the property management services, the Property Management Department (PMD) of Customer Service Group (CTG) has confirmed that theestimated response time to the mechanical and electrical breakdown is: • During office hours (Mon to Fri 8:30 am to 5:30 pm and Sat from 8:30 am to 1 pm)—within 1 hour • After office hours—within 2 hours 5 We await your written confirmation and agreement of the above by 31 Jan 2000. The acceptance of the above is in addition to the Letter of Acceptancein response to the two Letters of Offer. Thank you. Sincerely/s/ VANESSA LO Vanessa LoMarketing & Sales DepartmentJurong Town Corporation 25 January 2000 ST TELECOMMUNICATIONS PTE LTD Blk 51 Cuppage Rd BY FAX @ 8350200#10-11 & AR REGISTEREDSingapore 229469 Singapore 229469 (Attn Mr Ng Hiang Cheok/Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and a letter [Ref JTC(L)7329/30]dated 25 Jan 2000 and in the annexed Memorandum of Tenancy (“the Offer”): 1.01 Location Pte Lot A19857(b), Blk 20 (“the Building”) Ayer Rajah Cres #06-01 and Pte Lot A19857(a) at #06-05 to #06-08, Ayer Rajah Industrial EstateSingapore 139964 (“the Premises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 3 years (“the Term”) with effect from 1 August 2000 (“the Commencement Date”). 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause 2 of this letter, you shall have entered into a tenancy agreement with us (“theTenancy”) and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 2,021.0 square metres (subject to survey). 1.05 Rent and Service Charge: Rent: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 1 August 2000 to 31 July 2001; (ii) $14.80 per square metre per month for the period from 1 August 2001 to 31 July 2002; (iii) $15.11 per square metre per month for the period 1 August 2002 to 31 July 2003. (b) Normal rate of: $15.90 per square metre per month for the period from 1 August 2000 to 31 July 2001 (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February, March,etc.) The next payment shall be made 1 September 2000. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same dateand in the same manner as the Rent, subject to our revision from time to time. 1.05(a) Air-conditioning Charge: $0.008 per square metre per hour as charges for air-conditioning utility rendered by us, payable without demand on the same date andin the same manner as the Rent, subject to our revision from time to time in the same manner as the Service Charge. 1.06 Security Deposit/Banker’s Guarantee: You will at the time of acceptance of the Offer be required to place with us a deposit of $118,895.43 equivalent to 3 months’ Rent (at thediscounted rate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in theTenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 1 February2000 to 31 January 2004) and/or such offer form or security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned toyou for cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be,subject to appropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all timesbe equal to 3 months’ Rent and Service Charge. 1.07 Mode of Payment: Except for the payment to be made with your letter of acceptance pursuant to clause 2 of this letter, during the Term, you shall pay Rent,Service Charge and GST by Interbank GIRO or any other mode to be determined by us. [Note: Accordingly, you are to provide us with the duly completed GIRO authorization form enclosed herewith. 2 However, pending finalisation for the GIRO arrangement, you shall pay Rent, Service Charge and GST as they fail due by cheque]. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purposeof providing full internet-based related activities including data centre, call centre, regional network management, product andsoftware development and facilities hosting etc only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised Use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities. 1.10 Possession of Premises: (a) Keys to the Premises will be given to you six (6) months prior to the Commencement Date subject to due acceptance of the Offer(“Possession Date”). (b) From the Possession Date until the Commencement Data, you shall be deemed a licensee upon the same terms and conditions in theTenancy. (c) if you proceed with the Tenancy after the Commencement Date, licence fee payable from the Possession date to the Commencement Dateshall be waived (“Rent-Free Period”). Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations areremoved and reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law 1.11 Preparation and Submission of Plans: (a) No alteration, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein ispermitted without Building Control Unit [BCU(JTC)] prior written consent. Your attention is drawn to clauses 2.10 to 2.19 and 2.34 of theMemorandum of Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory in accordance with the terms of the tenancy and the ‘Guide’attached. It is important that you should proceed with the preparation and submission of the plans in accordance with the procedures set outin the said ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans shall be submitted to BuildingControl Unit 3 [BCU(JTC)] for approval on fire safety aspects. All fire alarm & sprinkler system plans must be signed by a relevant ProfessionalEngineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparationof the plans required herein. (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC)]. (f) Kindly note that at present URA requires you to use and occupy at least sixty per cent (60%) of the gross floor area of the Premises forindustrial activities and ancillary warehousing activities; and you may use and occupy the remaining gross floor area, if any, for offices,showrooms, neutral areas or communal facilities and such other uses as may be approved in writing by us and the relevant governmentaland statutory authorities. Nonetheless, as provided in paragraph 1.08, you shall ensure that the Premises: i) are used primarily for the industrial activities stipulated in the authorised use approved by us; and ii) are not used or occupied for the purpose of offices, showrooms, storage, warehousing, industrial activities unrelated to suchauthorised use or for any other use unless approved in writing by us and the relevant governmental and statutory authorities. 1.12 Final inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced. 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions: (a) maximum loading capacity of the goods lifts in the Building; and (b) maximum floor loading capacity of 10.0 kiloNewtons per square metre of the Premises on the 5th storey of the Building PROVIDED THATany such permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons ofthe Building, (2) You shall comply and ensure compliance with all notices, rules and regulations relating to the use of the Carpark (as defined in theMemorandum of Tenancy) including but not limited to: (i) parking or placing of container, vehicles, trailers or other carriages; and (ii) parking charges. 4 (3) You are to connect the mechanical ventilation system in the Premises to the switchboard installed by you, subject to clauses 2.12, 2.13 and2.14 of the Memorandum of Tenancy. (4) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term or tenancy of the Premises upon mutual terms to be agreed between you and us subject to thefollowing: (i) there shall be no breach of your obligations at the time you make your request for a further term; (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shallbe final; (iii) we shall have absolute discretion to determine such covenants, terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expire of the Term. 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 31 January 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix) • Payment of the sum set out in clause 4. • Duly completed GIRO authorized form. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 54. The total amount payable is as follows: Amount +3% GST1st Year: Rent at $14.50 psm per month on 2,021 sqm for the period 1 August 2000 to 31 August 2000 $29,304.50 Service Charge at $4.50 psm per month on 2,021 sqm for the period 1 August 2000 to 31 August 2000 $9,094.50 $38,399.00 $1,151.97 Deposit equivalent to three months’ rent (at the discounted rate payable in the third year of the Term) andservice charge [or Banker’s Guarantee provided in accordance with subparagraph 1.06 above] $118,895.43 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $3,748.00 Sub-Total Payable $161,042.43 $1,151.97Add: GST + 3% $1,151.97 Total Payable inclusive of GST $162,194.40 5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy The letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the EastZone Office is: 2999405). Please note that the number of season parking ticket(s) that can be purchased by you will depend on eligibility rules set out byus. 6 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Company with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment Building, 40 Scotts Road. Singapore 228231 (Telephone No. 7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power Supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk25 Kallang Avenue #05-01 Kallang Basin Industrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTC)] for approval prior to the issue of a letter to Water Conservation Department, Public Utilities Board to assist you in yourapplication for a water sub meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm, drawings, indicating the exiting fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc to and in accordance with the requirements of our Building Control Unit[BCU(JTC)]. Please contact our Building Control Unit [BCU(JTC)] at 301 Jurong Town Hall Road (3rd level) Singapore 609431 direct for furtherrequirements. 7 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories”. Yours faithfully /s/ VANESSA LOHVanessa LohMARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl 8 Draft of Letter of Acceptance(Please use company’s letterhead and In Duplicate) Date: (To be dated on the day this BY HAND letter is forwarded to JTC) Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 (Attn: Vanessa Loh) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #06-01, #06-05 TO # 06-08 AYER RAJAHINDUSTRIAL ESTATE Singapore 139964 1 We refer to your letter of offer and letter [Ref JTC(L)7329/30] dated [25 January 2000] for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$162,194.40] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$43,298.97] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. [Name of authorised signatory:[Designation:for and on behalf of: ]] [ST TELECOMMUNICATIONS PTE LTD] in the presence of: [Name of witness:[NRIC No: ]] *Please omit if not applicable SPECIMEN GUARANTEE FORM GUARANTEE TO: JURONG TOWN CORPORATION JURONG TOWN HALL JURONG TOWN HALL ROAD SINGAPORE 609431 WHEREAS: [ST TELECOMMUNICATIONS PTE LTD] of [Blk 51 Cuppage Rd #10-11 Singapore 229469] (“the Tenant”) is a tenant of the premises known as[Blk 20 Ayer Rajah Cres #06-01, To #06-05 To #06-08 Ayer Rajah Industrial Estate Singapore 139964] (“the Premises”) pursuant to a letter of offer andletter [Ref JTC(L)7329/30] dated [25 January 2000] from Jurong Town Corporation (“JTC”) to and duly accepted by the Tenant (“the Tenancy”, whichexpression shall include any written amendments made to the Tenancy from time to time). IN CONSIDERATION OF your agreeing to grant the Tenancy and pursuant to a term of the Tenancy, we, the undersigned, hereby unconditionally undertaketo pay to you from time to time on first demand the sum of aggregate sums not exceeding [$118,895.43] (“the Full Guaranteed Sum”) if accompanied by yourstatement that the Tenant is in breach of any of the Tenant’s obligations to you under the Tenancy and that the amount demanded is due and payable to youand remains unpaid provided that our liability under this Guarantee shall not exceed the Full Guaranteed Sum. Our liability under this Guarantee shall be that of a principal debtor and not by way of surety and such liability shall not be discharged or affected by anyevent, act or omission whereby our liability would have been discharged if we had been a surety. The Guarantee is valid from [1 February 2000] and shall expire on [31 January 2004] (“the expiry period”) and our liability hereunder shall cease inrespect of any claims made after expiry period. Notwithstanding that this Guarantee may not have expired, our liability hereunder shall cease forthwith upon our paying to you the Full Guaranteed Sum to beheld by you as a security deposit under the Tenancy. Dated [Signature, names and designations of authorised signatories of Bank/Finance Company and rubber stamp of Bank/Finance Company] [ALLOCATION PLAN] 14 25 January 2000 ST TELECOMMUNICATIONS PTE LTD Blk 51 Cuppage Rd BY FAX @ 8350200#10-11 & AR REGISTEREDSingapore 229469Singapore 229469 (Attn Mr Ng Hiang Cheok/Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and a letter [Ref JTC(L)7329/30]dated 25 Jan 2000 and in the annexed Memorandum of Tenancy (“the Offer”): 1.01 Location Pte Lot A19857(b), Blk 20 (“the Building”) Ayer Rajah Cres #05-05 to #05-08, Ayer Rajah Industrial Estate Singapore 139964 (“thePremises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 3 years (“the Term”) with effect from 1 August 2000 (“the Commencement Date”). 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause 2 of this letter, you shall have entered into a tenancy agreement with us (“theTenancy”) and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 1,684.0 square metres (subject to survey). 1.05 Rent and Service Charge: Rent: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 1 August 2000 to 31 July 2001; (ii) $14.80 per square metre per month for the period from 1 August 2001 to 31 July 2002; (iii) $15.11 per square metre per month for the period 1 August 2002 to 31 July 2003. (b) Normal rate of: $15.90 per square metre per month for the period from 1 August 2000 to 31 July 2001 (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February, March,etc.) The next payment shall be made 1 September 2000. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same dateand in the same manner as the Rent, subject to our revision from time to time. 1.05(a) Air-conditioning Charge: $0.008 per square metre per hour as charges for air-conditioning utility rendered by us, payable without demand on the same date and inthe same manner as the Rent, subject to our revision from time to time in the same manner as the Service Charge. 1.06 Security Deposit/Banker’s Guarantee: You will at the time of acceptance of the Offer be required to place with us a deposit of $99,069.72 equivalent to 3 months’ Rent (at thediscounted rate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in theTenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 1 February2000 to 31 January 2004) and/or such offer form or security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned toyou for cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be,subject to appropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all timesbe equal to 3 months’ Rent and Service Charge. 1.07 Mode of Payment: Except for the payment to be made with your letter of acceptance pursuant to clause 2 of this letter, during the Term, you shall pay Rent,Service Charge and GST by Interbank GIRO or any other mode to be determined by us. [Note: Accordingly, you are to provide us with the duly completed GIRO authorization form enclosed herewith. 2 However, pending finalisation for the GIRO arrangement, you shall pay Rent, Service Charge and GST as they fail due by cheque]. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purposeof providing full internet-based related activities including data centre, call centre, regional network management, product andsoftware development and facilities hosting etc only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised Use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities. 1.10 Possession of Premises: (a) Keys to the Premises will be given to you six (6) months prior to the Commencement Date subject to due acceptance of the Offer(“Possession Date”). (b) From the Possession Date until the Commencement Data, you shall be deemed a licensee upon the same terms and conditions in theTenancy. (c) if you proceed with the Tenancy after the Commencement Date, licence fee payable from the Possession date to the Commencement Dateshall be waived (“Rent-Free Period”). Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations areremoved and reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law 1.11 Preparation and Submission of Plans: (a) No alteration, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein ispermitted without Building Control Unit [BCU(JTC)] prior written consent. Your attention is drawn to clauses 2.10 to 2.19 and 2.34 of theMemorandum of Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory in accordance with the terms of the tenancy and the ‘Guide’attached. It is important that you should proceed with the preparation and submission of the plans in accordance with the procedures set outin the said ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans shall be submitted to BuildingControl Unit 3 [BCU(JTC)] for approval on fire safety aspects. All fire alarm & sprinkler system plans must be signed by a relevant ProfessionalEngineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparationof the plans required herein. (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC)]. (f) Kindly note that at present URA requires you to use and occupy at least sixty per cent (60%) of the gross floor area of the Premises forindustrial activities and ancillary warehousing activities; and you may use and occupy the remaining gross floor area, if any, for offices,showrooms, neutral areas or communal facilities and such other uses as may be approved in writing by us and the relevant governmentaland statutory authorities. Nonetheless, as provided in paragraph 1.08, you shall ensure that the Premises: i) are used primarily for the industrial activities stipulated in the authorised use approved by us; and ii) are not used or occupied for the purpose of offices, showrooms, storage, warehousing, industrial activities unrelated to suchauthorised use or for any other use unless approved in writing by us and the relevant governmental and statutory authorities. 1.12 Final inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced. 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions: (a) maximum loading capacity of the goods lifts in the Building; and (b) maximum floor loading capacity of 10.0 kiloNewtons per square metre of the Premises on the 5th storey of the Building PROVIDED THATany such permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons ofthe Building, (2) You shall comply and ensure compliance with all notices, rules and regulations relating to the use of the Carpark (as defined in theMemorandum of Tenancy) including but not limited to: (i) parking or placing of container, vehicles, trailers or other carriages; and (ii) parking charges. 4 (3) You are to connect the mechanical ventilation system in the Premises to the switchboard installed by you, subject to clauses 2.12, 2.13 and2.14 of the Memorandum of Tenancy. (4) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term or tenancy of the Premises upon mutual terms to be agreed between you and us subject to thefollowing: (i) there shall be no breach of your obligations at the time you make your request for a further term; (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shallbe final; (iii) we shall have absolute discretion to determine such covenants, terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expire of the Term. 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 31 January 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix) • Payment of the sum set out in clause 4. • Duly completed GIRO authorized form. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 5 4. The total amount payable is as follows: Amount +3% GST1st Year: Rent at $14.50 psm per month on 1,684 sqm for the period 1 August 2000 to 31 August 2000 $24,418.00 Service Charge at $4.50 psm per month on 1,684 sqm for the period 1 August 2000 to 31 August 2000 $7,578.00 $31,996.00 $959.88 Deposit equivalent to three months’ rent (at the discounted rate payable in the third year of the Term) andservice charge [or Banker’s Guarantee provided in accordance with subparagraph 1.06 above] $99,069.72 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $3,124.00 Sub-Total Payable $134,189.72 $959.88Add: GST + 3% $959.88 Total Payable inclusive of GST $135,149.60 5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy The letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the EastZone Office is: 2999405). Please note that the number of season parking ticket(s) that can be purchased by you will depend on eligibility rules set out byus. 6 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Company with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment Building, 40 Scotts Road. Singapore 228231 (Telephone No. 7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power Supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk25 Kallang Avenue #05-01 Kallang Basin Industrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTC)] for approval prior to the issue of a letter to Water Conservation Department, Public Utilities Board to assist you in yourapplication for a water sub meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm, drawings, indicating the exiting fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc to and in accordance with the requirements of our Building Control Unit[BCU(JTC)]. Please contact our Building Control Unit [BCU(JTC)] at 301 Jurong Town Hall Road (3rd level) Singapore 609431 direct for furtherrequirements. 7 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories”. Yours faithfully /s/ VANESSA LOH Vanessa LohMARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl 8 Draft of Letter of Acceptance(Please use company’s letterhead and In Duplicate) Date: (To be dated on the day this BY HAND letter is forwarded to JTC) Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 (Attn: Vanessa Loh) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #05-05 To # 05-08 AYER RAJAHINDUSTRIAL ESTATE Singapore 139964 1 We refer to your letter of offer and letter [Ref JTC(L)7329/30] dated [25 January 2000] for the Tenancy and hereby confirm our acceptance of all thecovenants, terms and conditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$135,149.60] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$36,079.88] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. [Name of authorised signatory:[Designation:for and on behalf of: ]] [ST TELECOMMUNICATIONS PTE LTD] in the presence of: [Name of witness:[NRIC No: ]] *Please omit if not applicable Exhibit 10.63 Date: 16 February 2001 Marketing & Sales DepartmentJTC CorporationThe JTC Summit8 Jurong Town Hall RoadSingapore 609434 Attn: Ms LOH LI YOON ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 28 AYER RAJAH CRESCENT #03-01 TO #03-04 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139959 We refer to your letter of offer dated 18 January 2001 for the Tenancy and hereby confirm our acceptance of all the covenants, terms and conditions stipulatedtherein. We enclose herewith a cheque for the sum of the amount of $42,006.13 except the Banker’s Guarantee as security deposit as confirmation of ouracceptance, and we shall send in the Banker’s Guarantee by hand within a week. In addition, we also enclose herewith a Letter of Authorisation as requestedby you for your information and record. Please find also attached a e-mail correspondence for your reference. This copy and e-mail correspondence shall be returned to I-STT upon receipt of our Banker’s Guarantee. /s/ LOU HUNG HOR Lou Hung HorAsst Project ManagerFor and on behalf of: [SYMBOL STAMPED *I-STT PTE LTD] i-STT PTE LTD  18 January 2001 I-STT PTE LTDBlk 20 Ayer Rajah Crescent#05-08 Ayer Rajah Industrial EstateSingapore 139964 BY LUM (Attn: Mr Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and in the annexed Memorandumof Tenancy (“the Offer”): 1.01 Location: Pte Lot A19857E, Blk 28 (“the Building”) Ayer Rajah Crescent #03-01 To #03-04, Ayer Rajah Industrial Estate Singapore 139959 (“thePremises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 3 years (“the Term”) with effect from 16 August 2001 (“the Commencement Date”). 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause 2 of this letter, you shall have entered into a tenancy agreement with US (“theTenancy”) and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 2,416.00 square metres (subject to survey). 1.05 Rent and Service Charge: For Discounted Rent: (a) Discounted rate of $12.69 psm pm for so long as the Tenant shall occupy by way of tenancy an aggregate floor area of 10,000 squaremetres inthe Building or in the various flatted factories belonging to the Landlord, and (b) Normal rate of $14.10 psm pm in the event that the said aggregate floor area occupied is at any time reduced to below 10,000 square metre(when the discount shall be totally withdrawn) with effect from the date of reduction in the said aggregate floor, (“Rent” ) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February,March, etc.). The next payment shall be made on 1 September 2001. Service charge: $2.75 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same date andin the same manner as the Rent, subject to our revision from time to time. 1.06 Security Deposit/Banker’s Guarantee: You will at the time of acceptance of the Offer be required to place with us a deposit of $111,909.12 equivalent to 3 months’ Rent (at thediscounted rate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in the Tenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 16 February 2001 to15 February 2005) and/or such offer form or security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned to youfor cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be, subject toappropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all times beequal to 3 months’ Rent and Service Charge. 1.07 Mode of Payment: Where letter of authorization is required due to limit set by company You have an existing GIRO account with us, the limit of which has to be increased to cover all the aforesaid payments. Please write to yourBanker to authorize the same (“the letter of authorization”) and let us have a copy thereof in accordance with the Mode of Acceptance herein. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purposeof Internet-related and support activities for data centre, call centre, regional network management, product and softwaredevelopment and facilities only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised Use. (c) Subject to clauses (a) and (b) above, you shall use and occupy at least sixty percent (60%) of the gross floor area of the Premises forindustrial activities and ancillary stores, and use and occupy the remaining gross floor area, if any, for offices, neutral areas, communalfacilities and such other uses as may be approved in writing by us and the relevant governmental and statutory authorities PROVIDEDTHAT you shall not use and occupy the Premises for the purpose of commercial office and storage unrelated to the Authorised Use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities. 1.10 Possession of Premises: (a) Keys to the Premises will be given to you six (6) months prior to the Commencement Date subject to due acceptance of the Offer(“Possession Date”). (b) From the Possession Date until the Commencement Data, you shall be deemed a licensee upon the same terms and conditions in theTenancy. (c) if you proceed with the Tenancy after the Commencement Date, licence fee payable from the Possession date to the Commencement Dateshall be waived (“Rent-Free Period”). Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations areremoved and reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law. 1.11 Preparation and Submission of Plans: (a) No alteration, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein ispermitted without Building Control Unit [BCU(JTC Corporation)] prior written consent. Your attention is drawn to clauses 2.10 to 2.19and 2.34 of the Memorandum of Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory and plans of the air-conditioning works in accordance withthe terms of the tenancy and the ‘Guide’ attached. It is important that you should proceed with the preparation and submission of the plansin accordance with the procedures set out in the said ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans shall be submitted to BuildingControl Unit [BCU(JTC Corporation)] for approval on fire safety aspects. All air-conditioning, fire alarm & sprinkler system plans mustbe signed by a relevant Professional Engineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparationof the plans required herein. (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC Corporation)]. 1.12 Final inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced. 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions: (a) maximum loading capacity of the goods lifts in the Building; and (b) maximum floor loading capacity of 12.50 kiloNewtons per square metre of the Premises on the storey of the Building PROVIDEDTHAT any such permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons ofthe Building. (2) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term or tenancy of the Premises upon mutual terms to be agreed between you and us subject to the following: (i) there shall be no breach of your obligations at the time you make your request for a further term; (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shall befinal; (iii) we shall have absolute discretion to determine such covenants, terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expire of the Term. 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 15 February 2001: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix) • Payment of the sum set out in clause 4. • A copy of the letter of authorization from your Banker. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us.4. The total amount payable is as follows: Amount +3% GSTRent at $12.69 per square metre per month on 2,416 square metres for the period 16 August 2001 to 15September 2001 $30,659.04 Service Charge at $2.75 per square metre per month on 2,416 square metre for the period 16 August2001 to 15 September 2001 $6,644.00 $37,303.04 $1,119.09 Deposit equivalent to three months’ rent service charge (or Banker’s Guarantee provided in accordancewith sub-paragraph 1.06 above) $111,909.12 Stamp fee payable on Letter of Acceptance which will be stamped by JTC Corporation on your behalf $3,584.00 Sub-Total Payable $152,796.16 $1,119.09Add: GST + 3% $1,119.09 Total Payable inclusive of GST $153,915.25 5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy The letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the SouthZone Office is: 3629501 or 6654628 respectively). Please note that the number of season parking ticket(s) that can be purchased by you will dependon eligibility rules set out by us. 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Company with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment Building, 40 Scotts Road. Singapore 228231 (Telephone No. 7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power Supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk25 Kallang Avenue #05-01 Kallang Basin Industrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTC Corporation)] for approval prior to the issue of a letter to Water Conservation Department, Public Utilities Board to assist you inyour application for a water sub-meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm, drawings, indicating the exiting fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc to and in accordance with the requirements of our Building Control Unit[BCU(JTC Corporation)]. Please contact our Building Control Unit [BCU(JTC Corporation)] at The JTC Summit, One-Step Centre (1st level) 8Jurong Town Hall Road Singapore 609434 direct for further requirements. 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories”. Yours faithfully /s/ LOH LI YOONLOH LI YOON (Ms)MARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJTC CORPORATIONEncl  SPECIMEN GUARANTEE FORM GUARANTEE TO: JTC CORPORATIONTHE JTC SUMMIT8 JURONG TOWN HALL ROADSINGAPORE 609434 WHEREAS: [I-STT PTE LTD] of [Blk 20 Ayer Rajah CresceNT #05-08 Ayer Rajah Industrial Estate Singapore 139964] (“the Tenant”) is a tenant of the premises knownas [Blk 28 Ayer Rajah Crescent #03-01 To #03-04 Ayer Rajah Industrial Estate Singapore 139959] (“the Premises”) pursuant to a letter of offer and letter dated[18 January 2001] from JTC CORPORATION (“JTC”) to and duly accepted by the Tenant (“the Tenancy”, which expression shall include any writtenamendments made to the Tenancy from time to time). IN CONSIDERATION OF your agreeing to grant the Tenancy and pursuant to a term of the Tenancy, we, the undersigned, hereby unconditionally undertaketo pay to you from time to time on first demand the sum of aggregate sums not exceeding [$111,909.12] (“the Full Guaranteed Sum”) if accompanied by yourstatement that the Tenant is in breach of any of the Tenant’s obligations to you under the Tenancy and that the amount demanded is due and payable to youand remains unpaid provided that our liability under this Guarantee shall not exceed the Full Guaranteed Sum. Our liability under this Guarantee shall be that of a principal debtor and not by way of surety and such liability shall not be discharged or affected by anyevent, act or omission whereby our liability would have been discharged if we had been a surety. This Guarantee is valid from [16 February 2001] and shall expire on [15 February 2005] (“the expiry period”) and our liability hereunder shall cease inrespect of any claims made after expiry period. Notwithstanding that this Guarantee may not have expired, our liability hereunder shall cease forthwith upon our paying to you the Full Guaranteed Sum to beheld by you as a security deposit under the Tenancy. Dated [Signature, names and designations of authorised signatories of Bank/Finance Company and rubber stamp of Bank/Finance Company]  Draft of Letter of Acceptance(Please use company’s letterhead and In Duplicate) Date: Marketing & Sales Department BY HANDJTC Corporation The JTC Summit 8 Jurong Town Hall Road Singapore 609434 (Attn: Ms LOH LI YOON) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 28 AYER RAJAH CRESCENT #03-01 To # 03-04 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139959] 1 We refer to your letter of offer and letter dated [18 January 2001] for the Tenancy and hereby confirm our acceptance of all the covenants, terms andconditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$153,915.25] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$42,006.13] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a Letter of Authorisation as requested by you for your information and record. [Name of authorised signatory: ] [Designation: ] for and on behalf of: [I-STT PTE LTD] in the presence of: [Name of witness: ] [NRIC No: ] *Please omit if not applicable  Date: 28th of November, 2001 TO: JTC CorporationCustomer Service GroupLease Management & Service Delivery Dept8 Jurong Town Hall RoadSingapore 609434 Attention: Ms. Lai Get Luan Dear Madam PREMATURE PARTIAL TERMINATION OF TENANCY IN RESPECT OF PREMISES KNOWS AS SITE A20961 AT 28 AYER RAJAHCRESCENT #03-03/04 (AREA: 1,100SQM) 1. We refer to your letter dated 12 October 2001 & 27 November 2001 and hereby accept all terms and conditions stated in the said letters. 2. We enclosed herewith a cheque $515/- being administrative fee for the premature partial termination of tenancy. /s/ LEE YOONG KIN Lee Yoong KinManaging Directori-STT Pte Ltd  12 October 2001 Mr. Walter KohI-STT Pte Ltd20 Ayer Rajah Crescent#05-08Singapore 139964 Dear Mr. Koh PARTIAL PREMATURE TERMINATION OF TENANCY IN RESPECT OF PREMISES KNOWN AS SITE A20961 (AREA: 1,208.00SQUARE METRES) AT 28, AYER RAJAH CRESCENT, #03-03/04, SINGAPORE (139959) 1 We refer to your e-mail dated 27 September 2001. 2 We note that you do not intend to continue with the tenancy of the aforesaid premises. We are agreeable to a partial premature termination of the saidtenancy in respect of 28, AYER RAJAH CRESCENT, #03-03/04, SINGAPORE (139959) subject to your compliance with the following terms andprocedure of vacation of the premises: (a) You shall give the Corporation at least 3 months’ advance written notice of your intention to terminate the tenancy prematurely. Since your e-maildated 27 September 2001 is treated as sufficient notification, your tenancy in respect of 28, AYER RAJAH CRESCENT, #03-03/04,SINGAPORE (139959) shall terminate on 26 December 2001 and rent and service charge shall be payable by you until the date. (b) You shall settle all outstanding arrears and other charges before vacation of the premises. (c) You are required to pay an administrative fee of $500/- plus $15/- being 3% GST totaling $515/- for the partial premature termination of thetenancy of the premises. (d) You shall bear and pay the Goods and Services Tax which the Government has introduced on 1st April 94. The said tax based on the prevailingtax rate, is borne by you and is calculated by reference to the amount of rent, service charge and any other sums payable by you to theCorporation. The Corporation as collecting agent for the government shall  collect the said tax from you together with the rent/ service charge without demand on the 1st day of each calendar month of year (ie 1st days forJanuary, February, March, etc) in accordance with the applicable laws and regulations. (e) You are required to reinstate the premises to its original state and to the satisfaction of the Corporation before vacation: (i) A joint inspection will be held prior to our acceptance of the keys to the premises. (ii) If it is discovered at the time of inspection that reinstatement works have not been carried out to the satisfaction of the Corporation, youshall pay for the cost of the reinstatement, in addition to the rental and other charges you shall be liable for in respect of the premises for theperiod after the date of termination of your tenancy to the date full reinstatement of the premises has been completed by you/our contractor tothe satisfaction of the Corporation in accordance with Clause 2(34) of your said Tenancy Agreement. (f) You are to deliver up vacant possession of the abovesaid premises fully reinstated and return the keys to the premises to our Property Executive-in-charge of th building at the latest on the date of termination, failing which revised rental and other charges will continue to be levied andrecoverable from you. (g) If the incoming tenant (if any) decides to take over your fixtures and fittings (“the installations”) from you and accepts the above premises in itsexisting state and condition, and if they will also furnish the Corporation with a letter of undertaking, before they take possession of theinstallations from you, to reinstate the premises to its original state and condition prior to the existence of the installations and to the satisfaction ofthe Corporation upon acceptance/expire/earlier determination of their tenancy, we are prepared to waive the usual requirement that you reinstate thepremises, subject to the following conditions: (i) only installation in respect of which plans have previously been submitted and approved by the Corporation and which comply with thesaid plans may be taken over by the incoming tenant; (ii) in addition, the installations to be taken over shall have to comply fully with all building guidelines of the Building Control Divisionprevailing at the time of termination of your tenancy. (iii) if the incoming tenant shall refuse or fail to take over the installations or any part thereof, or to accept the premises in its existing state orcondition, or to furnish the aforesaid undertaking,  then you shall forthwith reinstate the premises to its original state and condition, in accordance with Clauses 2(33) and 2(34) of the TenancyAgreement executed by you. (iv) in the latter event, a joint inspection shall be carried out between our Property Executive-in-charge of the building and your representativeprior to our acceptance of the keys to the premises from you; and (5) if it is discovered at the time of inspection that reinstatement workshave not been carried out to the satisfaction of the Corporation, you shall pay for the cost of the reinstatement, in addition to the rental andother charges you shall be liable for in respect of the premises for the period after the date of termination of your tenancy to the date fullreinstatement of the premises has been completed by your/our contractor to the satisfaction of the Corporation in accordance with Clause2(34) of your said Tenancy Agreement. (h) You must allow and arrange with our Property Management Department, not less than two weeks before the termination date, for the erection ofpartition wall between units #03-02 and #03-03. You can contact our Property Executive, Mr. Tan Slew Hem (Tel. No. 7730230) concerning thearrangement. 3 The letter of offer dated 18 January 2001 shall with effect from the date of termination of the tenancy of the above premises continue to be effective andthe covenants therein binding on you in respect of: Unit No. Area(in sqm) Rental(subject topayment of GST) Service Charge(subject to paymentof GST)#03-01/02 1,208.00 $14.10 $2.75 4. Our agreement to the above partial premature termination is without prejudice to whatever claims/action the Corporation may have against you (if any)for arrears, debts, breach of covenants, etc. 5. Please note that our granting of your request/application here does not at any time prejudice or waive any of our rights or remedies for breaches of yourobligations to us. Any waiver by us, to be effective, must be clearly and specifically stated in writing. 6. Please let us have your letter of acceptance of the above terms and conditions as set out in the format under Appendix 1 and payment of $515/- beingadministrative charge for the partial premature termination of tenancy within two weeks from the date hereof.  7 You may submit the above mentioned letter and payment by post or if you wish to make a submission personally, you may do so at our CustomerServices Centre at The JTC Summit at 8 Jurong Town Hall Road. Please bring a copy of this letter when making your submission. Yours sincerely /s/ LAI GET LUAN Lai Get Luan (Ms)Deputy Manager (Lease Management)Lease Management & Service Delivery DeptCustomer Services GroupDID : 8833304FAX : 8855894EMAIL : getluan@jtc.gov.sg  APPENDIX 1 DRAFT LETTER OF ACCEPTANCE[Please use your company’s letterhead] Date:_________________ TO: JTC CorporationCustomer Services GroupLease Management & Service Delivery Dept8 Jurong Town Hall RoadSingapore 609434 Attention:Ms. Lai Get Luan Dear Sir or Madam: PREMATURE PARTIAL TERMINATION OF TENANCY IN RESPECT OF PREMISES KNOWN AS SITE A20961 AT 28 AYER RAJAH CRESCENT#03-03/04 (AREA: 1208.00SQM) 1. We refer to your letter dated 12 October 2001 and hereby accept all terms and conditions stated in the said letter. 2. We enclosed herewith a cheque of $515/- being administrative fee for the premature partial termination of tenancy. Signature of authorised signatoryName of authorised signatory:Designation:  Exhibit 10.64 10th October 2000 i-STTMarketing & Sales Department Jurong Town Corporation BY HANDThe JTC Summit8 Jurong Town Hall RoadSingapore 609434 Attn: Ms Loh Li Yoon ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRESCENT AYER RAJAH INDUSTRIALESTATE SINGAPORE 139964 1. We refer to your letter of offer dated 9 October 2000 for the Tenancy and hereby confirm our acceptance of all the covenants, terms and conditionsstipulated therein. 2. We enclosed herewith a cheque for the amount of S$32,489.67 and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a Letter of Authorisation requested by you for your information and record. /s/ TAY KIONG HONG Name of authorised signatory: } Tay Kiong HongDesignation: } Chief Operating Officerfor and on behalf of } I-STT Pte LtdBlk 20 Ayer Rajah Crescent#05-05/08 Singapore 139964Tel: 723 8888 Fax: 820 2001i-STT Pte Ltd in the presence of: /s/ LEE YOONG KIN Name of witness: } Lee Yoong KinNRIC No: } S14925441 i-STT Pte Ltd20 Ayer Rajah Crescent#05-05/08Singapore 139964Tel: (65) 723 8888Fax: (65) 820 2001Website: www.i-STT.com  FACSIMILE MESSAGE JTC Logo TO Mr. Lee Yoong Kin DATE 10 Oct 2000ORG. i-STT PL FAX NO. 820-2006 NO. OF PAGES 1FROM Loh Yi Yoon SENDER’S TEL (65) 8833-423 FAX NO. (65) 8855-899 RE: LETTER OF OFFER FOR ARC 20 #05-01 OT 04 AT 1,439 SQM 1. We discussed this morning re the new application and the Letter of Offer (LOO) for the above which is processed on an urgent basis to suit yourmove-in and refurbishment needs. Faxed copy of LOO is done separately today. 2. To expedite the possession by your company on an urgent basis, you have agreed to accept the above offer upon issue of LOO. The Banker’sGuarantee for the 3-month deposit will be sent in within a week. 3. As for the partial termination of #03-01 to 04 which payment have been made and the Banker’s Guarantee and payment were done to cover #03-01to 08 in Jun 2000, our Lease Management Officer/Wee Soon Mey will follow-up on this separately from the lease management perspectives. Thank you /s/ LOH LI YOON Loh Li Yoon Jurong Town CorporationThe JTC SummitIndustrial Parks Devt Group8 Jurong Town Hall RoadSingapore 609434Republic of SingaporeTel: 1800-5687000 Fax: 8855899  JTC(L)7329/30 temp 1 DID: 8833423 FAX: 88558999 October 2000 Email vanesssaloh@jtc.gov.sg JTCi-STT PTE LTDBlk 20 Ayer Rajah Crescent#05-05 Ayer Rajah Industrial EstateSingapore 139964 BY LUM (Attn: Lee Yoong Kin) Dear Sirs PROPERTY TAX REBATE IN RESPECT OF THE FLATTED FACTORY SPACE AT BLK 20 AYER RAJAH CRESCENT #05-01 TO #05-04AYER RAJAH INDUSTRIAL ESATATE SINGAPORE 139964 1. We attach herewith our letter of offer of tenancy for the above mentioned premises. 2. In line with the government’s announcement on the property tax rebate, we are pleased to inform you that the Corporation is passing the full taxsavings amount to 3% on the rent to you for the period 1st July 2000 to 30th June 2001. 3. Our Statement of Account in the letter of offer of tenancy has reflected this rebate. 4. Please be informed that this rebate does not vary any of the terms or stipulations in the Memorandum of Tenancy. Yours faithfully /s/ LOH LI YOON LOH LI YOON (Ms)MARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONAttd Jurong Town CorporationThe JTC SummitIndustrial Parks Devt Group8 Jurong Town Hall RoadSingapore 609434Republic of SingaporeTel: 1800-5687000 Fax: 8855899  JTC(L)7329/30 temp 1 DID: 8833423 FAX: 88558999 October 2000 Email vanesssaloh@jtc.gov.sg JTCi-STT PTE LTDBlk 20 Ayer Rajah Crescent#05-05 Ayer Rajah Industrial EstateSingapore 139964 BY LUM (Attn: Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and in the annexed Memorandumof Tenancy (“the Offer”): 1.01 Location: Pte Lot A19857D, Blk 20 (“the Building”) Ayer Rajah Crescent #05-01 To #05-04, Ayer Rajah Industrial Estate Singapore 139964 (“thePremises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 2 years 6½ months (“the Term”) with effect from 16 January 2001 (“the Commencement Date”). Note: To co-terminate with A19857 and A19857(a) on 31 July 2003. 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause 2 of this letter, you shall have entered into a tenancy agreement with us (“theTenancy”) and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 1,439.0 square metres (subject to survey).  1.05 Rent and Service Charge: Rent: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 16 January 2001 to 15 January 2002; (ii) $14.80 per square metre per mouth for the period from 16 January 2002 to 15 January 2003; (iii) $15.11 per square metre per month for the period from 16 January 2003 to 31 July 2003. and (b) Normal rate of: $15.90 per square metre per month for the period from 16 January 2001 to 31 July 2003 in the event that the said discount is withdrawn, (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February, March,etc.). The next payment shall be made on 1 February 2001. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same date and inthe same manner as the Rent, subject to our revision from time to time. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same date and inthe same manner as the Rent, subject to our revision from time to time. 1.05(a) Air-conditioning Charge: $0.008 per square metre per hour as charges for air-conditioning utility rendered by us, payable without demand on the same date and in the samemanner as the Rent, subject to our revision from time to time in the same manner as the Service Charge. 1.06 Security Deposit/Banker’s Guarantee:  You will at the time of acceptance of the Offer be required to place with us a deposit of $92,599.65 equivalent to 3 months’ Rent (at thediscounted rate payable in the third year of the Term) and Service Charge (“Security Deposit”) as security against any breach of the covenants,terms and conditions in the Tenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 16 October 2000 to 31January 2004) and/or such other form of security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned to yourfor cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be, subject toappropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all times beequal to 3 months’ Rent at the normal rate payable in the third year of the Term and Service Charge. *[(3rd yr rate + service charge) *3* floor area] + the value of air-cond charge*3] 1.07 Mode of Payment: Where letter of authorization is required due to limit set by company You have an existing GIRO account with us, the limit of which has to be increased to cover all the aforesaid payments. Please write to yourBanker to authorize the same (“the letter of authorization”) and let us have a copy thereof in accordance with the Mode of Acceptance herein. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purposeof To providing full internet related activities including data centre, regional network management, product and software development andfacility hosting only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities.  1.10 Possession of Premises: (a) Keys to the Premises will be given to you three (3) months prior to the Commencement Date subject to due acceptance of the offer(“Possession Date”). (b) From the Possession Date until the Commencement Date, you shall be deemed a licensee upon the same terms and conditions in theTenancy. (c) If you proceed with the Tenancy after the Commencement Date, the license fee payable from the Possession Date to the Commencement Dateshall be waived (“Rent-Free Period”). Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations areremoved and reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law: 1.11 Preparation and Submission of Plans: (a) No alternation, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein ispermitted without Building Control Unit [BCU(JTC)] prior written consent. Your attention is drawn to clauses 2.10 to 2.19 and 2.34 of theMemorandum of Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory in accordance with the terms of the tenancy and the ‘Guide’attached. It is important that you should proceed with the preparation and submission of the plans in accordance with the procedures set outin the said ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans should be submitted toBuilding Control Unit [BCU(JTC)] for approval on fire safety aspects. All fire alarm & sprinkler system plans must be signed by arelevant Professional Engineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparationof the plans required herein.  (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC)]. (f) Kindly note that at present URA requires you to use and occupy at least sixty per cent (60%) of the gross floor area of the Premises forindustrial activities and ancillary warehousing activities; and you may use and occupy the remaining gross floor area, if any, for offices,showrooms, neutral areas or communal facilities and such other uses as may be approved in writing by us and the relevant governmentaland statutory authorities. Nonetheless, as provided in paragraph 1.08, you shall ensure that the Premises: (i) are used primarily for the industrial activities stipulated in the authorised use approved by us; and (ii) are not used or occupied for the purpose of offices, showrooms, storage, warehousing, industrial activities unrelated to suchauthorised use or for any other use unless approved in writing by us and the relevant governmental statutory authorities. 1.12 Final Inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced. 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions. (a) maximum loading capacity of the goods lifts in the Building, and (b) maximum floor loading capacity of 10.00 kiloNewtons per square metre of the Premises on the storey of the Building PROVIDEDTHAT any such permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons ofthe Building. (2) You shall comply and ensure compliance with all notices, rules and regulations relating to the use of the Carpark (as defined in theMemorandum of Tenancy) including but not limited to: (i) parking or placing of container, vehicles, trailers or other carriages; and  (ii) parking charges. (3) You are to connect the mechanical ventilation system in the Premises to the switchboard installed by you, subject to clauses 2.12, 2.13 and2.14 of the Memorandum of Tenancy. (4) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term of tenancy of the Premises upon mutual terms to be agreed between you and us subject to the following: (i) there shall be no breach of your obligations at the time you make your request for a further term; (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shall befinal; (iii) we shall have absolute discretion to determine such covenants. terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expiry of the Term. 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 15 October 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix.) • Payment of the sum set out in clause 4. • A copy of the letter of authorization from your Banker.  3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 4. The total amount payable is as follows: Amount +3% GSTRent at $14.50 per square metre per month on 1,439.0 square metres for the period 16 January 2001 to 15February 2001 $20,865.50 Less: $625.97 3% property tax rebate $20,239.53 Service Charge at $4.50 per square metre per month on 1,439.0 square metre for the period 16 January 2001to 15 February 2001 $6,475.50 Air-conditioning charges at $0.008 per square metre per hour on 1,439.0 square metre for the 1st month fromperiod 16 January 2001 to 15 February 2001 computed on 23-working day basis.* See Notes below $2,647.76 $29,362.79 $880.88 Deposit equivalent to three months’ rent, service charge and air-conditioning charges (or Banker’s Guaranteeprovided in accordance with sub-paragraph 106 above)Note: Based on third year rent of $15.11 psm pm. $92,599.65 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $2,246.00 Sub-Total Payable $124,208.44 $880.88Add: GST + 3% $880.88 Total Payable inclusive of GST $125,089.32 Notes: 1. This is for the 1st month air-con utility charge based on an average of 23 working days (230 hours) only as part of the deposit. (Mon – Fri8 a.m. to 6 p.m.) (Sat - 8 a.m. to 1 p.m.) 2. Subsequent air-con utility charges for standard and/or non-standard charges will be computed by the Lease Management Officer of theCustomer Service Department/South Zone.  5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy This letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the EastZone Office is: 6654628). Please note that the number of season parking ticket(s) that can be purchased by you will depend on eligibility rules set outby us. 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Comply with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment, Environment Building, 40 Scotts Road, Singapore 228231 (Telephone No.7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk 25 Kallang Avenue #05-01 Kallang BasinIndustrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTD)] for approval prior to the issue of a Letter to Water Conservation Department, Public Utilities Board to assist you in yourapplication for a water sub-meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm drawings, indicating the existing fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc. to and in accordance with the requirements of our Building ControlUnit [BCU(JTC)]. Please contact our Building Control Unit [BCU(JTC)] at 301 Jurong Town Hall Road (3rd level) Singapore 609431 direct forfurther requirements. 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories.” Yours faithfully LOH LI YOON (Ms)MARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl SPECIMEN GUARANTEE FORM GUARANTEE TO: JURONG TOWN CORPORATION THE JTC SUMMIT 8 JURONG TOWN HALL ROAD SINGARPORE 609434 WHEREAS: [I-STT PTE LTD] OF [Blk 20 Ayer Rajah Crescent #05-05 to #05-08 Ayer Rajah Industrial Estate Singapore 139964] (“the Tenant”) is a tenant of thepremises known as [Blk 20 Ayer Rajah Crescent #05-01. To #05-04 Ayer Rajah Industrial Estate Singapore 139964] (“the Premises”) pursuant to a letter ofoffer dated [9 October 2000] from Jurong Town Corporation (“JTC”) to and duly accepted by the Tenant (“the Tenancy”, which expression shall include anywritten amendments made to the Tenancy from time to time). IN CONSIDERATION OF your agreeing to grant the Tenancy and pursuant to a term of the Tenancy, we, the undersigned, hereby unconditionally undertaketo pay to you from time to time on first demand the sum or aggregate sums not exceeding [$92,599.65] (“the Full Guaranteed Sum”) if accompanied by yourstatement that the Tenant is in breach of any of the Tenant’s obligations to you under the Tenancy and that the amount demanded is due and payable to youand remains unpaid provided that our ability under this Guarantee shall not exceed the Full Guaranteed Sum. Our liability under this Guarantee shall be that of a principal debtor and not by way of surety and such liability shall not be discharged or affected by anyevent, act or omission whereby our liability would have been discharged if we had been a surety. This Guarantee is valid from [16 October 2000] and shall expire on [31 January 2004] (“the expiry period”) and our liability hereunder shall cease in respectof any claims made after the expiry period. Notwithstanding that this Guarantee may not have expired, our liability hereunder shall cease forthwith upon our paying to you the Full Guaranteed Sum to beheld by you as a security deposit under the Tenancy. Dated [Signature, names and designations of authorised signatories of Bank/Finance Company and rubber stamp of Bank/Finance Company]  Draft of Letter of Acceptance(Please use company’s letterhead and in Duplicate) Date: (To be dated on the day thisLetter is forwarded to JTC) Marketing & Sales DepartmentJurong Town CorporationThe JTC Summit8 Jurong Town Hall RoadSingapore 609434 BY HAND (Attn: Ms Loh Li Yoon) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRESCENT #05-01, #05-04 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964] 1. We refer to your letter of offer dated [9 October 2000] for the Tenancy and hereby confirm our acceptance of all the covenants, terms andconditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$125,089.32] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$32,489.67] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a Letter of Authorisation as requested by you for your information and record. [Name of authorised signatory: ] [Designation: ] for and on behalf of: [I-STT PTE LTD] in the presence of: [Name of witness: ] [NRIC No. ] * Please omit if not applicable  [ALLOCATION PLAN]  Exhibit 10.65 7th July 2000 Marketing & Sales Department Jurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 BY HAND Attn: Ms Loh Li Yoon ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRESCENT #03-01 TO # 03-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 1 We refer to your letter of offer and letter dated 24 May 2000 and amendment dated 8 June 2000 for the Tenancy and hereby confirm our acceptance of allthe covenants, terms and conditions stipulated therein. 2. We enclose herewith a cheque for the amount of $62,674.89 and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG [Name of authorised signatory: } Sio Tat Hiang[Designation: } Executive Vice Presidentfor and behalf of: } STT Communications Pte Ltd in the presence of: /s/ LEE YOONG KIN [Name of witness: } Lee Yoong Kin[NRIC No: ] } 14925441  To Page Date Jurong Town CorporationGua No. 2000/73 2/2 June 22, 2000 7th July 2000 Marketing & Sales Department Jurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 BY HAND Attn: Ms Loh Li Yoon ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRESCENT #03-01 TO # 03-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964 1 We refer to your letter of offer and letter dated 24 May 2000 and amendment dated 8 June 2000 for the Tenancy and hereby confirm our acceptance of allthe covenants, terms and conditions stipulated therein. 2. We enclose herewith a cheque for the amount of $62,674.89 and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form as requested by you for your information and record. /s/ SIO TAT HIANG [Name of authorised signatory: } Sio Tat Hiang[Designation: } Executive Vice Presidentfor and behalf of: } STT Communications Pte Ltd in the presence of: /s/ LEE YOONG KIN [Name of witness: } Lee Yoong Kin[NRIC No: ] } 14925441 8 June 2000 STT.COM PTE LTDBlk 20 Ayer Rajah Crescent#05-05/08Singapore 139964 BY LUM (Attn: Mr Ng Hiang Cheok) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE AT PTE LOT A19857C, BLK 20 AYER RAJAH CRES #03-01 TO 03-08, AYERRAJAH INDUSTRIAL ESTATE SINGAPORE 139964 1. We refer to our offer dated 24 May 2000 and our fax letter dated 2 June 2000. 2. We are pleased to inform you that the Corporation has no objection in principle to defer the possession of the premises to 16 July 2000. 3. In view of the above, please note the following amendments to our Letter of Offer dated 24 May 2000. 1.02 Term of Tenancy: 2 years 9½ months (“the Term”) with effect from 16 October 2000 (“the Commencement Date”). This tenancy is to co-terminate with Pte LotA19857 and A19857A. Tenancy shall expire on 31 July 2003. 1.05 Rent and Service Charge: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 16 October 2000 to 15 October 2001; (ii) $141.80 per square metre per month for the period from 16 October 2001 to 15 October 2002; (iii) $15.11 per square metre per month for the period from 16 October 2002 to 31 July 2003. (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January, February,March, etc.). The next payment shall be made on 16 November 2000. Note: Posted rent at $17.30 per square metre per month. Service charge: $4.50 per square metre per month. (“Service Charge”) as charges for services rendered by us, payable without demand on the same date andin the same manner as the Rent, subject to our revision from time to time. 1.06 Security Deposit/Banker’s Guarantee: For Discounted Rent: You will at the time of acceptance of the Offer be required to place with us a deposit of $175,884.05 equivalent to 3 months’ Rent (at the discountedrate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in the Tenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 16 July 2000 to 31January 2004) and/or such offer form or security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned to youfor cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be, subject toappropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all times beequal to 3 months’ Rent and Service Charge. 2. Mode of Payment: The Offer shall lapse if we do not receive the following by 10 July 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix) • Payment of the sum set out in clause 4. • Duly completed GIRO authorization form or a copy of the letter of authorization from your Banker. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 4. The total amount payable is as follows: Amount +3% GSTRent at $14.50 psm per month on 2,989.70 sqm for the period 16 October 2000 to 15 November 2000 $43,350.65 Less: 3% property tax rebate $1,300.52 $42,050.13 Service Charge at $4.50 psm per month on 2,989.70 sqm for the period 16 October 2000 to 15November 2000 $13,453.65 $55,503.78 $1,665.11 Deposit equivalent to three months’ rent service charge (or Banker’s Guarantee provided in accordancewith sub-paragraph 1.06 above) $175,884.05 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $5,506.00 Sub-Total Payable $236,893.83 $1,665.11 Add: GST + 3% $1,665.11 Total Payable inclusive of GST $238,558.94 4. The Corporation is passing the full tax savings amounting to 3% on the rent to you for the period 16 October 2000 to 30 June 2000 5. Keys to the premises will be given to you three (3) months prior to the Commencement Date is 16 July 2000 (“Possession Date”) subject to due acceptance inaccordance with the Mode of Acceptance above. 6. All other terms and conditions as sated in our offer dated 24 May 2000 remain unchanged. Yours faithfully /s/ LOH LI YOON LOH LI YOON (MS)MARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl Draft of Letter of Acceptance(Please use company’s letterhead and In Duplicate) Date: (To be dated on the day this BY HAND letter is forwarded to JTC) Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 Attn: Ms Loh Li Yoon ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #03-01, To # 03-08 AYER RAJAHINDUSTRIAL ESTATE Singapore 139964] 1 We refer to your letter of offer and letter dated 24 May 2000 and amendment dated 8 June 2000 for the Tenancy and hereby confirm our acceptance ofall the covenants, terms and conditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of $238,558.94 as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of $62,674.89 and the Banker’s Guarantee as security deposit as confirmation of our acceptance. 3. In addition, we also enclose herewith a duly completed GIRO authorisation form/Letter of Authorisation as requested by you for your information andrecord. [Name of authorised signatory:[Designation:for and on behalf of: ]] [STT.COM PTE LTD] in the presence of: [Name of witness:[NRIC No: ]] *Please omit if not applicable 24 May 2000 STT. COM PTE LTD Blk 20 AYER RAJAH CRES BY LUM#05-05/08 Singapore 139964 (Attn: Mr Lee Yoong Kin) Dear Sirs, OFFER OF TENANCY FOR FLATTED FACTORY SPACE 1. We are pleased to offer a tenancy of the Premises subject to the following covenants, terms and conditions in this letter and in the annexed Memorandumof Tenancy (“the Offer”): 1.01 Location: Pte Lot A19857(b), Blk 20 (“the Building”) AYER RAJAH CRES #03-01 TO #03-08, AYER RAJAH INDUSTRIAL ESTATESINGAPORE 139964 (“the Premises”) as delineated and edged in red on the plan attached to the Offer. 1.02 Term of Tenancy: 2 years 9½ months tenancy (“the Term”) with effect from 16 October 2000 (“the Commencement Date”) and expiring on 31 July 2003 1.03 Tenancy Agreement: Upon due acceptance of the Offer in accordance with clause 2 of this letter, you shall have entered into a tenancy agreement with us (“theTenancy”) and will be bound by the covenants, terms and conditions thereof. In the event of any inconsistency or conflict between any covenant, term or condition of this letter and the Memorandum of Tenancy, the relevantcovenant, term or condition in this letter shall prevail. 1.04 Area: Approximately 2,989.70 square metres (subject to survey). 1.05 Rent and Service Charge: (a) Discounted rate of: (i) $14.50 per square metre per month for the period from 16 October 2000 to 15 October 2001; (ii) $14.80 per square metre per month for the period from 16 October 2001 to 15 October 2002; (iii) $15.11 per square metre per month for the period 16 October 2002 to 31 July 2003. (“Rent”) to be paid without demand and in advance without deduction on the 1st day of each month of the year (i.e. 1st of January,February, March, etc.) The next payment shall be made 16 November 2000. Note: Posted rent at $17.30 per square metre per month. Service charge: $4.50 per square metre per month, (“Service Charge”) as charges for services rendered by us, payable without demand on the same dateand in the same manner as the Rent, subject to our revision from time to time. 1.05(a) Air-conditioning Charge: $0.008 per square metre per hour as charges for air-conditioning utility rendered by us, payable without demand on the same date and inthe same manner as the Rent, subject to our revision from time to time in the same manner as the Service Charge. 1.06 Security Deposit/Banker’s Guarantee: For Discounted Rent: You will at the time of acceptance of the Offer be required to place with us a deposit of $175,884.05 equivalent to 3 months’ Rent (at thediscounted rate) and Service Charge (“Security Deposit”) as security against any breach of the covenants, terms and conditions in theTenancy. The Security Deposit may be in the form of cash and/or acceptable Banker’s Guarantee in the form attached (effective from 16 July 2000 to31 January 2004) and/or such offer form or security as we may in our absolute discretion permit or accept. The Security Deposit must be maintained at the same sum throughout the Term and shall be repayable to you without interest or returned toyou for cancellation, after the termination of the Term (by expiry or otherwise) or expiry of the Banker’s Guarantee, as the case may be,subject to appropriate deductions or payment to us for damages or other sums due under the Tenancy. If the Rent at the discounted rate is increased to the normal rate or Service Charge is increased or any deductions are made from the SecurityDeposit, you are to immediately pay the amount of such increase or make good the deductions so that the Security Deposit shall at all times be equal to 3 months’ Rent and Service Charge. 1.07 Mode of Payment: Except for the payment to be made with your letter of acceptance pursuant to clause 2 of this letter, during the Term, you shall pay Rent, Service Chargeand GST by Interbank GIRO or any other mode to be determined by us. [Note: Accordingly, you are to provide us with the duly completed GIRO authorization form enclosed herewith. However, pending finalisation for the GIRO arrangement, you shall pay Rent, Service Charge and GST as they fail due by cheque]. Where letter of authorisation is required due to limit set by company You have an existing GIRO account with us, the limit of which has to be increased to cover all the aforesaid payments. Please write to your Banker toauthorize the same (“the letter of authorization”) and let us have a copy thereof in accordance with the Mode of Acceptable herein. 1.08 Permitted Use: (a) Subject to clause 1.12 of this letter, you shall commence full operations within four (4) months of the Commencement Date for the purpose ofprovide full internet-based related activities including data centre, call centre, Regional Network Management, product and softwaredevelopment and facility hosting etc only and for no other purpose whatsoever (“the Authorised Use”). (b) Thereafter, you shall maintain full and continuous operations and use and occupy the whole of the Premises for the Authorised Use. 1.09 Approvals The Tenancy is subject to approvals being obtained from the relevant government and statutory authorities. 1.10 Possession of Premises: (a) Keys to the Premises will be given to you three (3) months prior to the Commencement Date subject to due acceptance of the Offer (“PossessionDate”). (b) From the Possession Date until the Commencement Data, you shall be deemed a licensee upon the same terms and conditions in the Tenancy. (c) if you proceed with the Tenancy after the Commencement Date, the licence fee payable from the Possession Date to the Commencement Date shall be waived (“Rent-Free Period”). Should you fail to so proceed, you shall: (i) remove everything installed by you; (ii) reinstate the Premises to its original state and condition; and (iii) pay us a sum equal to the prevailing market rent payable for the period from the Possession Date up to the date the installations are removedand reinstatement completed to our satisfaction. without prejudice to any other rights and remedies we may have against you under the Tenancy or at law 1.11 Preparation and Submission of Plans: (a) No alteration, addition, improvement, erection, installation or interference to or in the Premises or the fixtures and fittings therein is permittedwithout Building Control Unit [BCU(JTC)] prior written consent. Your attention is drawn to clauses 2.10 to 2.19 and 2.34 of the Memorandumof Tenancy. (b) You will be required to prepare and submit floor layout plans of your factory in accordance with the terms of the tenancy and the ‘Guide’attached. It is important that you should proceed with the preparation and submission of the plans in accordance with the procedures set out in thesaid ‘Guide’. (c) Should there be alteration of existing automatic fire alarm and sprinkler system installation, alteration plans shall be submitted to BuildingControl Unit [BCU(JTC)] for approval on fire safety aspects. All fire alarm & sprinkler system plans must be signed by a relevant ProfessionalEngineer, registered with the Professional Engineers Board of Singapore. (d) Upon due acceptance of the Offer, a copy of the floor and elevation plans (transparencies) will be issued to you to assist in the preparation of theplans required herein. (e) No work shall commence until the plans have been approved by Building Control Unit [BCU(JTC)]. (f) Kindly note that at present URA requires you to use and occupy at least sixty per cent (60%) of the gross floor area of the Premises for industrialactivities and ancillary warehousing activities; and you may use and occupy the remaining gross floor area, if any, for offices, showrooms,neutral areas or communal facilities and such other uses as may be approved in writing by us and the relevant governmental and statutoryauthorities. Nonetheless, as provided in paragraph 1.08, you shall ensure that the Premises: i) are used primarily for the industrial activities stipulated in the authorised use approved by us; and  ii) are not used or occupied for the purpose of offices, showrooms, storage, warehousing, industrial activities unrelated to such authorised useor for any other use unless approved in writing by us and the relevant governmental and statutory authorities. 1.12 Final inspection: You shall ensure that final inspection by us of all installations is carried out and our approval of the same is obtained before any operations in thePremises may be commenced.\ 1.13 Special Conditions: (1) Normal (Ground & Non-ground) Floor Premises You shall comply and ensure compliance with the following restrictions: (a) maximum loading capacity of the goods lifts in the Building; and (b) maximum floor loading capacity of 12.50 kiloNewtons per square metre of the Premises on the 3rd storey of the Building PROVIDED THAT anysuch permitted load shall be evenly distributed. We shall not be liable for any loss or damage that you may suffer from any subsidence or cracking of the ground floor slabs and aprons of theBuilding, (2) You shall comply and ensure compliance with all notices, rules and regulations relating to the use of the Carpark (as defined in theMemorandum of Tenancy) including but not limited to: (i) parking or placing of container, vehicles, trailers or other carriages; and (ii) parking charges. (3) You are to connect the mechanical ventilation system in the Premises to the switchboard installed by you, subject to clauses 2.12, 2.13 and2.14 of the Memorandum of Tenancy. (4) Option for renewal of tenancy: (a) You may within 3 months before the expiry of the Term make a written request to us for a further term of tenancy. (b) We may grant you a further term or tenancy of the Premises upon mutual terms to be agreed between you and us subject to the following: (i) there shall be no breach of your obligations at the time you make your request for a further term;  (ii) our determination of revised rent, having regard to the market rent of the Premises at the time of granting the further term, shall befinal; (iii) we shall have absolute discretion to determine such covenants, terms and conditions, but excluding a covenant for renewal oftenancy; and (iv) there shall not be any breach of your obligations at the expire of the Term. 2. Mode of Acceptance: The Offer shall lapse if we do not receive the following by 10 July 2000: • Duly signed letter of acceptance (in duplicate) of all the covenants, terms and conditions in the Tenancy in the form enclosed at the Appendix.(Please date as required in the Appendix) • Payment of the sum set out in clause 4. • Duly completed GIRO authorized form or a copy of the letter of authorization from your Banker. 3. Please note that payments made prior to your giving us the other items listed above may be cleared by and credited by us upon receipt. However, if thesaid other items are not forthcoming from you within the time stipulated herein, the Offer shall lapse and there shall be no contract between you and usarising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us. 4. The total amount payable is as follows: Amount +3% GSTRent at $14.50 psm per month on 2,989.70 sqm for the period 16 October 2000 to 15 November 2000 $43,350.65 Less: 3% property tax rebate $1,300.52 $42,050.13 Service Charge at $4.50 psm per month on 2,989.70 sq m for the period 16 September 2000 to 15October 2000 $13,453.65 $55,503.78 $1,665.11 Deposit equivalent to three months’ rent and service charge (or Banker’s Guarantee provided in accordancewith subparagraph 1.06 above) $175,884.05 Stamp fee payable on Letter of Acceptance which will be stamped by JTC on your behalf $5,330.00 Sub-Total Payable $236,717.83 $1,665.11Add: 3% GST $1,665,11 Total Payable inclusive of GST $238,382.94 5. Rent-Free Period: As the Commencement Date will not be deferred, we advise you to accept the Offer as soon as possible and to collect the keys to the Premises on thescheduled date in order to maximize the Rent-Free Period referred to in clause 1.10(c) of this letter. 6. Variation to the Tenancy The letter and the Memorandum of Tenancy constitute the full terms and conditions governing the Offer and no terms or representation or otherwise,whether express or implied, shall form part of the Offer other than what is contained herein. Any variation, modification, amendment, deletion, additionor otherwise of the covenants, terms and conditions of the Offer shall not be enforceable unless agreed by both parties and reduced in writing by us. 7. Season Parking: Season parking tickets for car parking lots within the Estate can be purchased from the JTC Zone Office serving the Estate (Contact no. of the SouthZone Officeis: 6654626). Please note that the number of season parking ticket(s) that can be purchased by you will depend on eligibility rules set out byus. 8. Application for Approvals, Utilities etc. Upon your acceptance of the covenants, terms and conditions of the Offer, you are advised to proceed expeditiously as follows: 8.01 Preliminary Clearance: Company with the requirements of the Chief Engineer (Central Building Plan Unit), Pollution Control Department and/or other departmentspursuant to your application/s for preliminary clearance. (Please note that we have referred your application to the relevant department/s) 8.02 Discharge of Trade Effluence: Complete the attached Application for Permission to Discharge Trade Effluent into Public Sewer and return the application form direct to theHead, Pollution Control Department, Ministry of Environment Building, 40 Scotts Road, Singapore 228231 (Telephone No. 7327733). 8.03 Electricity: Engage a registered electrical consultant or competent contractor to submit three sets of electrical single-line diagrams to and in accordance with therequirements of our Property Support Department (PSD), Customer Services Group, JTC East Zone Office for endorsement before an applicationis made to the Power Supply Pte Ltd to open an account for electricity connection. Please contact our Property Support Department (PSD) at Blk25 Kallang Avenue #05-01 Kallang Basin Industrial Estate Singapore 339416 direct for their requirements. 8.04 Water: Submit four copies of sketch plans, prepared by a licensed plumber, showing the section and layout of the plumbing, to our Building ControlUnit [BCU(JTC)] for approval prior to the issue of a letter to Water Conservation Department, Public Utilities Board to assist you in yourapplication for a water sub meter. 8.05 Telephone: Apply direct to Singapore Telecommunications Ltd for all connections. 8.06 Automatic Fire Alarm System (Incorporating Heat Detector) Engage a registered electrical consultant/professional engineer to submit two sets of fire alarm, drawings, indicating the exiting fixtures if any, theproposed modifications of the fire alarm and the layout of machinery, etc to and in accordance with the requirements of our Building Control Unit [BCU(JTC)]. Please contactour Building Control Unit [BCU(JTC)] at 301 Jurong Town Hall Road (3rd level) Singapore 609431 direct for further requirements. 8.07 Factory Inspectorate Complete and return direct to Chief Inspector of Factories the attached form, “Particulars to be submitted by occupiers or Intending Occupiers ofFactories”. Yours faithfully /s/ LOH LI YOON LOH LI YOON (MS)MARKETING & SALES DEPARTMENTINDUSTRIAL PARKS DEVELOPMENT GROUPJURONG TOWN CORPORATIONEncl Draft of Letter of Acceptance(Please use company’s letterhead and In Duplicate) JTC(L)7329/30/VL Date: (To be dated on the day this BY HAND letter is forwarded to JTC) Marketing & Sales DepartmentJurong Town CorporationJurong Town Hall301 Town Hall RoadSingapore 609431 (Attn: Loh Li Yoon) ACCEPTANCE OF OFFER OF TENANCY FOR THE PREMISES AT BLK 20 AYER RAJAH CRES #03-01 To # 03-08 AYER RAJAHINDUSTRIAL ESTATE SINGAPORE 139964] 1 We refer to your letter of offer and letter dated [24 May 2000] for the Tenancy and hereby confirm our acceptance of all the covenants, terms andconditions stipulated therein. *2a. We enclose herewith a cheque for the sum of the amount of [$238,558.94] as confirmation of our acceptance. *2b. We enclose herewith a cheque for the amount of [$62,674.89] and the Banker’s Guarantee as security deposit as confirmation of our acceptance. *3. In addition, we also enclose herewith a duly completed GIRO authorisation form/Letter of Authorisation as requested by you for your information andrecord. [Name of authorised signatory:[Designation:for and on behalf of: ]] [STT.COM PTE LTD] in the presence of: [Name of witness:[NRIC No: ]] *Please omit if not applicable [ALLOCATION PLAN] Exhibit 10.66 NATION BUILDING II Lease Agreement Agreement No. R-069 /44 Dated February 1, 2001 This agreement is made at the office of the Nation Multimedia Group Public Co., Ltd. between Nation Multimedia Group Public Co., Ltd., havingregistered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr. Thanachai Santichaikul andMr. Vanchai Sriherunrusmee authorized directors herein after called the “Lessor” of one part and i-STT Nation Ltd. having registered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr.Lim Peng Koon and Mr. Sermsin Samalapa authorized director hereinafter called the “Lessee” of the other part. Whereas the Lessor is the owner of the the building at 44 on the 1st and 3rd floor of Nation Building II, situated at 44 Moo 10, Bangna Trad-Road,Kweang Bangna, Khet Bangna, Province of Bangkok Metropolis, wishes to lease some part of the aforesaid unit to the Lessee and the Lessee wishes to takelease, both parties agree to enter into a lease agreement subject to the following terms. 1. The Lessor agrees to lease out and the Lessee agrees to take on lease some part of the unit no. 44 on the 1st and 3rd floor of Nation Building II, covering anapproximate area of 947.8 square meters (Nine hundred and forty-seven point eight square meters) as appears in the floor plan attached to this agreementwhich shall be deemed as part of this agreement, hereinafter referred to as the “Leased Premises” for the business of keeping office and WEBCenter™. 2. The term of the lease shall be for a period of 3 years commencing from February 1, 2001 to January 31, 2004. The Lessee agrees to pay monthly rentalof Baht 142,170 (One hundred and forty-two thousand one hundred and seventy Baht only) throughout the term of the lease by advance payment withinthe 5th day of each month at the office of the Lessor. The Lessee shall have the option to renew this lease agreement for a further 3 years. The option shallbe exercised by the Lessee by giving notice of his intention to renew the lease at least 90 days prior to the expiration of this lease agreement subject to theterms and conditions of the lease agreement. Should notification not be made within the specified time, it shall be deemed that the Lessee has no wish torenew the lease. In case the Lessee has renewed the lease. The Lessor and the Lessee agree to be bound by the terms and conditions of this lease agreement exceptthat the rate of rent for a further 3 years shall be increased by not more than 15% of the previous rent. 3. The Lessee agrees to commence to conduct his business at the leased premises within 30 days from the date of receiving notice Iron the Lessor that theLessee is eligible to utilize the leased premises. 4. In order to comply with the lease agreement, the Lessee agrees to deposit as security bond with the Lessor Baht 236,950 (Two hundred and thirty-sixthousand nine hundred and fifty Baht only.) upon signing of this agreement. This security deposit without interest shall be returned to the Lessee in fullalter the termination of the lease agreement and the Lessee is determined to be without any obligation due to the Lessor either directly oar indirectly. In case where the Lessee is in breach of any section of this agreement, or wishes to terminate this agreement before the end of the lease period, thenthe Lessee shall forfeit to the Lessor the deposited security bond as damages. 5. Both parties agree to take the Service Agreement No. S-069/44 dated February 1, 2001 between the Lessor and the Lessee as part of the lease agreement.All the terns and conditions in the Service Agreement shall apply to this agreement to the extent that they are not contrary to or in conflict with thisagreement, when the terms of this agreement shall take preference. Breach of the Service Agreement shall also be deemed breach of this agreement. 6. The right of the Lessee refers only to the lease of the interior of the premises and excludes the external areas of the premises. Interior fitting out may bedone upon submitting the detailed plans and written permission from the Lessor obtained. The Lessee may not modify or alter the leased premises. Any modification, alteration, or addition carried out on the leased premises, may beconducted only with the Lessor’s prior written consent. In all cases any new fixture resulting from modification, alteration, addition to the leasedpremises shall immediately become the property of the Lessor. In case of damage having occurred to the leased premises, the Lessee shall be responsiblefor all repairs in order to reinstate to the original condition at his own expense, without any right to oppose or reject claims for any damages orcompensation from the Lessor. 7. The Lessee agrees not to pierce the floor, ceiling, walls or any part in the interior or exterior of the leased premises without the Lessor’s prior writtenpermission. 8. The Lessee has the right to install name plates or advertising signs inside the leased premises only. Installation outside the leased premises shall bepermitted only at the location assigned by the Lessor, and then only with the written permission of the Lessor. The Lessee agrees to pay for all costs, feesand all forms of taxation incurred in connection with any such installations. In case the installation of the name plates or advertising signs outside the leased premises has been conducted without prior written permissionfrom the Lessor, the Lessor or his representative shall have the right to remove them from the leased premises, and the Lessee shall have no right to claim for any damages and shall be responsible for all expenses incurred in reinstating the place of fixture to theoriginal condition. 9. The Lessee shall comply with all the rules and regulations of Nation Building and Nation Tower Juristic Person. 10. The Lessee shall not allow any person to reside on the leased premises, and shall enter and leave the leased premises within accepted normal hours ofbusiness. Should it be necessary to enter or leave before or after such times, he must observe and conform to all reasonable regulations made by theLessor in writing. 11. The Lessee shall conduct business in his own name as specified in Clause 1, and shall not sublease nor allow other persons to conduct it in his steadwithout prior written permission from the Lessor. Changing of business name without prior permission shall be deemed as sublease. 12. During the period of the lease agreement the Lessee agrees not to assign the lease right either in part or in full, except with the Lessor’s prior expresswritten consent, and the transferee shall be bound by all the terms and conditions of this agreement. 13. The Lessor shall pay all rental tax and withholding tax throughout the term of the lease agreement, at the rate prescribed by law. In case of registration of the lease, the Lessee shall pay for registration fees and other expenses in connection with the registration. 14. The Lessee accepts that the leased premises are in good condition without deterioration at commencement of the lease period. The Lessee agrees tomaintain the same in good condition throughout the term of the Lease at his own expense. During the period of the lease should the leased premises or any interior accessories become deteriorated or damaged by the Lessee or any of hisassignees, and the Lessee does not implement repairs within a reasonable period as deemed fit by the Lessor. The Lessor shall be entitled to enter uponthe Leased Premises to undertake the repairs himself and the Lessee shall reimburse all reasonable repair expenses in full upon request by the Lessor. 15. The Lessee shall keep the inside and the immediate outside vicinity of the leased premises clean at all times and dispose of refuse in the container orother place of disposal stipulated by the Lessor. 16. Throughout the period of the lease, the Lessee agrees not to bring into the leased premises any things prohibited by law, any chemical substance, fuel,inflammable material, or any material posing a fire hazard, or load any part of the leased premises with anything weighting more than 1,000 kilogramsper square meter. 17. The Lessee may insure for its own benefit the interior decoration of the Leased Premises and its stock (if any) contained therein in accordance withcommon business practice. 18. Throughout the term of the lease, the Lessor has the right to install any additional equipment and apparatus for the benefit of the Lessee or other lesseesor of the Lessor himself, provided that in so doing minimum disturbance is caused to the Lessee and the Lessee shall give his best cooperation in thisregard. The Lessor shall not be responsible for any obstruction or for any inconvenience which may be caused to the Lessee owing to the necessity ofinstallation, repair, or maintenance, or any other force major which is beyond the control of the Lessor, including any actions by his workers inimplementation thereof. 19. Both Lessor and Lessee have a liability insurance to cover any damages occurring from deterioration or other accidents from the state of the building. 20. The Lessee or his assignees shall not commit any act which is unlawful, immoral, undesirable, or cause disturbance or nuisance to the Lessor or otherpersons, or broadcast by whatever means, or cause objectionable noises to emanate from the leased premises, or commit any act which poses danger tothe leased premises or to nearby property, or the Lessor, or any other persons. 21. Should the Lessee be in default of rent payment or fails to comply with any clause of this agreement, or is ordered by the court for his property withinthe leased premises to be impounded or confiscated or the Lessee is charged with bankruptcy, the agreement shall be deemed terminated without priornotification. The Lessor has the right to enter upon and repossess the leased premises immediately with the right to remove all the property of the Lesseetherefrom. The Lessee shall have no right to claim for any damages, including the right to enter into any action both Civil and Criminal against theLessor. 22. Should fire or any other peril cause damage to the leased premises or any part thereof to the extent that, in the opinion of the Lessor, the leased premisescan no longer be utilized by the Lessee, then the agreement shall be deemed terminated. 23. At the expiration of the term of this agreement or this agreement is terminated from whatever cause the Lessee shall remove all his belongings and vacatethe leased premises immediately and deliver the leased premises to the Lessor in normal condition. Should the leased premises be damaged or deterioratedthe Lessee shall be responsible to pay for all such losses. Should the Lessee be unable to hand over the leased premises to the Lessor then the Lessor shall have the right to claim for damages at the rate ofbaht 8,500 (eight thousand five hundred baht only) per day from the date due for handing over to the Lessor until the leased premises has beencompletely handed over to the Lessor in normal condition, without depriving the Lessor of the right to claim for other damages. 24. The Lessor or his representative shall have the right to enter the leased premises for inspection at any reasonable time and give advice or caution in theevent of impending breach of any clause of this agreement or anything likely to cause damage. The Lessee shall comply with all the regulations and ruleswhich the Lessor has imposed on all the lessees of the premises. .  25. In case written notification or correspondence cannot be conveyed to the Lessor’s person by any other means, the Lessee accepts that a written noticeaffixed upon the leased premises shall be deemed sufficient notification and acknowledgment by the Lessee. This agreement is made in duplicate. The parties to the agreement, each retaining one copy, have read and understood the entire substance of theagreement to their satisfaction and hereunto set their signatures and their company seals in the presence of witnesses. Lessor : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL, VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee)Lessee : i-STT Nation Ltd. /ss/ LIM PEANG KOON AND SERMSIN SAMALAPA(Mr. Lim Peang Koon and Mr. Sermsin Samalapa)Witness : /s/ TIAB PHALEE(Mr. Tiab Phalee)Witness : ( )  Service Agreement Agreement No. S-069/44 Dated February 1, 2001 This agreement is made at the office of the Nation Multimedia Group Public Co., Ltd. between Nation Multimedia Group Public Co., Ltd. registeredoffice at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr. Thanachai Santichaikul and Mr. VanchaiSriherunrusmee authorized directors hereinafter called the “Service Provider” of one part and i-STT Nation Ltd. having registered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis by Mr.Lim Peng Koon and Mr. Sermsin Samalapa authorized director hereinafter called the “Service Receiver” of the other part. Both parties agree to enter into a Service Agreement subject to the following terms: 1. The Service Receiver has entered into the Lease Agreement with the Service Provider, Agreement No. R-069/44 dated February 1, 2001, for the premisessituated at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Bangkok Metropolis, leasing some part of unit no. 44 approximate total area947.8 square meters (Nine hundred and forty-seven point eight square meters) on the 1st and 3rd floor of Nation Building II. 2. The Service Agreement shall be considered as part of the Lease Agreement above mentioned in Clause 1. 3. The Service Receiver agrees to pay service charges to the Service Provider by advance monthly payments as follows: 3.1 Electricity system per month : Baht 47,390(excluding value added tax)3.2 Common property service per month : Baht 47,390(excluding value added tax) 4. During the electricity meter is not transferred to the Service Receiver name, the Service Receiver Lessee shall pay for the electricity charges in accordancewith the sub-meter installed for the leased premises at the rate of the Metropolitan Electricity Authority (invoiced by the Lessor). However, if theclassification of the electricity user change from 3.1.2 (present), the Service Provider still pay at the previous rate (classification 3.1.2), the remaindershall be responsible by the Service Receiver. Whenever the electricity meter has been transferred to the Service Receiver name, the Service Receiver shall pay for the deposit to the MetropolitanElectricity Authority. The Electricity charge of each month shall be payable directly to electricity Metropolitan Electricity Authority bill by the ServiceReceiver. 5. The Service Provider agrees to provide the Service Receiver with the following services: 5.1 Electricity distribution system for the Service Receiver to use throughout 24 hours whereby 5.2 Central Sanitary system for the use of bathrooms, toilets, drainage, sewerage, water supply and other sanitary facilities according to the ServiceProvider’s design. 5.3 Car parking facilities to the Service Receiver’s clients and visitors while imposing parking charges at an appropriate rate. 5.4 Security service in the common property areas. 5.5 Cleaning service in the common property areas. 5.6 Central refuse collection service. 6. The Service Provider shall provide and install water supply and water meter to the leased premises at the point stipulated in the plan (if any). TheService Receiver is responsible to pay charges for water consumption as recorded by the water meter at the rate stipulated by the Service Provider (Baht16 per unit). The water supply charges had included with the common property service charges for the following month. Should the Service Receiver wish to expand the water supply system, sanitary system, bathrooms and other facilities within the leased premises,the Service Receiver shall submit the expansion plans to the Service Provider who will give the matter consideration case by case, so as to be inconformance with engineering or architectural requirements and not in conflict with the law and by-laws of the Bangkok Metropolis in connection withthis matter. 7. The Service Provider shall provide and install appropriate electrical power supply at the point stipulated in the Service Provider’s design, with feedercables and electricity meter inside the leased premises, together with receptacles and lighting fixtures at the points stipulated in the plans. 8. The Service Provider shall provide and install an internal telephone line by connecting the Lessee’s telephone outlet to the building’s PABX for whichthere is no charge to the Service Receiver. But the Service Receiver has to provide his own telephone handset. 9. The Service Receiver agrees to pay the service charges in advance according to Clause 3 of this agreement to the Service Provider within the 5th day ofeach month at the office of the Service Provider, commencing the payment from the time that the Lease agreement in Clause 1 becomes effective. TheService Receiver agrees to pay the service charges as long as he still occupies the leased premises, whether or not the lease agreement remains in effect,until the Service Receiver has completely returned the leased premises to the Service Provider. 10. The Service Receiver accepts that to be in breach of the Lease Agreement is also deemed to be in breach of the Service Agreement and vice versa. 11. Should there arise any difficulty in connection with providing the services in accordance herewith, the Service Provider agrees to correct it at his ownexpense. But such difficulties shall in no way be construed as just cause for the Service Receiver to terminate the agreement. 12. This agreement shall remain in full force and effect until the lease agreement between the Service Receiver and Service Provider referred to in Clause 1shall expire. 13. Should the Service Receiver be in default in paying the Service Charges and is notified in writing by the Service Provider for payment to be made withina certain time limit and the Service Receiver does not pay within the specified time, then the Service Provider shall have the right to terminate theagreement and claim the whole amount of the security deposit immediately in accordance with Clause 4 of the Lease Agreement. The Service Receiver agrees to pay a late payment fine to the Service Provider at the rate of 15% per annum from the date of default until theoutstanding services charges have been completely paid. 14. It is agreed that the service charges mentioned in Clause 3 are the expenses for provision of the services collected from all Service Receivers in proportionto leased areas. The Service Provider reserves the right to adjust the service charge rate in case of future increase in cost for provision of such services. 15. Any dispute arising from the terms and conditions of this agreement or concerning breach of this agreement shall be submitted to the Civil Court inBangkok. In serving warrants and notices should the Service Provider have affixed the notice to the wall of the Leased Premises, it shall be deemed tohave been properly delivered. This agreement is made in duplicate. The parties to the agreement, each retaining one copy, have read and understood the entire substance of theagreement to their satisfaction and hereunto set their signatures and their company seals in the presence of witnesses. Service Provider : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL, VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Service Receiver : i-STT Nation Ltd. /ss/ LIM PENG KOON AND SERMSIN SAMALAPA (Mr. Lim Peng Koon and Sermsin Samalapa)  Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) : Witness ( )  Memorandum Attached to Lease Agreement No. R-069/44 andService Agreement No. S-069/44 Dated February 1, 2001 Both parties agree to additional terms as follows: 1. The Lessor/Service Provider present the following complimentary items without charge: 1.1 Daily newspaper, The Nation and Krungthep Turakij. 2.2 Nation Weekly 2. The Service Provider shall allow the Service Receiver the use of 9 parking spaces without charge throughout the period of the agreement. Visitors’carparking for 2 hours free of charge, Baht 10 per hour after all. The additional carparking spaces can be rented at the rate of Baht 500 -per space/month. It is understood and agreed that the Service Provider shall not be held responsible for any loss or damage which may arise with the vehiclesusing the said parking spaces. Lessor/Service Provider : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL, VANCHAI SRIHERUNRUSMEE ( Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Lessee/Service Receiver : i-STT Nation Ltd. /ss/ LIM PENG KOON AND SERMSIN SAMALAPA ( Mr. Lim Peng Koon and Sermsin Samalapa ) Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) Witness : ( )  Memorandum Attached to Lease Agreement No. R-069/44 andService Agreement No. S-069/44 Dated July 11, 2001 Both parties agree to additional terms as follows: 1. The Lessor/Service Provider shall maintain the peak demand to be below 1000 KW for the year 2001. Should the peak load exceeds 1000 KW, theLessor agrees to renegotiate the responsibility of the new electricity charge. 2. The Lessor shall accept the software solution installed by the Lessee to measure the peak load demand . 3. The Lessor shall provide a fixed parking lot with the company sign on it for 5 cars. Lessor/Service Provider : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL, VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Lessee/Service Receiver : i-STT Nation Ltd. /ss/ LIM PEANG KOON AND SERMSIN SAMALAPA (Mr. Lim Peng Koon and Sermsin Samalapa ) Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) Witness : ( ) Exhibit 10.67 NATION TOWER Lease Agreement Agreement No. R-103 /45 Dated October 1, 2001 This agreement is made at the office of the nation Multimedia Group Public Co., Ltd. between Nation Multimedia Group Public Co., Ltd., havingregistered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr. Thanachai Santichaikul andMr. Vanchai Sriherunrusmee authorized directors herein after called the “Lessor” of one part and i-STT Nation Ltd. having registered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr.Alvin Oei and Mr. Sermsin Samalapa authorized director hereinafter called the “Lessee” of the other part. Whereas the Lessor is the owner of the building at 46/15-16 on the 6th floor of Nation Tower, situated at 46/15-16 Moo 10, Bangna Trad-Road,Kweang Bangna, Khet Bangna, Province of Bangkok Metropolis, wished to lease some part of the aforesaid unit to the Lessee and the Lessee wishes to takelease, both parties agree to enter into a lease agreement subject to the following terms. 1. The Lessor agrees to leas out and the Lessee agrees to take on lease unit no. 46/15-16 on the 6th floor of Nation Tower, covering an approximate area of348.54 square meters (Three hundred and forty-eight and point fifty-four square meters) as appears in the floor plan attached to this agreement whichshall be deemed as part of this agreement, hereinafter referred to as the “Leased Premises” for the business of keeping office”. 2. The term of the lease shall be for a period of 3 years commencing from October 1, 2001 to September 30, 2004. The Lessee agrees to pay monthly rentalof Baht 37,642.32 (thirty-seven thousand six hundred and forty-two baht and thirty-two stang) throughout the term of the lease by advance paymentwithin the 5th day of each month at the office of the Lessor. The Lessee shall have the option to renew this lease agreement for a further 3 years. Theoption shall be exercised by the Lessee by giving notice of his intention to renew the lease at least 90 days prior to the expiration of this lease agreementsubject to the terms and conditions of the lease agreement. Should notification not be made within the specified time, it shall be deemed that the Lesseehas no wish to renew the lease. In case the Lessee has renewed the lease. The Lessor and the Lessee agree to be bound by the terms and conditions of this lease agreement exceptthat the rate of rent for a further 3 years shall be increased by not more than 15% of the previous rent. 3. The Lessee agrees to commence to conduct his business at the leased premises within 30 days from the date of receiving notice from the Lessor that theLessee is eligible to utilize the leased premises. 4. In order to comply with the lease agreement, the Lessee agrees to deposit as security bond with the Lessor Baht 62,737 (sixty-two thousand and sevenhundred and thirty-seven baht only.) upon signing of this agreement. This security deposit without interest shall be returned to the Lessee in full after thetermination of the lease agreement and the Lessee is determined to be without any obligation due to the Lessor either directly or indirectly. In case where the Lessee is in breach of any section of this agreement, or wishes to terminate this agreement before the end of the lease period, thenthe Lessee shall forfeit to the Lessor the deposited security bond as damages. 5. Both parties agree to take the Service Agreement No. S-103/45 dated October 1, 2001 between the Lessor and the Lessee as part of the lease agreement. Allthe terms and conditions in the Service Agreement shall apply to this agreement to the extent that they are not contrary to or in conflict with thisagreement, when the terms of this agreement shall take preference. Breach of the Service Agreement shall also be deemed breach of this agreement. 6. The right of the Lessee refers only to the lease of the interior of the premises and excludes the external areas of the premises. Interior fitting out may bedone upon submitting the detailed plans and written permission from the Lessor obtained. The Lessee may not modify or alter the leased premises. Any modification, alteration, or addition carried out on the leased premises, may beconducted only with the Lessor’s prior written consent. In all cases any new fixture resulting from modification, alteration, addition to the leasedpremises shall immediately become the property of the Lessor. In case of damage having occurred to the leased premises, the Lessee shall be responsiblefor all repairs in order to reinstate to the original condition at his own expense, without any right to oppose or reject claims for any damages orcompensation from the Lessor. 7. The Lessee agrees not to pierce the floor, ceiling, walls or any part in the interior or exterior of the leased premises without the Lessor’s prior writtenpermission. 8. The Lessee has the right to install name plates or advertising signs inside the leased premises only. Installation outside the leased premises shall bepermitted only at the location assigned by the Lessor, and then only with the written permission of the Lessor. The Lessee agrees to pay for all costs, feesand all forms of taxation incurred in connection with any such installations. In case the installation of the name plates or advertising signs outside the leased premises has been conducted without prior written permissionfrom the Lessor, the Lessor or his representative shall have the right to remove them from the leased premises, and the Lessee shall have no right to claimfor any damages and shall be responsible for all expenses incurred in reinstating the place of fixture to the original condition. 9. The Lessee shall comply with all the rules and regulations of Nation Tower Juristic Person. 10. The Lessee shall not allow any person to reside on the leased premises, and shall enter and leave the leased premises within accepted normal hours ofbusiness. Should it be necessary to enter or leave before or after such times, he must observe and conform to all reasonable regulations made by theLessor in writing. 11. The Lessee shall conduct business in his own name as specified in Clause 1, and shall not sublease nor allow other persons to conduct it in his steadwithout prior written permission from the Lessor. Changing of business name without prior permission shall be deemed as sublease. 12. During the period of the lease agreement the Lessee agrees not to assign the lease right either in part or in full, except with the Lessor’s prior expresswritten consent, and the transferee shall be bound by all the terms and conditions of this agreement. 13. The Lessor shall pay all rental tax and withholding tax throughout the term of the lease agreement, at the rate prescribed by law. In case of registration of the lease, the Lessee shall pay for registration fees and other expenses in connection with the registration. 14. The Lessee accepts that the leased premises are in good condition without deterioration at commencement of the lease period. The Lessee agrees tomaintain the same in good condition throughout the term of the Lease at his own expense. During the period of the lease should the leased premises or any interior accessories become deteriorated or damaged by the Lessee or any of hisassignees, and the Lessee does not implement repairs within a reasonable period as deemed fit by the Lessor. The Lessor shall be entitled to enter uponthe Leased Premises to undertake the repairs himself and the Lessee shall reimburse all reasonable repair expenses in full upon request by the Lessor. 15. The Lessee shall keep the inside and the immediate outside vicinity of the leased premises clean at all times and dispose of refuse in the container orother place of disposal stipulated by the Lessor. 16. Throughout the period of the lease, the Lessee agrees not to bring into the leased premises any things prohibited by law, any chemical substance, fuel,inflammable material, or any material posing a fire hazard, or load any part of the leased premises with anything weighting more than 250 kilogramsper square meter. 17. The Lessee may insure for its own benefit the interior decoration of the Leased Premises and its stock (if any) contained therein in accordance withcommon business practice. 18. Throughout the term of the lease, the Lessor has the right to install any additional equipment and apparatus for the benefit of the Lessee or other lesseesor of the Lessor himself, provided that in so doing minimum disturbance is caused to the Lessee and the Lessee shall give his best cooperation in thisregard. The Lessor shall not be responsible for any obstruction or for any inconvenience which may be caused to the Lessee owing to the necessity ofinstallation, repair, or maintenance, or any other force major which is beyond the control of the Lessor, including any actions by his workers inimplementation thereof. 19. Both Lessor and Lessee have a liability insurance to cover any damages occurring from deterioration or other accidents from the state of the building. 20. The Lessee or his assignees shall not commit any act which is unlawful, immoral, undesirable or cause disturbance or nuisance to the Lessor or otherpersons, or broadcast by whatever means, or cause objectionable noises to emanate from the leased premises, or commit any act which poses danger tothe leased premises or to nearby property, or the Lessor, or any other persons. 21. Should the Lessee be in default of rent payment or fails to comply with any clause of this agreement, or is ordered by the court for his property withinthe leased premises to be impounded or confiscated or the Lessee is charged with bankruptcy, the agreement shall be deemed terminated without priornotification. The Lessor has the right to enter upon and repossess the leased premises immediately with the right to remove all the property of the Lesseetherefrom. The Lessee shall have no right to claim for any damages, including the right to enter into any action both Civil and Criminal against theLessor. 22. Should fire or any other peril cause damage to the leased premises or any part thereof to the extent that, in the opinion of the Lessor, the leased premisescan no longer be utilized by the Lessee, then the agreement shall be deemed terminated. 23. At the expiration of the term of this agreement or this agreement is terminated from whatever cause the Lessee shall remove all his belongings and vacatethe leased premises immediately and deliver the leased premises to the Lessor in normal condition. Should the leased premises be damaged or deterioratedthe Lessee shall be responsible to pay for all such losses. Should the Lessee be unable to hand over the leased premises to the Lessor then the Lessor shall have the right to claim for damages at the rate ofbaht 3,500 (three thousand and five hundred baht only) per day from the date due for handing over to the Lessor until the leased premises has beencompletely handed over to the Lessor in normal condition, without depriving the Lessor of the right to claim for other damages. 24. The Lessor or his representative shall have the right to enter the leased premises for inspection at any reasonable time and give advice or caution in theevent of impending breach of any clause of this agreement or anything likely to cause damage. The Lessee shall comply with all the regulations and ruleswhich the Lessor has imposed on all the lessees of the premises. 25. In case written notification or correspondence cannot be conveyed to the Lessor’s person by any other means, the Lessee accepts that a written noticeaffixed upon the leased premises shall be deemed sufficient notification and acknowledgement by the Lessee. This agreement is made in duplicate. The parties to the agreement, each retaining one copy, have read and understood the entire substance of theagreement to their satisfaction and hereunto set their signatures and their company seals in the presence of witnesses. Lessor : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Lessee : i-STT Nation Ltd. /ss/ ALVIN OEI SERMSIN SAMALAPA (Mr. Alvin Oei and Mr. Sermsin Samalapa) Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) Witness : ( ) Service Agreement Agreement No. S-103/45 Dated October 1, 2001 This agreement is made at the office of the Nation Multimedia Group Public Co., Ltd. between Nation Multimedia Group Public Co., Ltd. registeredoffice at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr. Thanachai Santichaikul and Mr. VanchaiSriherunrusmee authorized directors hereinafter called the “Service Provider” of one part and i-STT Nation Ltd. having registered office at 44 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Province of Bangkok Metropolis, by Mr.Alvin Oei and Mr. Sermsin Samalapa authorized director hereinafter called the “Service Receiver” of the other part. Both parties agree to enter into a Service Agreement subject to the following terms: 1. The Service Receiver has entered into the Lease Agreement with the Service Provider, Agreement No. R-103/45 dated October 1, 2001, for the premisessituated at 46/15-16 Moo 10, Bangna-Trad Road, Kwaeng Bangna, Khet Bangna, Bangkok Metropolis, leasing some part of unit no. 44 approximatetotal area 348.54 square meters (Three hundred and forty-eight point fifty-four square meters) on the 6th floor of Nation Tower. 2. The Service Agreement shall be considered as part of the Lease Agreement above mentioned in Clause 1. 3. The Service Receiver agrees to pay service charges to the Service Provider by advance monthly payments as follows: 3.1 Air-conditioning system per month : Baht 12,547.44(excluding value added tax)3.2 Electricity system per month : Baht 6,273.72(excluding value added tax)3.3 Common property service per month : Baht 6,273.72(excluding value added tax) 4. The Service Provider agrees to provide the Service Receiver with the following services: 4.1 Completely installed air-conditioning system, together with central cooling by water according to the Service Provider’s design, including air-conditioning units, control system and distribution ducts within the leased area.The central cooling water system aforementioned in the first paragraph shall operate daily from 08.00 hrs. to 18.00 hrs. except Sundays andofficial public holidays. 4.2 Electricity distribution system for the Service Receiver to use throughout 24 hours whereby the Service Receiver shall pay for the electricitycharges in accordance with the meter installed for the leased premises at the rate stipulated by the Service Provider. The electricity charges of eachmonth shall be payable with the Service charges of the following month. 4.3 Central Sanitary system for the use of bathrooms, toilets, drainage, sewerage, water supply and other sanitary facilities according to the ServiceProvider’s design. 4.4 Car parking facilities to the Service Receiver’s clients and visitors while imposing parking charges at an appropriate rate. 4.5 Security service in the common property areas. 4.6 Cleaning service in the common property areas. 4.7 Central refuse collection service. 5. During the electricity meter is not transferred to the Service Receiver name, the Service Receiver Lessee shall pay for the electricity charges at the rate ofthe Metropolitan Electricity Authority. Whenever the electricity meter has been transferred to the Service Receiver name, the Service Receiver shall pay for the deposit to the MetropolitanElectricity Authority. The Electricity charge of each month shall be payable directly to electricity Metropolitan Electricity Authority bill by the ServiceReceiver. 6. The Service Provider shall provide and install water supply and water meter to the leased premises at the point stipulated in the plan (if any). TheService Receiver is responsible to pay charges for water consumption as recorded by the water meter at the rate stipulated by the Service Provider (Baht16 per unit). The water supply charges had included with the common property service charges for the following month. Should the Service Receiver wish to expand the water supply system, sanitary system, bathrooms and other facilities within the leased premises,the Service Receiver shall submit the expansion plans to the Service Provider who will give the matter consideration case by case, so as to be inconformance with engineering or architectural requirements and not in conflict with the law and by-laws of the Bangkok Metropolis in connection withthis matter. 7. The Service Provider shall provide and install appropriate electrical power supply at the point stipulated in the Service Provider’s design, with feedercables and electricity meter inside the leased premises, together with receptacles and lighting fixtures at the points stipulated in the plans. 8. The Service Provider shall provide and install an internal telephone line by connecting the Lessee’s telephone outlet to the building’s PABX for whichthere is no charge to the Service Receiver. But the Service Receiver has to provide his own telephone handset. 9. The Service Receiver agrees to pay the service charges in advance according to Clause 3 of this agreement to the Service Provider within the 5th day ofeach month at the office of the Service Provider, commencing the payment from the time that the Lease agreement in Clause 1 becomes effective. TheService Receiver agrees to pay the service charges as long as he still occupies the leased premises, whether or not the lease agreement remains in effect,until the Service Receiver has completely returned the leased premises to the Service Provider. 10. The Service Receiver accepts that to be in breach of the Lease Agreement is also deemed to be in breach of the Service Agreement and vice versa. 11. Should there arise any difficulty in connection with providing the services in accordance herewith, the Service Provider agrees to correct it at his ownexpense. But such difficulties shall in no way be construed as just cause for the Service Receiver to terminate the agreement. 12. This agreement shall remain in full force and effect until the lease agreement between the Service Receiver and Service Provider referred to in Clause 1shall expire. 13. Should the Service Receiver be in default in paying the Service Charges and is notified in writing by the Service Provider for payment to be made withina certain time limit and the Service Receiver does not pay within the specified time, then the Service Provider shall have the right to terminate theagreement and claim the whole amount of the security deposit immediately in accordance with Clause 4 of the Lease Agreement. The Service Receiver agrees to pay a late payment fine to the Service Provider at the rate of 15% per annum from the date of default until theoutstanding services charges have been completely paid. 14. It is agreed that the service charges mentioned in Clause 3 are the expenses for provision of the services collected from all Service Receivers in proportionto leased areas. The Service Provider reserves the right to adjust the service charge rate in case of future increase in cost for provision of such services. 15. Any dispute arising from the terms and conditions of this agreement or concerning breach of this agreement shall be submitted to the Civil Court inBangkok. In serving warrants and notices should the Service Provider have affixed the notice to the wall of the Leased Premises, it shall be deemed tohave been properly delivered. This agreement is made in duplicate. The parties to the agreement, each retaining one copy, have read and understood the entire substance of theagreement to their satisfaction and hereunto set their signatures and their company seals in the presence of witnesses. Service Provider : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Service Receiver : i-STT Nation Ltd. /ss/ ALVIN OEI SERMSIN SAMALAPA (Mr. Alvin Oei and Mr. Sermsin Samalapa) Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) Witness : ( )  Memorandum Attached to Lease Agreement No. R-103/45 andService Agreement No. S-103/45 Dated October 1, 2001 Both parties agree to additional terms as follows: 1. The Lessor allows the Lessee a discounted rent concession of 12 calendar months subsequent to the fitting out period, during that period the rent andservice charges shall be payable by the Lessee at the rate of 5/6 (Five/Six) of the agreed contract rate. 2. The Lessor/Service Provider present the following complimentary items without charge: 2.1 Daily newspaper, The Nation and Krungthep Turakij. 2.2 Nation Weekly 3. The Service Provider shall allow the Service Receiver the use of 6 parking spaces without charge throughout the period of the agreement. Visitors’carparking for 2 hours free of charge, Baht 10 per hour after all. The additional carparking spaces can be rented at the rate of Baht 500.-perspace/month. It is understood and agreed that the Service Provider shall not be held responsible for any loss or damage which may arise with thevehicles using the said parking spaces. Lessor/Service Provider : Nation Multimedia Group Public Co., Ltd. /ss/ THANACHAI SANTICHAIKUL VANCHAI SRIHERUNRUSMEE (Mr. Thanachai Santichaikul and Mr. Vanchai Sriherunrusmee) Lessee/Service Receiver : i-STT Nation Ltd. /ss/ ALVIN OEI SERMSIN SAMALAPA (Mr. Alvin Oei and Mr. Sermsin Samalapa) Witness : /s/ TIAB PHALEE (Mr. Tiab Phalee) Witness : ( ) Exhibit 10.68 Reference Number: (Biao 113) General Factory Lease Agreement Party A: Shanghai Jin Qiao Pte Ltd Party B: i-STT Pte Ltd 21st February 2001 Shanghai Serial Number: General Factory Lease Agreement Party A: Shanghai Jin Qiao Pte Ltd Address: No. 28, New Jinqiao Road Legal Representative: Yang Xiaoming Party B: i-STT Pte Ltd Address: 20 Ayer Rajah Crescent #05-05/08 Singapore 139964 Executive Director: Xiao Deyang WHEREAS Party A is the legal owner of the Factory for lease (as defined below) and intends to let the Factory for lease to Party B and Party B intends torent the Factory for lease from Party A; NOW in accordance with the , , , , and other relevant stipulations and with reference to current practices in China and in the various developmentdistricts in Shanghai, both parties reach the following unanimously with regard to the leasing of the Factory: 1. Definition1.1 Factory for lease: refers to the 1st and 2nd storey of the general-purpose factory at the general-purpose factory block No. 48 [*general-purpose factory lotNo. 2 (T52-2)] (No. 1112, Chuanqiao Road) located at Plot 52, Jinqiao Export Processing District, Shanghai that Party A leases out to Party B andParty B rents from Party A. It has a total building area of 8456 metres (the actual area shall be based on the survey conducted by the relevant authority).Its geographical location and structure are indicated in Appendix I . The variance between the measured area and 8456 square metres must not exceed 338.24 square metres. For variance within 338.24 square metres, therent shall be refunded for any overpayment or supplemented for any deficiency. In the event that the difference between the measured area and 8456square metres is larger than 338.24 square metres, Party A shall not charge rental for the area that exceeds 338.24 square metres and Party B shall beallowed to use the area at no cost; in the event that the difference between 8456 square metres and the measured area is larger than 338.24 square metres,Party B shall be entitled to terminate this Agreement.  1.2 Property Management Company: In this Agreement, it refers to the property management company that has signed a property management contract withthe owner(s) of the factory district where the factory for lease is located, which shall be responsible for the property management of the said factorydistrict. 1.3 Supporting facilities: Unless otherwise stated, the following two areas shall be included in this Agreement: (1) Power supply, water supply, telecommunication and gas pipes; (2) Drainage of rain water, waste water drainage pipes and connections;Specific details on the relevant supporting facilities of this Agreement are shown in Appendix II . 1.4 Places for private use: In this Agreement, these refer to places inside the factory building for lease such as the production workshop, power distributionroom, toilets, pantry, auxiliary room and wall spaces. 1.5 Places for common use: In this Agreement, these refer to places inside a general-purpose factory building that are shared and used by the owners andtenants of the entire block of factory building. They include the lobby, the staircase, lifts, engine room for lifts, meter room, water pump room,corridors, loading and unloading platforms, outdoor wall spaces and roofing. Party B shall not occupy places for common use for itself. 1.6 Periodic Year: In this Agreement, it refers to 1st April of the preceding year to 31st March of the following year. 2. The legal status of both parties 2.1 Based on the duplicate copy of the Business Licence of Party A in Appendix III of this Agreement provided by Party A, Party A is an economic entityapproved by the state, responsible for the development and management of Shanghai Jinqiao Export Processing District. It is incorporated in China. 2.2 Based on the duplicate copy of the Certificate of Incorporation of Party B in Appendix IV of this Agreement provided by Party B, Party B is a legaleconomic entity in Singapore, engaging in the development of computer network technology. Party B shall invest in the establishment of an enterprise with foreign investment in Shanghai Jinqiao Export Processing District. According to theduplicate copy of the approval certificate in Appendix V, issued by the Evaluation and Approval Department for Chinese Investment with regards toParty B establishing a foreign enterprise, the said enterprise has been approved by the state for incorporation, and is an economic entity which isinvolved in production business. It is incorporated in China.  From the day that the said enterprise with foreign investment is incorporated, both Parties agree that Party B shall transfer all its rights and obligationsunder this Agreement to the said enterprise and the said enterprise shall rent the general factory stipulated in this Agreement. Both Parties and the saidenterprise with foreign investment shall execute an agreement for the relevant changes in due course. 3. Use of Factory for Lease 3.1 Party A has provided Party B with a copy of “Licence for Planning of Construction Project”(Reference Number Hu Pu Jian (00) No. 388) of the Factoryfor Lease as Appendix VI of this Agreement; the Factory for Lease is used as a production site. 3.2 Party B undertakes that the Factory for Lease shall be used as Party B’s production site; its scope of operation includes but not limited to activities suchas managing of servers, leasing of machines and motor rooms, etc. Party A confirms that Party B could use the Factory for Lease for 24 hours a day,365 days a year continuously in a proper manner. 3.3 During the lease period, without prior written consent of Party A and the approval of the relevant departments according to stipulations, Party B shallnot change the usage of the Factory for Lease. 4. The Lease Period 4.1 Party B shall rent the Factory for Lease for a period of three years from 1st April 2001 (hereinafter referred to as “the Date of Commencement of Lease”) to31st March 2004 (hereinafter referred to as “the Expiry Date”). 4.2 During the ease period, the right of use of the factory lot for lease shall belong to Party B. Its lawful rights and interests shall be protected by state laws. 5 Rent for the factory lot, property management fee and the mode of payment 5.1 Rent for the factory lot shall be three hundred and twenty-eight dollars and fifty cents (RMB 328.50) per square metre floor area per year. It amounts totwo million seven hundred and seventy-seven thousand seven hundred and ninety-six dollars (RMB 2,777,796) per year for a total floor area of 8456square metres. The property management fee shall be two dollars (RMB 2) per square metre floor area per month which amounts to sixteen thousandnine hundred and twelve dollars (RMB16,912) for the total floor area of 8456 square metres.  5.2 Within 15 days upon signing of this Agreement, Party B shall pay a deposit equivalent to two months’ rent to Party A which amounts to four hundredand sixty-two thousand nine hundred and sixty-six dollars (RMB 462,966). From the day Party A hands over the factory lot for lease to Party B, theabove-mentioned deposit paid shall be converted to security deposit for renting the factory lot. If Party A is unable to hand over the factory lot for lease toParty B or this Agreement cannot go into effect officially due to causes attributed to Party B, there shall be no refund of the deposit paid by Party B. 5.3 The rent from the date of commencement of the lease to the end of that month shall be remitted by Party B to the account of the bank of depositdesignated by Party A within 3 days from the date this Agreement goes into effect. Subsequently, Party B shall remit the rent for the current month to theaccount of the bank of deposit designated by Party A before the 15th of the month (see the last page of this Agreement). 5.4 The rent of the factory lot for lease shall not be adjusted for the first three periodic years from the Date of Commencement of Lease; from the fourthperiodic year, the rent could be adjusted (upwards or downwards) every three periodic years, the adjustment shall not be exceed 5% of the total rent ofthe previous periodic year. The adjustment shall be based on the trend of fluctuation margin of the general leasing market of similar factories (of similardevelopment district and similar type of factory) in Pudong New District, Shanghai. 5.5 The property management fee for the factory lot for lease shall be paid from the date of hand over of the factory lot. The property management fee fromthe date of hand over of the factory lot to the end of that month shall be paid directly to the property management company on the day of hand over of thefactory lot. Subsequently, Party B shall pay the property management fee directly to the property management company before the 15th of every month.The bank account of the property management company is as follows:Shanghai Jin Qiao Pte LtdBank of Deposit: Jinqiao Agricultural Bank General Business DepartmentAccount No.: 033432-10801016449 6. Other expenses for the factory lot for lease and the mode of payment 6.1 If Party B uses the supporting facilities, the articles and clauses of (Appendix II) shall apply. 6.2 During the lease period, expenses on water, electricity, gas and waste water shall be borne by Party B. Of these, charges for electricity at places forprivate use shall be paid by Party B to the power supply department directly. Charges on water shall be paid by the property management company onbehalf of the tenants and Party B shall pay the management company according to the sub-meter reading in the meter room. Charges for water andelectricity at the places for common use within the location of factory for lease shall be entered into the property management fee, and shall not be collected separately. 6.3 During the lease period, Party B shall be responsible for the power consumption in the use of lifts. The property management company shall beresponsible for the inspection and repair of lifts and training of operators of Party B. If Party B causes damage to the lift, it shall be responsible for therestoration or compensation. 6.4 Party A shall provide 8 parking lots to Party B free of charge. Of these, four are parking lots for trucks and four are for small passenger vehicles. 6.5 For the procedure of payment, details of charges and details on the use of supporting facilities in Clauses 6.1 – 6.4 mentioned above, see Appendix VII. 7. Hand over of factory lot for lease 7.1 Party A shall hand over the factory lot for lease to Party B on 1 March 2001 (referred to as “the date of hand over” below). The relevant qualityinspection department should have inspected the factory before Party A informs Party B of the handing over. 7.2 Within three days before the date of hand over of the factory lot for lease, Party A shall present the <(Sample) of Notice of Occupation> similar toAppendix VIII of this Agreement to Party B, informing Party B to go through the formalities of occupation in writing and carry out the hand over of thefactory lot for lease. Party B shall send personnel to attend to the hand over on that day. If Party B fails to be present on the day of hand over and fails torequest Party A in writing to hand over the factory for lease after 14 days, the factory lot for lease shall be considered as handed over to Party B on thedate of hand over. 7.3 On the day of hand over of the factory lot for lease, parties A and B shall sign on the hand over documents similar to the <(Samples) of Documents ofHand Over of Factory Lot for Lease> in Appendix IX to indicate that the hand over of the factory lot for lease has been completed. 7.4 Party A undertakes that the factory for lease shall be completed, inspected and accepted by the relevant government departments and obtain the relevantcertification before 15th March 2001; failing which, Party A shall provide Party B with another suitable factory of which qualified certification ofcompletion has been obtained. Party A shall bear all direct expenses incurred by Party B in renovation and removal, and compensate Party B with arenovation period of one month.  8. Sub-lease 8.1 Unless otherwise stated in writing, the lease of the factory lot shall be limited to the production needs of the enterprise with foreign investment of Party B.As Party B plans to work in stages, the first stage of the project shall only utilise part of the factory for lease, utilisation of the remaining parts of thefactory shall be based on the market needs and the whole project shall be completed progressively with the commencement of the second stage of theproject. In view of the above mentioned reasons, Party A agrees to allow Party B to sub-lease the remaining parts of the factory during this period, but theproduction works of such tenant shall satisfy the environmental needs and property directives of Jinqiao Export Processing District, and Party B shallnot benefit from the sub-lease. Once the second stage of the project commences, Party B shall recover the said sub-leased part of the factory, and use thewhole factory for its own production works. 9. Other rights and obligations 9.1 During the lease period, logistic services such as security, cleanliness and maintenance of green areas of Party B’s places for private use shall beprovided by the property management company. Party B shall hold consultations with the property management company and sign the relevantcontracts of engagement. Party B may also determine the companies that provide logistic services by calling tenders. The property management companyreferred to in this Agreement may participate in the tenders. The credentials of companies that submit tenders must be recognised by Party A. 9.2 Party B shall not damage the supporting facilities by any means. Should there be any damage, Party B shall restore them to the original conditions andbear all expenses. 9.3 During the lease period, should Party A need to carry out package facilities work in the factory for lease, Party B shall be given prior notice. ShouldParty A cause any damages to Party B’s machinery and facilities, Party A shall be liable to restore them to the original condition and bear all suchexpenses. Works carried out by Party A shall not affect Party B’s operations, failing which the rent shall be deducted according to a per day basis. 9.4 Party A shall be responsible for the natural wear and tear of the factory for lease. Party A shall carry out repairs based on the regulated time andmaintenance scope according to the maintenance cycle of the general factory of the factory for lease. Party B shall be responsible for the repair orcompensation of corresponding monetary losses for damages to the factory for lease due to human factor. 9.5 During the lease period, Party B shall not damage the factory for lease and its equipment and accessory facilities. It shall not be allowed to change theuse of the factory for lease, demolish and build at will or damage the structure of the factory for lease.  9.6 During the period of lease, if Party B has to carry out partition, refitting and/or partially reconstruct the factory lot for lease, it must obtain the priorwritten consent of Party A and the approval of the property management company in accordance with the procedure stipulated in Appendix VII. Theabove-mentioned actions of Party B shall not violate state and local laws, regulations and stipulations in construction, fire-fighting, environmentalprotection and industrial hygiene. They shall not damage the factory lot for lease and the building structure of the general-purpose factory building whereit is situated. The relevant government departments, Party A and the property management company shall be entitled to carry out supervision andinspection on Party B and demand immediate alteration by Party B. Furthermore, Party B shall not damage the building structure of the factory lot forlease. If there is damage or change in the building structure, Party B shall be responsible for restoration to the original conditions and bear all theexpenses. Expenses on partition, decoration or partial reconstruction and the responsibility of maintenance shall be solely borne by Party B. 9.7 Clients who purchase and/or rent the same general factory shall not occupy the places for common use or other areas outside the limits of the factory lotfor lease for any reason. When Party B installs equipment and pipes that involves places of neighbouring owners or users, consent of the neighbouringusers shall be sought and the normal use of the factory building shall not be affected. Should there be defaults, Party B shall be responsible forremoving obstructions and restoration to the original conditions and bear all charges. 9.8 There shall be no construction of any attached buildings or structures to the external walls and roof of the factory lot for lease and the general-purposefactory building where it is situated. If the construction is necessary under special circumstances, written consent from Party A shall be sought. 9.9 Party B shall take care of the environmental hygiene in response to the relevant laws, regulations and provisions of the state and Shanghai City. 9.10 Works such as management of places for common use and environmental management of factory area, etc., shall be handled according to Appendix X. 9.11 Party A shall be responsible for items outside the factory for lease such as public sanitation, greenery maintenance, etc. 9.12 Shanghai Jinqiao Export Processing District has already attained the certification of ISO14000. Party B shall adhere to Appendix XI of this Agreement.  9.13 During the lease period, should Party A wish to sell the factory for lease, Party B shall enjoy priority to purchase under the same conditions. Party Ashall inform Party B in writing three months in advance of its intention to sell the factory for lease. Party B shall reply to Party A in writing as towhether it would like to purchase the factory for lease within 15 days upon receiving Party A’s written notice. Should Party B fail to reply in writingbefore the time frame, it shall be deemed that Party B has abandon its right to purchase the factory for lease. When Party A transfers the factory for leaseto another party, Party A must obtain the undertaking of the transferee that it shall, during Party B’s lease period, continue to fulfil Party A (owner)’sresponsibilities and obligations under this Agreement, and be bounded by the provisions of this Agreement. 9.14 During the lease period, Party B shall enjoy purchasing right of the factory for lease. Party A agrees that if Party B exercises the said right within oneyear from the date of hand over, and both Parties reach an agreement with regards to the sale of the factory for lease within the same one-year period,Party B shall have the right to purchase the factory at a price of US$430 per square metre. The rent that Party B prior the purchase of the said factorycould be converted into the amount paid for purchasing the factory. Should Party B exercise the said right one year after the date of hand over, Party Bshall purchase the said factory at market price. 9.15 Before signing the formal Lease Agreement, Party A undertakes as follows:1) Should there be another party who may rent or purchase the factory beside or near to the factory rented by Party B, Party A shall inform Party B ofthe party’s business dealings, and Party B shall ascertain if the party’s operations would damage or affect its own operations. The said damages oreffects shall include but not limited to violent vibrations that result in the vibration of Party B’s engine room, potential hazards caused by combustibleor explosive substances, hazardous or severely polluting gases, loud noises (referring to noises of more than 65 decibels measured at a position of 1metre away) and strong electro-magnetic interference. In addition, Party B shall confirm that the production it is engaging does not cause any damage oreffect on any third party of a neighbouring or/and nearby factory. The damage or effects include but not limited to the engine room vibration caused byviolent vibrations, hazards caused by combustible and explosive substances, hazardous or severely polluting gases, loud noises (referring to noises ofmore than 65 decibels measured at a position of 1 metre away) and strong electro-magnetic interference. However, when disputes arise from the above-mentioned issues, both parties shall employ a third party independent authority for confirmation. 2) Party A shall assist Party B actively in expanding the electrical power of the entire factory for lease to 4500KW. 3) Party A shall assist Party B in the broadband connections between the factory leased by Party B and Shanghai Telecommunication and JinqiaoTelecommunication. Party A assures that there will be optical cable/electrical cable channel within a short distance from the factory leased by Party B,and at the same time, allows Party B to connect the optical (electrical) cables from the nearest channel to the factory’s interior by underground method. Thespecific works shall be executed according to the prevailing relevant regulations. 4) As Party B expands its business, Party A shall, within its power, allow Party B to use its optical (electrical) cable channel or connect the currentfactory and the factory newly leased by Party B from Party A using optical cable by breaking ground/breaking road. The above mentioned fees shall beborne by Party B. 5) Party B could install supplementary facilities such as generator, air-conditioning outdoor compressor, and oil storage tank. Party B shall discusswith Party A with regards to the specific location of these facilities before installation. 6) Due to the limitations of the business operated by Party B, fire safety system of the factory for lease shall be changed from sprinkler type to gaseoustype. Party A shall assist Party B in the testing and inspection, as well as the licensing matters of the fire safety system. 9.16 Party A shall be responsible for the registration of the lease at the Land and Building Department. 10. Extension and termination of contract 10.1 Upon expiry of the lease period of the factory lot for lease, Party B may apply for extension. To apply for an extension, Party B shall satisfy thefollowing conditions: (1) Written application for extension should be delivered to Party A at least three months before the expiry of the prevailing lease; (2) Should the extension exceed the operational period, Party B shall also submit approval document from the Examining and Approving Departmentfor Investment indicating its consent to the extension of Party B’s operational period. Such document should be delivered to Party A together withthe document mentioned in the previous clause; (3) Both Parties A and B have agreed on the rent of the factory for lease in accordance with Clause 5.4. 10.2 After Party B submits an application for extension according to Clause 10.1, Party A must not make any legally binding commitments to any thirdparty with regards to lease matters of the factory for lease before the expiry date stipulated in this Agreement.  10.3 If Party B applies for extension according to Clause 10.1, Party A shall grant consent to the application. Both parties shall draw up a new < GeneralFactory Lease Agreement> with reference to the objectives of this Agreement. From the date of expiry to the date when the new < General Factory LeaseAgreement> goes into effect, this Agreement continues to be effective and both parties shall fulfil their obligations under this Agreement. However, withinsix months from the expiry date, should both Parties be unable to sign a new “General Factory Lease Agreement”, unless both parties reach a writtenagreement to continue discussion on the extension of lease, this Agreement shall be terminated automatically. The termination date shall be the first day ofthe seventh month from the expiry date. 10.4 When any party of this Agreement has to terminate this Agreement in advance due to special reasons, the other party shall be informed in writing threemonths in advance. With the other party’s consent, both parties may agree to terminate this Agreement in advance and draw up the compensation termsin writing. 10.5 If Party A fails to hand over the factory for lease for a period exceeding 60 days from the date of hand over, Party B shall be entitled to cancel thisAgreement unilaterally by way of a written notice. If Party B fails to pay rent or any other charges according to schedule for a period exceeding 60 days,Party A shall be entitled to cancel this Agreement unilaterally by way of a written notice. In addition, under notarisation by a notary organisation, PartyA shall be entitled to remove all articles such as equipment and machines from the factory lot for lease in the absence of Party B and expenses incurredfor the removal and storage of such articles shall be borne by Party B.Should any party terminate this Agreement in accordance with the above clause of this Agreement, the date of termination shall be the following day ofwhich such party issues a written notice. 10.6 If Party B does not extend the lease under this Agreement after its expiry, or terminates the Agreement in accordance with Clause 10.3 to 10.5, Party Bshall return the factory for lease to Party A on the date of expiry or the day following the date of termination. However, should it be difficult for Party Bto return the factory for lease on the expiry date or the second day of the termination, the return of the factory could be delayed for two months afterobtaining Party A’s prior written consent. During the two-month grace period, Party B shall pay monthly rent to Party B according to the rent of theprevailing month of the expiry date, and pay the agreed property management fees and other fees stipulated in this Agreement. For the procedure bywhich Party B returns the factory for lease, please refer to Appendix VII of this Agreement. Party B shall comply with the following conditions whenreturning the factory for lease to Party A: (1) If Party B has carried out partitioning, refitting and/or partial reconstruction, it shall restore the premises to the conditions before thereconstruction; (2) Party B shall be responsible for the repair or compensation of damages to the facilities or supplementary equipment due to human factor;  (3) Party B shall be responsible for the dismantling works during the restoration of the factory, as well as the removal of the debris by transportingthem to the relevant dumping ground for construction debris located outside the factory district; (4) An acceptance check shall be passed by Party A; (5) The factory lot for lease shall be returned to Party A intact, including keys and codes. 10.7 Without the prior written consent of Party A, if Party B fails to return the factory for lease according to schedule, apart from the payment of penaltyaccording to this Agreement, it shall also continue to pay the monthly rent for the factory for lease according to the monthly rent on the day of expiry(period less than a month shall be considered as one month). In addition, it shall continue to pay the property management fee and other chargesaccording to this Agreement. 11. Liability for default 11.1 Unless otherwise stated in this Agreement, any of the following events shall constitute a default by Party A: (1) Failure to hand over the factory for lease to Party B by the date of hand over; (2) The factory provided fails to comply with the conditions stipulated in this Agreement; (3) Carry out works in the factory for lease without informing Party B in advance, thus causing damages to Party B’s normal production operation; (4) Violation of other articles and clauses of this Agreement. 11.2 Unless otherwise stated in this Agreement, any of the following events shall constitute a default by Party B: (1) Sub-lease of the factory for lease without Party A’s consent; (2) Damage to the various supporting facilities that lead to economic losses suffered by Party A; (3) Damage to the factory for lease or alteration of building structure without permission; (4) Failure to return the factory to Party A in according with provisions; (5) Violation of other articles and clauses of this Agreement. 11.3 If any of the events described in Clauses 11.1 (1), (2) or (3) or Clauses 11.2 (1) or (4) occurs, the defaulting party shall pay penalty to the other party.The penalty shall be calculated on a daily basis. The method of calculation is as follows: (1) The daily penalty shall be 0.3% of the annual rent, ie. Eight thousand three hundred and thirty three dollars and 39 cents (RMB 8,333.39);  (2) Number of days of default = Number of calendar days from the day of occurrence of default to the day the default is rectified; (3) Amount of penalty = daily penalty × number of days of default. 11.4 In the event of any other default other than those listed in Clause 11.3, the defaulting party shall compensate the other party for its economic losses. If theeconomic losses caused by the default exceed the penalty, the defaulting party shall also compensate for the part that exceeds the penalty. Thecompensation shall be jointly computed and determined by both parties according to the extent of economic losses. It may also be determined by a thirdparty with professional authority jointly authorised by both parties. 11.5 Upon occurrence of a default, if the performing party demands for the continual fulfilment of the Agreement, regardless of whether the payment ofcompensation has been made, the defaulting party shall continue to fulfil its obligations under this Agreement. If the duration of default exceeds 60days, the abiding party may issue a notice to the defaulting party to terminate this Agreement immediately. The termination of the Agreement shall notaffect the abiding party’s right to seek compensation. 11.6 Penalties and compensations shall be paid within 10 days from the day of confirmation of liability of default. If the default continues on the day ofpayment and compensation and thereafter, the defaulting party shall continue to pay for the penalty and compensation until the act of default ceases. 11.7 It shall be considered as overdue payment under one of the following circumstances. For each day overdue, surcharge for overdue payment shall be paidaccording to the proportion of 0.003 of the outstanding amount. (1) The rent, property management fee and other charges to be paid by Party B are overdue; (2) Overdue payment of penalty or compensation by either party. 12. Contract documents 12.1 The appendices of this Agreement are incorporated into this Agreement as they are referred to and shall be an inseparable component of this Agreement.They shall have equal effects as this Agreement. 12.2 The appendices of this Agreement include the following: (1) Appendix I: < Manual on the Technical Indices of General-purpose Factory Buildings>; (2) Appendix II: ; (3) Appendix III: Duplicate of Party A’s Business Licence; (4) Appendix IV: Duplicate of Party B’s Certificate of Incorporation; (5) Appendix V: Copy of the approval certificate issued by the Evaluation and Approval Department for Chinese Investment with regards to the enterpriseset up by Party B. (6) Appendix VI: (Reference Number Hu Pu Jian (00) No. 388) (7) Appendix VII: ; (8) Appendix VIII: <(Sample) of Notice for Occupation>; (9) Appendix IX: <(Sample) of Letter of Hand Over of General-purpose Factory Lot>; (10) Appendix IX: ; (11) Appendix XI:

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