Equinix
Annual Report 2008

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2008OR ¨¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For 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: Title of each class Name of each exchange on which registeredCommon Stock, $0.001 The NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Act. x Yes ¨ NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x NoIndicate 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 ¨ NoIndicate 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. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x NoThe 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 as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $2.9 billion.As of January 31, 2009, a total of 37,769,926 shares of the registrant’s common stock were outstanding.DOCUMENTS INCORPORATED BY REFERENCEPart III—Portions of the registrant’s definitive proxy statement to be issued in conjunction with the registrant’s 2009 Annual Meeting of Stockholders,which is expected to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2008. 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-KDECEMBER 31, 2008TABLE OF CONTENTS Item Page No.PART I1. Business 31A. Risk Factors 111B. Unresolved Staff Comments 282. Properties 283. Legal Proceedings 284. Submission of Matters to a Vote of Security Holders 29PART II5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 306. Selected Financial Data 327. Management’s Discussion and Analysis of Financial Condition and Results of Operations 337A. Quantitative and Qualitative Disclosures About Market Risk 578. Financial Statements and Supplementary Data 609. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 609A. Controls and Procedures 609B. Other Information 61PART III10. Directors, Executive Officers and Corporate Governance 6211. Executive Compensation 6212. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 6213. Certain Relationships and Related Transactions, and Director Independence 6214. Principal Accounting Fees and Services 62PART IV15. Exhibits and Financial Statement Schedules 63 Signatures 68 Index to Exhibits 69 2Table of ContentsPART I ITEM 1.BUSINESSThe 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.OverviewEquinix provides global data center services. Global enterprises, content providers, financial companies and network service providers rely uponEquinix’s insight and expertise to protect and connect their most valued information assets. We operate 42 International Business Exchange (IBX) data centers,or IBX centers, across 18 markets in North America, Europe and Asia-Pacific where customers directly interconnect with a network ecosystem of partnersand customers. More than 300 network service providers offer access to more than 90% of the world’s Internet routes inside Equinix’s IBX centers. Thisaccess to Internet routes provides Equinix customers improved reliability and streamlined connectivity while significantly reducing costs by reaching a criticalmass of networks within a centralized physical location.As the world becomes increasingly more information-driven, businesses choose Equinix for the delivery of high levels of operational availability and theleading insight of Equinix’s expert staff. Based on our network-neutral model and the quality of our IBX centers, Equinix has established a critical mass ofcustomers which continues to drive new and existing customer growth and bookings. A supply and demand imbalance in the data center market hascontributed to Equinix’s revenue growth. In addition, as a result of a largely fixed cost model, any growth in revenue would likely drive incremental marginsand increased operating cash flow; however, the costs of a new IBX center at initial opening has a negative effect on earnings until it generates sufficientrevenues to cover these costs.Equinix’s network-neutral business model also differentiates us in the market. Because we do not operate a network, Equinix is able to offer customersdirect interconnection to an aggregation of bandwidth providers, including the world’s top carriers, Internet Service Providers (ISPs), broadband accessnetworks (DSL/cable) and international carriers. AOL, at&t, British Telecom, Cable & Wireless, Comcast, Level 3, NTT, Qwest, SingTel, Sprint andVerizon Business are all currently located within our IBX centers. Access to such a wide variety of networks has attracted a variety of customers in variousbusiness sectors, including: • Enterprise (Apple, Deloitte, IBM, McGraw-Hill) • Content Providers (eBay, Electronic Arts, Fox Interactive Media, Google, MSN, Sony) • Financial Companies (Bank of America, Chicago Mercantile Exchange, Dow Jones, NASDAQ OMX)Equinix services are primarily comprised of colocation, interconnection and managed IT infrastructure services. • Colocation services include cabinets, power, operations space and storage space for customers’ colocation needs. 3Table of Contents • Interconnection services include cross connects, as well as switch ports on the Equinix Exchange service. These services provide scalable andreliable connectivity that allows customers to exchange traffic directly with the service provider of their choice or directly with each other. • Managed IT infrastructure services allow customers to leverage Equinix’s significant telecommunications expertise, maximize the benefits of ourIBX centers and optimize their infrastructure and resources.The market for Equinix’s services has historically been served by large telecommunications carriers which have bundled their telecommunications andmanaged services with their colocation offerings. Over the past several years, a number of these telecommunications carriers have eliminated or reduced theircolocation footprint to focus on their core businesses. Additionally, many of the competitive providers have failed to scale their businesses and have beenforced to exit the market. While some Equinix customers, such as AOL, Google and MSN, build and operate their own data centers for their largeinfrastructure deployments, these customers rely upon Equinix IBX centers for their critical interconnection relationships.The need for large, wholesale outsourced data centers is also, more recently, being addressed by real estate investment trusts (REITs) that build largedata centers to meet customers’ needs for standalone centers, a different customer segment than Equinix serves. However, with the diminished role of thetelecommunications players in the market and the increasing cost and complexity of the power and cooling requirements of today’s data center equipment, therecontinues to be a supply and demand imbalance in the market. Demand continues to outpace supply as a result of the current credit contraction, which iscreating a financial strain on many data center operators, limiting their ability to create new supply. Equinix continues to fund its own expansion program,while other data center operators slow or halt their data center builds altogether.The supply and demand imbalance in the industry has, to date, created a favorable pricing environment for Equinix, as well as an opportunity toincrease market share. Equinix has gained many customers that have outgrown their existing data centers or that have realized the benefits of a network-neutralmodel. Strategically, we will continue to look at attractive opportunities to grow market share and selectively expand our footprint and service offerings. Wecontinue to leverage our global reach and depth to differentiate based upon our ability to support truly global customer requirements in all our markets.Several factors are contributing to this growth, including: • The continuing growth of consumer Internet traffic from new bandwidth-intensive services, such as video, VoIP, gaming, data-rich media andwireless services. • Significant increases in power and cooling requirements for today’s data center equipment. Servers have increased the overall level of powerconsumed and heat generation by over two times since 2000, and many legacy-built data centers are unable to accommodate these new power andcooling demands. • The growth of enterprise applications, such as Software as a Service (SaaS) and disaster recovery, and the potential of cloud computingtechnology services. • The growth of “proximity communities” that rely on immediate physical colocation with their strategic partners and customers, such as financialexchange ecosystems for electronic trading and settlement. • The high capital costs associated with building and maintaining “in-sourced” data centers creates an opportunity for capital savings byoutsourcing.Industry BackgroundThe 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 services between these networks. For example, when a person sends an email tosomeone that 4Table of Contentsuses a different provider for their connectivity (e.g., Comcast versus Earthlink), the email must pass from one network to the other in order to get to its finaldestination. Equinix provides the physical point at which that interconnection occurs.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 trafficoften at no charge to the other party. At first, government and non-profit organizations established places where these networks could exchange traffic, or peer,with each other—these points were known as network access points, or NAPs. Over time, many NAPs became a natural extension of carrier services and wererun by such companies as MFS (now a part of Verizon Business), Sprint, Ameritech and Pacific Bell (both now known as at&t).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 AOL, Google,Microsoft, Yahoo! and others. In addition, the providers, as well as a growing number of enterprises, required a more secure and reliable solution for directconnection to a variety of telecommunications networks as the importance of their Internet operations 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, was 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 exchange networktraffic or peer. Customers have chosen Equinix for peering because they are now able to peer with the networks they require within one location using simpledirect connections. Their ability to peer across the room, instead of across a metro area, has increased the scalability of their operations while decreasing costsfor some customers by upwards of 70%.Equinix Value PropositionMore than 2,000 companies, including a diversified mix of content providers, financial companies, global enterprises and network service providerscurrently operate at Equinix. These companies derive specific value from the following elements of the Equinix service offering: • Comprehensive global service offering: with 42 IBX centers in 18 markets in the U.S., Europe and Asia-Pacific, Equinix offers a consistentglobal service. • Premium centers: Equinix IBX centers feature advanced design, security, power and cooling elements to provide customers with industry-leadingreliability. While others in the market have business models that include additional offerings, Equinix is focused on data center services as ourcore competency. • Dynamic ecosystem: Equinix’s network-neutral model has enabled us to attract a critical mass of networks that, in turn, attracts other businessesseeking to interconnect within a single location. This ecosystem model, versus connecting to multiple partners in disparate locations, reduces costsand increases performance for all. As Equinix grows and attracts an even more diversified base of customers, the value of Equinix’s IBX centeroffering increases. • Improved economics: Customers seeking to outsource their data center operations rather than build their own capital-intensive data centers enjoysignificant capital cost savings in this credit-challenged economic environment. Customers also benefit from improved economics on account ofthe broad access to networks Equinix provides. Rather than purchasing costly local loops from multiple transit providers, customers can connectdirectly to over 300 networks inside Equinix’s IBX centers. 5Table of Contents • Leading insight: With more than 10 years of industry experience, Equinix has a specialized staff of industry experts who helped build and shapethe interconnection infrastructure of the Internet. This specialization and industry knowledge offer customers a unique consultative value and acompetitive advantage.Our StrategyOur objective is to expand our global leadership position as the premier data center operator for content providers, financial companies and globalenterprises seeking protection and connection of their most valued information assets. Key components of our strategy include the following:Continue to build upon our critical mass of network providers and content companies and grow our position within the enterprise andfinancial sectors. We have assembled a critical mass of premier network providers and content companies and have become one of the core hubs of theinformation-driven world. This critical mass is a key selling point for companies that want to connect with a diverse set of networks to provide the bestconnectivity to their end-customers and network companies that want to sell bandwidth to companies and interconnect with other networks in the mostefficient manner available. Currently, we service over 300 unique networks, including all of the top tier networks, allowing our customers to directlyinterconnect with providers that serve more than 90% of global Internet routes. We have a growing mass of key players in the enterprise and financial sectors,such as Bank of America, The Gap, Gannett, IBM, Salesforce.com, Sony and others. We expect the success we have experienced in the content provider andfinancial segments to continue to drive our growth in 2009 and beyond.Promote our IBX centers as the most reliable data centers in the industry. Data center reliability, power availability and network choice are themost important attributes considered by our customers when they are choosing a data center provider. Our IBX centers are next-generation data centers andoffer customers advanced security, reliability and redundancy. Our security design in the U.S. IBX centers includes five levels of biometrics security to accesscustomer cages. Our power infrastructure in the U.S. includes N+1 redundancy for all systems and has delivered 99.999% uptime over the period fromJanuary 1, 2002 through December 31, 2008. We provide access to over 300 different network providers. Our support staff, trained to aid customers withoperational support, is available 24 hours a day, 365 days a year.Leverage the network ecosystem. As networks, content providers and other enterprises locate in our IBX centers, it benefits their suppliers andbusiness partners to do so as well to gain the full economic and performance benefits of direct interconnection. These partners, in turn, pull in their businesspartners, creating a “network effect” of customer adoption. Our interconnection services enable scalable, reliable and cost-effective interconnection and trafficexchange thus lowering overall cost and increasing flexibility. The ability to directly interconnect with a wide variety of companies is a key differentiator for usin the market.Provide new products and services within our IBX centers. We plan to continue to offer additional products and services that are most valuable toour customers as they manage their Internet and network businesses and, specifically, as they attempt to effectively utilize multiple networks. Examplesinclude our IBXLink services, which allow customers to easily move traffic between IBX centers located in the same metro area, or the Financial Exchangeservice, which allows direct interconnection with electronic financial exchanges, such as the Chicago Mercantile Exchange, NASDAQ and ICAP in marketssuch as Chicago, Frankfurt, London, New York and Paris.Pursue continuous growth for our customers. We continue to evaluate expansion opportunities in select markets based on customer demand. Weexpect to open new IBX centers, or IBX center expansions, in nine of our 18 markets in 2009. These efforts, and excluding the capacity added from our recententry into Europe, have more than doubled our sellable cabinet capacity since 2003. 6Table of ContentsOur strategy is to continue to grow in select existing markets and possibly expand to additional markets where demand and financial return potentialwarrant. We expect to execute this expansion strategy in a cost-effective and prudent manner through a combination of acquiring existing data centers throughlease or purchase, or building new IBX centers based on key criteria, such as demand and potential financial return, in each market.Our CustomersOur customers include carriers and other bandwidth providers, content providers, financial companies and global enterprises. We offer each customer achoice of business partners and solutions based on their colocation, interconnection and managed IT service needs. As of December 31, 2008, we had 2,272customers worldwide (2,757 including the recently acquired customers in the Netherlands).Typical customers in our four key customer categories include the following: Enterprise Carriers/Networks Content Providers Financial CompaniesApple at&t AOL AT KearneyAutodesk British Telecom ebay Bank of AmericaBechtel Cable & Wireless Electronic Arts Chicago Mercantile ExchangeCapGemini Comcast Fox Interactive Media CommerzbankDeloitte Level 3 Google Deutsche BoerseThe Gap NTT MSN Dow JonesIBM Sprint News Corporation Fidelity InvestmentsSalesforce.com Verizon Business Sony NASDAQ OMXCustomers typically sign renewable contracts of one or more years in length. No single customer accounted for 10% or greater of our revenues for theyears ended December 31, 2008, 2007 or 2006.Our ServicesOur services are primarily comprised of colocation, interconnection and managed IT infrastructure services.Colocation ServicesOur IBX centers provide our customers with secure, reliable and fault-tolerant environments that are necessary for optimum Internet commerceinterconnection. Our IBX centers include multiple layers of physical security, scalable cabinet space availability, on-site trained staff 24 hours per day, 365days a year, dedicated areas for customer care and equipment staging, redundant AC/DC power systems and multiple other redundant and fault-tolerantinfrastructure systems. Some specifications or services provided may differ in our Asia-Pacific and European locations in order to properly meet the localneeds of customers in these markets.Within our IBX centers, customers can place their equipment and interconnect with a choice of networks or other business partners. We also providecustomized solutions for customers looking to package our IBX services as part of their complex solutions. Our colocation products and services include:Cabinets. Our customers have several choices for colocating their networking, server and storage equipment. They can place the equipment in one ofour shared or private cages or customize their space. In Europe, customers can purchase their own private “suite” which is walled off from the rest of the datacenter. As a customer’s colocation requirements increase, they can expand within their original cage (or suite) or upgrade into a cage that meets their expandedrequirements. Customers buy the hardware they place in our IBX centers directly from their chosen vendors. Cabinets (or suites) are priced with an initialinstallation fee and an ongoing recurring monthly charge. 7Table of ContentsPower. Power is an element of increasing importance in customers’ colocation decisions. We offer both AC and DC power circuits at various amperagesand phases customized to a customer’s individual power requirements. Power is priced with an initial installation fee and an ongoing recurring monthlycharge.IBXflex. IBXflex allows customers to deploy mission-critical operations personnel and equipment on-site at our IBX centers. Because of the closeproximity to their infrastructure within our IBX centers, IBXflex customers can offer a faster response and quicker troubleshooting solution than thoseavailable in traditional colocation facilities. This space can also be used as a secure disaster recovery point for customers’ business and operations personnel.This service is priced with an initial installation fee and an ongoing recurring monthly charge.Interconnection ServicesOur interconnection services enable scalable, reliable and cost-effective interconnection and traffic exchange between Equinix customers. Theseinterconnection services are either on a one-to-one basis with direct cross connects or one-to-many through one of our Equinix Exchange services. In the peeringcommunity, we provide an important industry leadership role by acting as the relationship broker between parties who would like to interconnect within ourIBX centers. Our staff holds significant positions in the leading industry groups such as the North American Network Operators’ Group, or NANOG, andthe Internet Engineering Task Force, or IETF. Members of our staff have published industry-recognized white papers and strategy documents in the areas ofpeering and interconnection, many of which are used by other institutions worldwide in furthering the education and promotion of this important set ofservices. We will continue to develop additional services in the area of traffic exchange that will allow our customers to leverage the critical mass of networksnow available in our IBX centers. Our current exchange services are comprised of the following:Physical Cross-Connect/Direct Interconnections. Customers needing to directly and privately connect to another IBX center customer can do sothrough single or multi-mode fiber. These cross connections are the physical link between customers and can be implemented within 24 hours of request.Cross-connect services are priced with an initial installation fee and an ongoing monthly recurring charge.Equinix Exchange. Customers may choose to connect to and peer through our Equinix Exchange via a central switching fabric rather than purchase adirect physical cross connection. With a connection to this switch, a customer can aggregate multiple interconnects over one physical connection with up to 10gigabits of capacity instead of purchasing individual physical cross connects. The Exchange service is offered as a bundled service that includes a cabinet,power, cross connects and port charges. The service is priced by IBX center with an initial installation fee and an ongoing monthly recurring charge.Individual IBX center prices increase as the number of participants on the exchange service grows.Equinix IBXLink. Customers who are located in one IBX center may need to interconnect with networks or other customers located in an adjacent ornearby IBX center in the same metro area. IBXLink allows customers to seamlessly interconnect between IBX centers at capacities up to an OC-192, or 10gigabits per second level. IBXLink services are priced with an initial installation fee and an ongoing monthly recurring charge dependent on the capacity thecustomer purchases.Internet Connectivity Services. Customers who are installing equipment in our IBX centers generally require IP connectivity or bandwidth services.Although many large customers prefer to contract directly with carriers, we offer customers the ability to contract for these services through us from any of themajor bandwidth providers in that center. This service, which is provided in our Asia-Pacific region, is targeted to customers who require a single bill and asingle point of support for their entire services contract through Equinix for their bandwidth needs. Internet connectivity services are priced with an initialinstallation fee and an ongoing monthly recurring charge based on the amount of bandwidth committed. 8Table of ContentsManaged IT Infrastructure ServicesWith 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 300 Internet Service Providers (ISPs) and carriers located in our IBX centers, we leverage the value of network choicewith our set of multi-network management and other outsourced IT services.Professional Services. Our IBX centers are staffed with Internet and telecommunications specialists who are on-site and/or available 24 hours a day,365 days a 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 IBX centerstaff 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.Equinix Direct. Equinix Direct is a managed multi-homing service that allows customers to easily provision and manage multiple network connectionsover a single interface. Customers can choose branded networks on a monthly basis with no minimums or long-term commitments. This service is priced withan initial installation fee and ongoing monthly recurring charges, depending on the bandwidth used by the customer.Sales and MarketingSales. We use a direct sales force and channel marketing program to market our services to global enterprises, content providers, financial companiesand network service providers. We organize our sales force by customer type 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 located in Silicon Valley, we haveestablished an Asia-Pacific regional headquarters in Hong Kong, and a European regional headquarters in London. Our U.S. sales offices are located inBoston, Chicago, Los Angeles, New York, Reston, Virginia and Silicon Valley. Our Asia-Pacific sales offices are located in Hong Kong, Singapore, Sydneyand Tokyo. Our European sales offices are located in Amsterdam, Dusseldorf, Frankfurt, Geneva, London, Munich, Paris and Zurich.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 center participants encourage their customers, suppliers and businesspartners to also locate in our IBX centers. These customers, suppliers and business partners, in turn, encourage their business partners to locate in our IBXcenters resulting in additional customer growth. This network effect significantly reduces our new customer acquisition costs. In addition, large networkproviders or managed service providers may refer customers to Equinix as a part of their total customer solution.Marketing. To support our sales effort and to actively promote our brand in the U.S., Asia-Pacific and Europe, we conduct comprehensive marketingprograms. Our marketing strategies include an active public relations campaign and ongoing customer communications programs. Our marketing efforts arefocused on major business and trade publications, online media outlets, industry events and sponsored activities. Our staff holds leadership positions in keynetworking organizations and we participate in a variety of Internet, computer and financial industry conferences, placing our officers and employees inkeynote speaking engagements at these conferences. We also regularly measure customer satisfaction levels and host key customer forums to ensure customerneeds are understood and incorporated in product and service planning efforts. From a brand perspective, we build recognition through sponsoring or leadingindustry technical forums and participating in Internet industry standard-setting bodies. We continue to develop and host industry educational forums focusedon peering technologies and practices for ISPs and content providers. 9Table of ContentsOur CompetitionOur current and potential competition includes: • Internet data centers operated by established communications carriers such as at&t, COLT, Level 3, NTT, Qwest, SAVVIS, SingTeland Verizon Business. Unlike the major network providers, who constructed data centers primarily to help sell bandwidth, we have aggregatedmultiple networks in centralized locations, designed to provide superior diversity, bandwidth, pricing and performance for our customers.Telecommunications companies’ data centers generally only provide one choice of carrier and target customers with high managed services needsas part of their pricing structures. Locating in our IBX centers provides access to top tier networks and allows customers to negotiate prices with anumber of carriers, resulting in better economics and redundancy for our customers. Because telecom carriers are not network-neutral, we believewe have a competitive advantage over these carriers because access to their networks is also available in our IBX centers. • Network access points (NAPs) and/or network-neutral colocation providers such as Global Switch, Interxion, Switch and Data andTelecityGroup. NAPs, generally operated by carriers, are typically older facilities that often cannot scale with traffic growth. In contrast, weprovide state-of-the-art, secure centers and geographic diversity with 24-hour support and a full range of network and content providerinterconnection offerings along with certain other network-neutral colocation providers. Other network-neutral colocation providers lack the abilityto serve key global markets. For example, Equinix is the only network-neutral colocation provider with a presence in all of the top 10 majorfinancial markets in the world. • Vertically integrated website hosting, colocation and ISP companies such as at&t, SAVVIS, Verizon Business and Vericenter. Mostmanaged service providers require that customers purchase their entire network and managed services directly from them. We are a network andservice provider aggregator and allow customers the ability to contract directly with the networks and webhosting partners located in our IBXcenters that are best-suited for their business. By locating in one of our IBX centers, hosting companies increase our value and businessproposition by bringing in more partners and customers and thus enhancing the network effect in our IBX centers. • Real Estate Investment Trusts (REITs) such as Digital Realty Trust and DuPont Fabros. Some REITs have leased or started building datacenters focused on meeting the outsourced data center needs of wholesale, or very large, customer deployments. These centers primarily providespace and power without additional services. These customers are not typically suited to the Equinix model as we focus on a large number ofdiverse customers on a per IBX center basis thereby creating a network effect for customers and maximizing the financial returns on a per sitebasis. • Private data centers operated by companies requiring significant colocation space such as AOL, Google and Microsoft. Certaincompanies require significant colocation space to run their Internet operations. Certain of these companies, with a large need for raw space, haveopted to build their own private data centers in areas that are often less expensive than the network-rich metropolitan areas in which our IBXcenters are located. While many of these companies maintain a presence in our IBX centers for interconnection purposes, the majority of theirbasic colocation needs are met by these private centers. Due to the large footprints required by these customers, they are not target customers ofEquinix.Unlike other providers whose core businesses are bandwidth or managed services, we focus on neutral interconnection hubs for content providers,financial companies and global enterprises. As a result, we are free of the channel conflict common at other hosting/colocation companies. We compete basedon the quality of our IBX centers, our ability to provide a one-stop solution in our U.S., European and Asia-Pacific locations, the performance and diversity ofour network-neutral strategy and the economic benefits of the aggregation of top networks and Internet businesses under one roof. Specifically, we haveestablished relationships with a number of leading hosting companies such as IBM (our largest customer) and others. We expect the industry to continue 10Table of Contentsto benefit from several industry trends including the consolidation of supply in the colocation market, the need for contracting with multiple networks due tothe uncertainty in the telecommunications market, customers’ increasing power requirements, enterprise customers’ growth in outsourcing and the continuedgrowth of broadband.Our Business Segment Financial InformationWe currently operate in three reportable segments, comprised of our U.S., Europe and Asia-Pacific geographic regions. Information attributable to each ofour reportable segments is set forth in Note 16 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.EmployeesAs of December 31, 2008, we had 1,115 employees. We had 646 employees based in the U.S., 279 employees based in Europe and 190 employeesbased in Asia-Pacific. Of those employees, 508 were in engineering and operations, 179 were in sales and marketing and 428 were in management, financeand administration.Available InformationWe were incorporated in Delaware in June 1998. We are required to file reports under the Securities Exchange Act of 1934, as amended, with theSecurities and Exchange Commission. You may read and copy our materials on file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,Washington, DC 20549. You may obtain information regarding the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC alsomaintains an Internet website at http://www.sec.gov that contains reports, proxy and information 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 our current reports on Form 8-K, and anyamendments to such reports, free of charge by visiting the investor relations page on our website, www.equinix.com. These reports are available as soon asreasonably practical after we file them with the SEC. Information contained on our website is not part of this annual report on Form 10-K. ITEM 1A.RISK FACTORSIn addition to the other information contained in this report, the following risk factors should be considered carefully in evaluating our business and us:Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional capital.We have a significant amount of debt. As of December 31, 2008, our total indebtedness was approximately $1.2 billion, our stockholders’ equity was$892.7 million and our cash and investments totaled $307.9 million.Our substantial amount of debt could have important consequences. For example, it could: • require us to dedicate a substantial portion of our cash flow from operations to make payments on our debt, reducing the availability of our cashflow to fund future capital expenditures, working capital, execution of our expansion strategy and other general corporate requirements; • make it more difficult for us to satisfy our obligations under our various debt instruments; • increase our vulnerability to general adverse economic and industry conditions and adverse changes in governmental regulations; 11Table of Contents • limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a competitive disadvantagecompared with our competitors; • limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity, which would also limit our ability to furtherexpand our business; and • make us more vulnerable to increases in interest rates because of the variable interest rates on some of our borrowings to the extent we have noteffectively hedged such variable rates.The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition. Inaddition, the performance of our stock price may trigger events that would require the write-off of a significant portion of our debt issuance costs related to ourconvertible debt, which may have a material adverse effect on our results of operations and financial condition.In addition, of our total indebtedness as of December 31, 2008, $576.0 million was non-convertible senior debt (of which $251.7 million is with asingle lender). Although these are committed facilities, virtually all of which are fully drawn or advanced for which we are amortizing debt repayments ofeither principal and/or interest only, and we are in full compliance with all covenants related to them effective December 31, 2008 (we amended certainprovisions in connection with one of our financings related to certain financial covenants effective December 31, 2008), deteriorating market and liquidityconditions may give rise to issues which may impact the lenders’ ability to hold these debt commitments to their full term. Accordingly, these lenders ofcommitted and drawn facilities may attempt to call this debt which would have a material adverse effect on our liquidity, even though no call provisions existwithout being in default.We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or thatthe terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time ofrefinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. These risks couldadversely affect our financial condition, cash flows and results of operations.If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to fund incremental expansion plans may belimited.Our capital expenditures, together with ongoing operating expenses and obligations to service our debt, will be a substantial drain on our cash flow andmay decrease our cash balances. The capital markets are currently limited for external financing opportunities. Additional debt or equity financing, especiallyin the current credit-constrained climate, may not be available when needed or, if available, may not be available on satisfactory terms. Our inability to obtainneeded debt and/or equity financing or to generate sufficient cash from operations may require us to prioritize projects or curtail capital expenditures whichcould adversely affect our results of operations.The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.The continued credit crisis and related turmoil in the global financial markets has had and may continue to have an impact on our business and ourfinancial condition. For example, we are currently unable to access cash invested with the Reserve Primary Fund, a prime obligations money market fund thathas suspended redemptions and is being liquidated. While the Company received periodic distributions from the Reserve in October and December of 2008,the Reserve continues to hold a portion of our investment balance. We had invested approximately $50.9 million in this fund, wrote-off $1.5 million and havereceived redemptions of approximately $40.2 million. The remaining balance still held at the Reserve had a fair value of approximately $9.2 million asof December 31, 2008. In February 2009, we received an additional distribution of $3.4 million from the Reserve. While we expect to receive substantially allof our remaining holdings in this fund within the next six 12Table of Contentsmonths, we cannot predict when this will occur or the amount we will receive. Further, a number of litigation claims have been filed against the Reserve’smanagement which could potentially delay the timing and amount of the final distributions of the fund. If the litigation were to continue for an extended periodof time it is possible that the Reserve management’s cost of defending these claims could also reduce the final amount of distribution to us. We do not believethat the current liquidity issues related to this fund will impact our ongoing business operations. However, if the current market conditions continue todeteriorate, we may suffer further losses on our investment portfolio, which could have a material adverse effect on our liquidity.The global financial crisis could have a material adverse effect on our liquidity in other ways. Customer collections are our primary source of cash.While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions continue to deterioratesome of our customers may begin to have difficulty paying us and we may experience increased churn in our customer base, including reductions in theircommitments to us. For example, we have a number of large customers in the financial services sector which has been significantly impacted by the downturn.We may also be required to increase our allowance for doubtful accounts and our results would be negatively impacted. Our sales cycle could also belengthened as customers slow spending, or delay decision-making, on our products and services, which could adversely affect our revenue growth. Finally,we could also experience pricing pressure as a result of economic conditions if our competitors lower prices and attempt to lure away our customers with lowercost solutions.The credit crisis could also have an impact on our foreign exchange forward contract and interest rate swap hedging contracts if our counterparties areforced to file for bankruptcy or are otherwise unable to perform their obligations.Finally, our ability to access the capital markets may be severely restricted at a time when we would like, or need, to do so, which could have an impacton our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.We are exposed to fluctuations in the market values of our portfolio investments and in interest rates; impairment of our investments couldharm our results of operations.We maintain an investment portfolio of various holdings, types and maturities, including money market funds and other short-term and long-termsecurities. These securities are classified as available-for-sale and, consequently, are recorded on our consolidated balance sheets at fair value with unrealizedgains or losses as a separate component of accumulated other comprehensive income or loss. Our portfolio includes fixed income securities, the values ofwhich are subject to market price volatility and changes in interest rates. If the market price declines, we may recognize in our statements of operations thedecline in fair value of our investments below the cost basis when the decline is judged to be other-than-temporary. For information regarding the sensitivity ofand risks associated with the market value of our portfolio and interest rates, refer to our discussion of our investment portfolio and interest rate risks in“Quantitative and Qualitative Disclosures About Market Risk” included in Part II, Item 7A of this Annual Report on Form 10-K.Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could harm our results of operations.We may experience gains and losses resulting from fluctuations in foreign currency exchange rates. To date, the majority of our revenues and costs havebeen denominated in U.S. dollars; however, the majority of revenues and costs in our international operations have been denominated in foreign currencies.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, therebymaking our products and services more expensive in local currencies. We are also exposed to risks resulting from fluctuations in foreign currency exchangerates in connection with our international expansions. To the extent we are paying contractors in foreign currencies, our expansions could cost more than 13Table of Contentsanticipated from declines in the U.S dollar relative to foreign currencies. In addition, fluctuating foreign currency exchange rates have a direct impact on howour international results of operations translate into U.S. dollars.Although we have in the past, and may decide in the future, to undertake foreign exchange hedging transactions to reduce foreign currency transactionexposure, we do not currently intend to eliminate all foreign currency transaction exposure. For example, while we hedge certain of our foreign currency assetsand liabilities on our balance sheet, we do not hedge revenue. During fiscal 2007 and the first half of 2008, the U.S. dollar had been generally weaker relativeto the currencies of the foreign countries in which we operate. This overall weakness of the U.S. dollar had a positive impact on our consolidated results ofoperations because the foreign denominations translated into more U.S. dollars. However, during the second half of 2008, the U.S. dollar strengthened relativeto certain of the currencies of the foreign countries in which we operate. This significantly impacted our consolidated financial position and results ofoperations as amounts in foreign currencies are generally translating into less U.S. dollars. Further strengthening of the U.S. dollar would continue to have asignificant impact on our consolidated financial position and results of operations including the amount of revenue that we report in future periods. Foradditional information on foreign currency risk, refer to our discussion of foreign currency risk in “Quantitative and Qualitative Disclosures About MarketRisk” included in Part II, Item 7A of this Annual Report on Form 10-K.Our products and services have a long sales cycle that may harm our revenues and operating results.A customer’s decision to license cabinet space in one of our IBX centers and to purchase additional services typically involves a significant commitmentof resources. In addition, some customers will be reluctant to commit to locating in our IBX centers until they are confident that the IBX center has adequatecarrier connections. As a result, we have a long sales cycle. Furthermore, we may expend significant time and resources in pursuing a particular sale orcustomer that does not result in revenue.The current economic downturn may further impact this long sales cycle by making it extremely difficult for customers to accurately forecast and planfuture business activities. This could cause customers to slow spending, or delay decision-making, on our products and services, which would delay andlengthen our sales cycle.Delays due to the length of our sales cycle may materially and adversely affect our revenues and operating results, which could harm our ability to meetour forecasts for a given quarter and cause volatility in our stock price.We have incurred substantial losses in the past and may incur additional losses in the future.As of December 31, 2008 our accumulated deficit was $427.1 million. Although we generated net income during 2008, our first full year of net incomesince our inception, we are also currently investing heavily in our future growth through the build-out of several additional IBX centers and IBX centerexpansions. As a result, we will incur higher depreciation and other operating expenses, as well as interest expense, that may negatively impact our ability tosustain profitability in future periods unless and until these new IBX centers generate enough revenue to exceed their operating costs and cover our additionaloverhead needed to scale our business for this anticipated growth. The current global financial crisis may also further add to our losses if we cannot generatesufficient revenue to offset the increased costs of our recently-opened IBX centers or IBX centers currently under construction. In addition, costs associatedwith the acquisition and integration of any acquired companies, as well as the additional interest expense associated with debt financing we have undertaken tofund our growth initiatives, may also negatively impact our ability to sustain profitability. Finally, given the competitive and evolving nature of the industry inwhich we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis. 14Table of ContentsWe are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns onthese investments.We are considering the acquisition or lease of additional properties and the construction of new IBX centers beyond those expansion projects alreadyannounced. We will be required to commit substantial operational and financial resources to these IBX centers, generally 12 to 18 months in advance ofsecuring customer contracts, and we may not have sufficient customer demand in those markets to support these centers once they are built. In addition,unanticipated technological changes could affect customer requirements for data centers and we may not have built such requirements into our new IBXcenters. Either of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments.Our construction of additional new IBX centers could involve significant risks to our business.In order to sustain our growth in certain of our existing and new markets, we must acquire suitable land with or without structures to build new IBXcenters from the ground up. We call these “greenfield builds.” Greenfield builds are currently underway, or being contemplated, in several key markets. Agreenfield build involves substantial planning and lead-time, much longer time to completion than an IBX retrofit of an existing data center, and significantlyhigher costs of construction, equipment and materials, which could have a negative impact on our returns. A greenfield build also requires us to carefullyselect and rely on the experience of one or more general contractors and associated subcontractors during the construction process. Should a general contractoror significant subcontractor experience financial or other problems during the construction process, we could experience significant delays, increased costs tocomplete the project and other negative impacts to our expected returns. Site selection is also a critical factor in our expansion plans, and there may not besuitable properties available in our markets with the necessary combination of high power capacity and fiber connectivity.While we may prefer to locate new IBX centers adjacent to our existing locations, we may be limited by the inventory and location of suitable propertiesas well as by the need for adequate power and fiber to the site. In the event we decide to build new IBX centers separate from our existing IBX centers, we mayprovide services to interconnect these two centers. Should these services not provide the necessary reliability to sustain service, this could result in lowerinterconnection revenue and lower margins and could have a negative impact on customer retention over time.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 our customers’ IBX infrastructure and their equipmentlocated in our IBX centers. We continue to acquire IBX centers not built by us. If we discover that these IBX centers and their infrastructure assets are not inthe condition we expected when they were acquired, we may be required to incur substantial additional costs to repair or upgrade the centers. The services weprovide in each of our IBX centers are subject to failure resulting from numerous factors, including: • human error; • equipment failure; • physical or electronic security breaches; • fire, earthquake, flood, tornados and other natural disasters; • extreme temperatures; • water damage; • fiber cuts; 15Table of Contents • power loss; • terrorist acts; • sabotage and vandalism; and • the failure of business partners who provide our resale products.Problems at one or more of our IBX centers, whether or not within our control, could result in service interruptions or significant equipment damage. Wehave service level commitment obligations to certain of our customers, including our significant customers. As a result, service interruptions or significantequipment damage in our IBX centers could result in difficulty maintaining service level commitments to these customers and potential claims related to suchfailures. Because our IBX centers are critical to many of our customers’ businesses, service interruptions or significant equipment damage in our IBX centerscould also result in lost profits or other indirect or consequential damages to our customers. We cannot guarantee that a court would enforce any contractuallimitations on our liability in the event that one of our customers brings a lawsuit against us as the result of a problem at one of our IBX centers.We may incur significant liability to our customers in connection with a loss of power or our failure to meet other service level commitment obligations,or if we are held liable for a substantial damage award. In addition, any loss of service, equipment damage or inability to meet our service level commitmentobligations could reduce the confidence of our customers and could consequently impair our ability to obtain and retain customers, which would adverselyaffect both our ability to generate revenues and our operating results.Furthermore, we are dependent upon Internet service providers, telecommunications carriers and other website operators in the U.S., Asia-Pacific region,Europe and elsewhere, some of which 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 fail to provide the required services, ourbusiness, financial condition and results of operations could be materially and adversely impacted.The market price of our stock may continue to be highly volatile, and the value of an investment in our common stock may decline.Since January 1, 2008, the closing sale price of our common stock on the NASDAQ Global Select Market ranged from $35.14 to $100.75 per share.The market price of the shares of our common stock has been and may continue to be highly volatile. General economic and market conditions, and marketconditions for telecommunications stocks in general, may affect the market price of our common stock.Announcements by others or us may also have a significant impact on the market price of our common stock. These announcements may relate to: • our operating results or forecasts; • new issuances of equity, debt or convertible debt by us; • developments in our relationships with corporate customers; • announcements by our customers or competitors; • changes in regulatory policy or interpretation; • governmental investigations; • changes in the ratings of our stock by securities analysts; • our purchase or development of real estate and/or additional IBX centers; 16Table of Contents • acquisitions by us of complementary businesses; or • the operational performance of our IBX centers.The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices foremerging telecommunications companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adverselyaffect the market price of our common stock.We expect our operating results to fluctuate.We have experienced fluctuations in our results of operations on a quarterly and annual basis. The fluctuations in our operating results may cause themarket price of our common stock to be volatile. We expect to experience significant fluctuations in our operating results in the foreseeable future due to avariety of factors, including, but not limited to: • fluctuations of foreign currencies in the markets in which we operate; • the timing and magnitude of capital expenditures, financing or other expenses related to the acquisition, purchase or construction of additional IBXcenters or the upgrade of existing IBX centers; • demand for space, power and services at our IBX centers; • changes in general economic conditions, such as the current economic downturn, and specific market conditions in the telecommunications andInternet industries, both of which may have an impact on our customer base; • costs associated with the write-off or exit of unimproved or underutilized property, or the reversal of prior exit costs due to a change in strategy; • charges to earnings resulting from past acquisitions due to, among other things, impairment of goodwill or intangible assets, reduction in theuseful lives of intangible assets acquired, identification of additional assumed contingent liabilities or revised estimates to restructure an acquiredcompany’s operations; • the duration of the sales cycle for our services; • restructuring charges or reversals of existing restructuring charges, which may be necessary due to revised sublease assumptions, changes instrategy or otherwise; • acquisitions or dispositions we may make; • the financial condition and credit risk of our customers; • 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; • the timing required for new and future centers to open or become fully utilized; • competition in the markets in which we operate; • conditions related to international operations; • increasing repair and maintenance expenses in connection with aging IBX centers; • lack of available capacity in our existing IBX centers to generate new revenue or delays in opening up new or acquired IBX centers that delay ourability to generate new revenue in markets which have otherwise reached capacity; 17Table of Contents • changes in rent expense as we amend our IBX center leases in connection with extending their lease terms when their initial lease term expirationdates approach; • the timing and magnitude of other operating expenses, including taxes, expenses related to the expansion of sales, marketing, operations andacquisitions, if any, of complementary businesses and assets; • the cost and availability of adequate public utilities, including power; • changes in employee stock-based compensation; • changes in income tax benefit or expense; and • changes in or new generally accepted accounting principles (GAAP) in the U.S. as periodically released by the Financial Accounting StandardsBoard (FASB).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 we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of futureoperating results. Prior to 2008, we had generated net losses every fiscal year since inception. It is possible that we may not be able to generate positive netincome on a quarterly or annual basis in the future. In addition, a relatively large portion of our expenses are fixed in the short-term, particularly with respect tolease and personnel expenses, depreciation and amortization and interest expenses. Therefore, our results of operations are particularly sensitive to fluctuationsin revenues. As such, comparisons to prior reporting periods should not be relied upon as indications of our future performance. In addition, our operatingresults in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we could experience an immediate andsignificant decline in the trading price of our stock.We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.Although we received an unqualified opinion regarding the effectiveness of our internal controls over financial reporting as of December 31, 2008, in thecourse of our ongoing evaluation of our internal controls over financial reporting we have identified certain areas which we would like to improve and are in theprocess of evaluating and designing enhanced processes and controls to address these areas identified during our evaluation, none of which we believeconstitutes a material change. However, we cannot be certain that our efforts will be effective or sufficient for us, or our independent registered publicaccounting firm, to issue unqualified reports in the future, especially as our business continues to grow and evolve.Our ability to manage our operations and growth will require us to improve our operational, financial and management controls, as well as our internalreporting systems and controls. We may not be able to implement improvements to our internal reporting systems and controls in an efficient and timelymanner and may discover deficiencies in existing systems and controls. Any such deficiencies could result in material misstatements in our consolidatedfinancial statements.If we cannot effectively manage our international operations, and successfully implement our international expansion plans, our revenues maynot increase and our business and results of operations would be harmed.For the years ended December 31, 2008, 2007 and 2006, we recognized 37%, 23% and 14%, respectively, of our revenues outside the U.S.To date, the neutrality of our IBX centers and the variety of networks available to our customers has often been a competitive advantage for us. In certainof our acquired IBX centers in the Asia-Pacific region the limited 18Table of Contentsnumber of carriers available reduces that advantage. As a result, we may need to adapt our key revenue-generating services and pricing to be competitive inthose markets. In addition, we are currently undergoing expansions or evaluating expansion opportunities in Europe and in the Asia-Pacific region.Undertaking and managing expansions in foreign jurisdictions may present unanticipated challenges to us.Our international operations are generally subject to a number of additional risks, including: • the costs of customizing IBX centers in 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, including negotiating with foreign labor unions or workers’ councils; • political and economic instability; • fluctuations in currency exchange rates; • difficulties in repatriating funds from certain countries; • our ability to obtain, transfer, or maintain licenses required by governmental entities with respect to our business; • compliance with the Foreign Corrupt Practices Act; and • compliance with evolving governmental regulation with which we have little experience.The increased use of high power density equipment may limit our ability to fully utilize our IBX centers.Customers are increasing their use of high-density electrical power equipment, such as blade servers, in our IBX centers which has significantlyincreased the demand for power on a per cabinet basis. Because many of our IBX centers were built a number of years ago, the current demand for electricalpower may exceed the designed electrical capacity in these centers. As electrical power, not space, is typically the limiting factor in our IBX centers, our abilityto fully utilize those IBX centers may be limited. The availability of sufficient power may also pose a risk to the successful operation of our new IBX centers.The ability to increase the power capacity of an IBX center, should we decide to, is dependent on several factors including, but not limited to, the local utility’sability to provide additional power; the length of time required to provide such power; and/or whether it is feasible to upgrade the electrical infrastructure of anIBX center to deliver additional power to customers. Although we are currently designing and building to a much higher power specification, there is a risk thatdemand will continue to increase and our IBX centers could become obsolete sooner than expected.Acquisitions present many risks, and we may not realize the financial or strategic goals that were contemplated at the time of any transaction.Over the last several years we have completed several acquisitions (including our acquisitions of IXEurope plc in 2007 and Virtu Secure WebservicesB.V. in 2008) and we may make additional acquisitions in the future. These acquisitions may include acquisitions of businesses, products, services ortechnologies that we believe to be complementary, as well as acquisitions of new IBX centers or real estate for development of new IBX centers. We may pay forfuture acquisitions by using our existing cash resources (which may limit other potential uses of our cash), incurring additional debt (which may increase ourinterest expense, leverage and debt service requirements) and/or issuing shares (which may dilute our existing stockholders and have a negative effect on ourearnings per share). Acquisitions expose us to several potential risks, including: • the possible disruption of our ongoing business and diversion of management’s attention by acquisition, transition and integration activities; 19Table of Contents • our potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities associated with an acquisition, some ofwhich would be anticipated in any purchase price; • the possibility that we may not be able to successfully integrate acquired businesses or achieve anticipated operating efficiencies or cost savings; • the possibility of customer dissatisfaction if we are unable to achieve levels of quality and stability on par with past practices; • the possibility that our customers may not accept either the existing equipment infrastructure or the “look-and-feel” of a new or different IBXcenter; • the possibility that additional capital expenditures may be required; • the possible loss or reduction in value of acquired businesses; • the possibility that carriers may find it cost-prohibitive or impractical to bring fiber and networks into a new IBX center; • the possibility of litigation or other claims in connection with or as a result of an acquisition, including claims from terminated employees,customers, former stockholders or other third parties; and • the possibility of pre-existing undisclosed liabilities, including but not limited to environmental or asbestos liability, for which insurance coveragemay be insufficient or unavailable.The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows.We cannot assure you that the price for any future acquisitions of IBX centers will be similar to prior IBX center acquisitions. In fact, we expectacquisition costs, including capital expenditures required to build or render new IBX centers operational, to increase in the future. If our revenue does not keeppace with these potential acquisition and expansion costs, we may not be able to maintain our current or expected margins as we absorb these additionalexpenses. There is no assurance we would successfully overcome these risks or any other problems encountered with these acquisitions.Our business could be harmed by prolonged electrical power outages or shortages, increased costs of energy or general lack of availability ofelectrical resources.Our IBX centers are susceptible to regional costs of power, electrical power shortages, planned or unplanned power outages and limitations, especiallyinternationally, on the availability of adequate power resources.Power outages, such as those that occurred in California during 2001, the Northeast in 2003, and from the tornados on the U.S. east coast in 2004,could harm our customers and our business. We attempt to limit exposure to system downtime by using backup generators and power supplies; however, wemay not be able to limit our exposure entirely even with these protections in place, as was the case with the power outages we experienced in our Chicago andWashington, D.C. metro area IBX centers in 2005 and London metro area IBX centers in 2007.In addition, global fluctuations in the price of power can increase the cost of energy, and although contractual price increase clauses exist in the majorityof our customer agreements, we may not always choose to pass these increased costs on to our customers.In each of our markets, we rely on third parties to provide a sufficient amount of power for current and future customers. At the same time, power andcooling requirements are growing on a per unit basis. As a result, some customers are consuming an increasing amount of power per cabinet. We generally donot control the amount of electric power our customers draw from their installed circuits. This means that we could face power 20Table of Contentslimitations in our centers. This could have a negative impact on the effective available capacity of a given center and limit our ability to grow our business,which could have a negative impact on our financial performance, operating results and cash flows.We may also have difficulty obtaining sufficient power capacity for potential expansion sites in new or existing markets. We may experience significantdelays and substantial increased costs demanded by the utilities to provide the level of electrical service required by our current IBX center designs.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.We agreed to a covenant in connection with our combination with i-STT Pte Ltd and Pihana Pacific, Inc. in 2002 (which we refer to as the FIRPTAcovenant) that we would use all commercially reasonable efforts to ensure that at all times from and after the closing of the combination none of our capitalstock issued to STT Communications would constitute “United States real property interests” within the meaning of Section 897(c) of the Code. UnderSection 897(c) of the Code, our capital stock issued to STT Communications would generally constitute “United States real property interests” at such pointin time that the fair market value of the “United States real property interests” owned by us equals or exceeds 50% of the sum of the aggregate fair marketvalues of (a) our “United States real property interests,” (b) our interests in real property located outside the United States and (c) any other assets held by uswhich are used or held for use in our trade or business. Currently, the fair market value of our “United States real property interests” is significantly below the50% threshold. However, in order to ensure compliance with the FIRPTA covenant, we may be limited with respect to the business opportunities we maypursue, particularly if the business opportunities would increase the amounts of “United States real property interests” owned by us or decrease the amount ofother assets owned by us. In addition, we may take proactive steps to avoid our capital stock being deemed a “United States real property interest,” including,but not limited to, (a) a sale-leaseback transaction with respect to some or all of our real property interests, or (b) the formation of a holding company organizedunder the laws of the Republic of Singapore which would issue shares of its capital stock in exchange for all of our outstanding stock (which would requirethe submission of that transaction to our stockholders for their approval and the consummation of that exchange). We will take these actions only if suchactions are commercially reasonable for our stockholders and us. We have entered into an agreement with STT Communications and its affiliate pursuant towhich we will no longer be bound by the FIRPTA covenant as of September 30, 2009. If we were to breach this covenant, we may be liable for damages toSTT Communications.Increases in property taxes could adversely affect our business, financial condition and results of operations.Our IBX centers are subject to state and local real property taxes in the U.S. and certain of our foreign jurisdictions. The state and local real propertytaxes on our IBX centers may increase as property tax rates change and as the value of the properties are assessed or reassessed by taxing authorities. Manystate and local governments are facing budget deficits, which may cause them to increase assessments or taxes. If property taxes increase, our business,financial condition and operating results could be adversely affected.A small number of our stockholders has voting control over a substantial portion of our stock and has influence over matters requiringstockholder consent.Several of our stockholders each hold voting control over greater than 10% of our outstanding common stock. In addition, these stockholders are notprohibited from buying shares of our stock in public or private transactions. As a result, each of these stockholders is able to exercise significant control overall matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could prevent or delaya third party from acquiring or merging with us. 21Table of ContentsWe have various mechanisms in place that may discourage takeover attempts.Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party from acquiring control of us in amerger, acquisition or similar transaction that a stockholder may consider favorable. Such provisions include: • authorization for the issuance of “blank check” preferred stock; • the prohibition of cumulative voting in the election of directors; • a super-majority voting requirement to effect business combinations or certain amendments to our certificate of incorporation and bylaws; • limits on the persons who may call special meetings of stockholders; • the prohibition of stockholder action by written consent; and • advance notice requirements for nominations to the Board or for proposing matters that can be acted on by stockholders at stockholder meetings.In addition, Section 203 of the Delaware General Corporation Law, which restricts certain business combinations with interested stockholders in certainsituations, may also discourage, delay or prevent someone from acquiring or merging with us.Environmental regulations may impose upon us new or unexpected costs.We are subject to various environmental and health and safety laws and regulations, including those relating to the generation, storage, handling anddisposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, forinvestigation and cleanup costs on current and former owners and operators of real property and persons who have disposed of or released hazardoussubstances into the environment. Our operations involve the use of hazardous substances and materials such as petroleum fuel for emergency generators, aswell as batteries, cleaning solutions and other materials. In addition, we lease, own or operate real property at which hazardous substances and regulatedmaterials have been used in the past. At some of our locations, hazardous substances or regulated materials are known to be present in soil or groundwater andthere may be additional unknown hazardous substances or regulated materials present at sites we own, operate or lease. At some of our locations, there are landuse restrictions in place relating to earlier environmental cleanups that do not materially limit our use of the sites. To the extent any hazardous substancesor any other substance or material must be cleaned up or removed from our property, we may be responsible under applicable laws, regulations or leases forthe removal or cleanup of such substances or materials, the cost of which could be substantial.In addition, we are subject to environmental, health and safety laws regulating air emissions, storm water management and other issues arising in ourbusiness. While these obligations do not normally impose material costs upon our operations, unexpected events, equipment malfunctions and human error,among other factors, can lead to violations of environmental laws, regulations or permits. Noncompliance with existing, or adoption of more stringent,environmental or health and safety laws and regulations or the discovery of previously unknown contamination could require us to incur costs or become thebasis of new or increased liabilities that could be material.Fossil fuel combustion creates greenhouse gas emissions that are linked to global climate change. Regulations to limit greenhouse gas emissions are inforce in the European Union in an effort to prevent or reduce climate change. In the United States, federal proposals are expected to be introduced that would, ifadopted, implement some form of regulation or taxation to reduce or mitigate greenhouse gas emissions. Several states within the United States have adoptedlaws intended to limit fossil fuel consumption and/or encourage renewable energy development for the same purpose. The proposals include a tax on carbon, acarbon 22Table of Contents“cap-and-trade” market, and/or other restrictions on carbon and greenhouse gas emissions. California’s Global Warming Solutions Act of 2006 established astatewide greenhouse gas emissions cap and will require mandatory emissions reporting. The area of greenhouse gas limitations and regulation is rapidlychanging and will continue to change as additional legislation is considered and adopted, and regulations are finalized that implement existing law.We do not anticipate being directly regulated by each of the potential or developing climate change-related laws and regulations, but the resulting controlson greenhouse gas emissions are likely to increase the costs of electricity or fossil fuels, and these cost increases could materially increase our costs ofoperation or limit the availability of electricity or emergency generator fuels. If laws reducing greenhouse gas emissions are passed or new regulations areimplemented based on existing law, we may be required to modify our emergency power source systems, buildings or other infrastructure in order to comply,the cost of which could be substantial.To the extent any of these environmental regulations impose new or unexpected costs, our business, results of operations or financial condition may beadversely affected.We depend on a number of third parties to provide Internet connectivity to our IBX centers; if connectivity is interrupted or terminated, ouroperating results and cash flow could be materially and adversely affected.The presence of diverse telecommunications carriers’ fiber networks in our IBX centers is critical to our ability to retain and attract new customers. Weare not a telecommunications carrier, and as such we rely on third parties to provide our customers with carrier services. We believe that the availability ofcarrier capacity will directly affect our ability to achieve our projected results. We rely primarily on revenue opportunities from the telecommunicationscarriers’ customers to encourage them to invest the capital and operating resources required to connect from their centers to our IBX centers. Carriers will likelyevaluate the revenue opportunity of an IBX center based on the assumption that the environment will be highly competitive. We cannot provide assurance thateach and every carrier will elect to offer its services within our IBX centers or that once a carrier has decided to provide Internet connectivity to our IBX centersthat it will continue to do so for any period of time. Further, many carriers are experiencing business difficulties or announcing consolidations. As a result,some carriers may be forced to downsize or terminate connectivity within our IBX centers, which could have an adverse effect on our operating results.Our new IBX centers require construction and operation of a sophisticated redundant fiber network. The construction required to connect multiplecarrier facilities to our IBX centers is complex and involves factors outside of our control, including regulatory processes and the availability of constructionresources. If the establishment of highly diverse Internet connectivity to our IBX centers does not occur, is materially delayed or is discontinued, or is subjectto failure, our operating results and cash flow will be adversely affected. Any hardware or fiber failures on this network may result in significant loss ofconnectivity to our new IBX center expansions. This could affect our ability to attract new customers to these IBX centers or retain existing customers.We may be vulnerable to security breaches which could disrupt our operations and have a material adverse effect on our financial performanceand operating results.A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate either ourproprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expendsignificant capital and resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach securitychange frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or,if and when implemented, whether these measures could be circumvented. Any breaches that may occur could expose us to increased risk 23Table of Contentsof lawsuits, regulatory penalties, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have amaterial adverse effect on our financial performance and operating results.A small number of customers account for a significant portion of our revenues, and the loss of any of these customers could significantly harm ourbusiness, financial condition and results of operations.While no single customer accounted for 10% or more of our revenues for the years ended December 31, 2008, 2007 and 2006, our top 10 customersaccounted for approximately 20%, 23% and 25%, respectively, of our revenues during these periods. We expect that a small percentage of our customers willcontinue to account for a significant portion of our revenues for the foreseeable future. We cannot guarantee that we will retain these customers or that they willmaintain their commitments in our IBX centers at current levels. If we lose any of these key customers, or if any of them decide to reduce the level of theircommitment to us, our business, financial condition and results of operations could be adversely affected.We resell products and services of third parties that may require us to pay for such products and services even if our customers fail to pay us forthem, which may have a negative impact on our operating results.In order to provide resale services such as bandwidth, managed services and other network management services, we contract with third party serviceproviders. These services require us to enter into fixed term contracts for services with third party suppliers of products and services. If we experience the lossof a customer who has purchased a resale product, we may remain obligated to continue to pay our suppliers for the term of the underlying contracts. Thepayment of these obligations without a corresponding payment from customers will reduce our financial resources and may have a material adverse effect onour operating and financial results and cash flows.We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties.We derive some revenues from contracts with the U.S. government, state and local governments and their respective agencies. Some of these customersmay terminate all or part of their contracts at any time, without cause.There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. Some of our federalgovernment contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. Similarly,some of our contracts at the state and local levels are subject to government funding authorizations.Additionally, government contracts are generally subject to audits and investigations which could result in various civil and criminal penalties andadministrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines andsuspensions or debarment from future government business.We may not be able to compete successfully against current and future competitors.Our IBX centers and other products and services must be able to differentiate themselves from those of other providers of space and services fortelecommunications companies, webhosting companies and other colocation providers. In addition to competing with neutral colocation providers, we mustcompete with traditional colocation providers, including telecom companies, carriers, Internet service providers and webhosting facilities. Similarly, withrespect to our other products and services, including managed services, bandwidth services and security services, we must compete with more establishedproviders of similar services. Most of these companies have longer operating histories and significantly greater financial, technical, marketing and otherresources than us. 24Table of ContentsBecause of their greater financial resources, some of our competitors have the ability to adopt aggressive pricing policies, especially if they have beenable to restructure their debt or other obligations. As a result, in the future, we may suffer from pricing pressure that would adversely affect our ability togenerate revenues and adversely affect our operating results. In addition, these competitors could offer colocation on neutral terms, and may start doing so inthe same metropolitan areas in which we have IBX centers. Some of these competitors may also provide our target customers with additional benefits,including bundled communication services, and may do so in a manner that is more attractive to our potential customers than obtaining space in our IBXcenters. If these competitors were able to adopt aggressive pricing policies together with offering colocation space, our ability to generate revenues may bematerially and adversely affected.We may also face competition from persons seeking to replicate our IBX center concept by building new IBX centers or converting existing IBX centersthat some of our competitors are in the process of divesting. We may continue to see increased competition for data center space and customers from largeREITS who also operate in our market. We may experience competition from our landlords, some of which are REITS, in this regard. Rather than leasingavailable space in our buildings to large single tenants, they may decide to convert the space instead to smaller square foot units designed for multi-tenantcolocation use. Landlords/REITS may enjoy a cost effective advantage in providing services similar to those provided by our IBX centers, and in addition tothe risk of losing customers to these parties this could also reduce the amount of space available to us for expansion in the future. Competitors may operatemore successfully or form alliances to acquire significant market share. Furthermore, enterprises that have already invested substantial resources inoutsourcing arrangements may be reluctant or slow to replace, limit or compete with their existing systems by becoming a customer. Customers may alsodecide it is cost effective for them to build out their own data centers which could have a negative impact on our results of operations. In addition, othercompanies may be able to attract the same potential customers that we are targeting. Once customers are located in competitors’ facilities, it may be extremelydifficult to convince them to relocate to our IBX centers.Because we depend on the retention of key employees, failure to maintain competitive compensation packages, including equity incentives, may bedisruptive to our business.Our success in retaining key employees and discouraging them from moving to a competitor is an important factor in our ability to remain competitive.As is common in our industry, our employees are typically compensated through grants of equity awards in addition to their regular salaries. In addition togranting equity awards to selected new hires, we periodically grant new equity awards to certain employees as an incentive to remain with us. To the extent weare unable to offer competitive compensation packages to our employees and adequately maintain equity incentives due to equity expensing or otherwise, andshould employees decide to leave us, this may be disruptive to our business and may adversely affect our business, financial condition and results ofoperations.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, includingglobal enterprises, content providers, financial companies, and network service providers. The more balanced the customer base within each IBX center, thebetter we will be able to generate significant interconnection revenues, which in turn increases our overall revenues. Our ability to attract customers to our IBXcenters will depend on a variety of factors, including the presence of multiple carriers, the mix of products and services offered by us, the overall mix ofcustomers, the IBX center’s operating reliability and security and our ability to effectively market our services. However, some of our customers are, and arelikely to continue to be, Internet companies that face many competitive pressures and that may not ultimately be successful. If these customers do not succeed,they will not continue to use the IBX centers which may be disruptive to our business. Finally, the current economic downturn may harm our ability to attractand retain customers if customers slow spending, or delay decision-making, on our products and services or if 25Table of Contentscustomers begin to have difficulty paying us and we experience increased churn in our customer base. Any of these factors may hinder the development andgrowth of a balanced customer base and adversely affect our business, financial condition and results of operations.The failure to obtain favorable terms when we renew our IBX center leases could harm our business and results of operations.While we own certain of our IBX centers, others are leased under long-term arrangements with lease terms expiring at various dates ranging from 2009 to2027. These leased centers have all been subject to significant development by us in order to convert them from, in most cases, vacant buildings orwarehouses into IBX centers. All of our IBX center leases have renewal options available to us. However, these renewal options provide for rent set at then-prevailing market rates. To the extent that then-prevailing market rates are higher than present rates, these higher costs may adversely impact our business andresults of operations.We are subject to securities class action and other litigation, which may harm our business and results of operations.During the quarter ended September 30, 2001, putative shareholder class action lawsuits were filed against us, a number of our officers and directors,and several investment banks that were underwriters of our initial public offering. Similar complaints were filed against more than 300 other issuers, theirofficers and directors, and investment banks. The suits allege that the underwriter defendants agreed to allocate stock in our initial public offering to certaininvestors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases in the aftermarket at pre-determined prices. Plaintiffs allege that the prospectus for our initial public offering was false and misleading and in violation of the securities laws because itdid not disclose these arrangements. A previously agreed upon settlement with the plaintiffs has been terminated. On August 14, 2007, the plaintiffs filedamended complaints in six cases selected as test, or “focus,” cases and moved for class certification on September 27, 2007. On October 10, 2008, at therequest of Plaintiffs, Plaintiffs’ motion for class certification was withdrawn, without prejudice. The parties in the approximately 300 coordinated classactions, including Equinix, the underwriter defendants in the Equinix class action, and the plaintiffs in the Equinix class action, have reached an agreement inprinciple under which the insurers for the issuer defendants in the coordinated cases will make the settlement payment on behalf of the issuers, includingEquinix. The settlement is subject to approval by the parties and is also subject to Court approval.On August 22, 2008, a complaint was filed against Equinix, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors inPihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant towhich Equinix merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of Equinix.Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuatedimproperly, by Pihana’s majority shareholders, officers and directors, with the alleged assistance of Equinix and others. Among other things, plaintiffscontend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they improperly received noconsideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees and costs, and compensatorydamages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725 million value of Equinix held byDefendants” (a group that includes more than 30 individuals and entities). An amended complaint, which adds new plaintiffs (other alleged holders of Pihanacommon stock), but is otherwise substantially similar to the original pleading, was filed on September 29, 2008 (the “Amended Complaint”). On October 13,2008, a complaint was filed by another purported holder of Pihana common stock, naming the same defendants and asserting substantially similar allegationsas the August 22, 2008 and September 29, 2008 pleadings. On December 12, 2008, the court entered a stipulated order, which consolidated the two actionsunder one case number and set January 22, 2009 as the last day for Defendants to move to dismiss or otherwise respond to the Amended Complaint, theoperative complaint in this case. On January 22, 2009, motions to dismiss the Amended 26Table of ContentsComplaint were filed by Equinix and other Defendants. The court has not yet ruled on any of the motions to dismiss. We believe that plaintiffs’ claims andalleged damages are without merit and we intend to defend the litigation vigorously.Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcomes of the above matters or whether such outcomes wouldhave a material impact on our business, results of operations, financial condition or cash flows.We continue to participate in the defense of the above matters, which may increase our expenses and divert management’s attention and resources. Inaddition, we may, in the future, be subject to other litigation. For example, securities class action litigation has often been brought against a company followingperiods of volatility in the market price of its securities. Any adverse outcome in litigation could seriously harm our business, results of operations, financialcondition or cash flows.We may not be able to protect our intellectual property rights.We cannot assure that the steps taken by us to protect our intellectual property rights will be adequate to deter misappropriation of proprietaryinformation or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. We also are subject to therisk of litigation alleging infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums in litigation, paydamages, develop non-infringing intellectual property, or acquire licenses to the intellectual property that is the subject of the alleged infringement.If the use of the Internet does not continue to grow, our revenues may not grow.Acceptance and use of the Internet may not continue to develop at historical rates. Demand for Internet services and products are subject to a high level ofuncertainty and are subject to significant pricing pressure. As a result, we cannot be certain that a viable market for our IBX centers will be sustained. If themarket for our IBX centers grows more slowly than we currently anticipate, our revenues may not grow and our operating results could suffer.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 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. We have limited experience with such internationalregulatory issues and substantial resources may be required to comply with regulations or bring any non-compliant business practices into compliance withsuch regulations. In addition, the development of the market for online commerce and the displacement of traditional telephony service by the Internet andrelated communications services may prompt an increased call for more stringent consumer protection laws or other regulation both in the U.S. and abroadthat may impose additional burdens on companies conducting business online and their service providers. The compliance with, adoption or modification of,laws or regulations relating to the Internet, or interpretations of existing laws, could have a material adverse effect on our business, financial condition andresults of operation.Industry consolidation may have a negative impact on our business model.The telecommunications industry is currently undergoing consolidation. As customers combine businesses, they may require less colocation space, andthere may be fewer networks available to choose from. Given the competitive and evolving nature of this industry, further consolidation of our customersand/or our competitors 27Table of Contentsmay present a risk to our network-neutral business model and have a negative impact on our revenues. In addition, increased utilization levels industry-widecould lead to a reduced amount of attractive expansion opportunities available to us.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 contribute to a climate of political and economic uncertainty. Due to existing or developing circumstances, we may need to incuradditional costs in the future to provide enhanced security, which would have a material adverse effect on our business and results of operations. Thesecircumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our IBXcenters. We may not have adequate property and liability insurance to cover catastrophic events or attacks. ITEM 1B.UNRESOLVED STAFF COMMENTSThere is no disclosure to report pursuant to Item 1B. ITEM 2.PROPERTIESOur executive offices are located in Foster City, California, and we also have sales offices in several cities throughout the United States. Our Asia-Pacificheadquarters office is located in Hong Kong and we also have office space in Singapore; Tokyo, Japan; and Sydney, Australia, which is operated out of ourIBX center there. Our European headquarters office is located in London, U.K. and our regional sales offices in Europe are based in our IBX centers inEurope. We have entered into leases for certain of our IBX centers in Dallas, Texas; Chicago, Illinois; Los Angeles, San Jose, Santa Clara and Sunnyvale,California; Newark and Secaucus, New Jersey; Hong Kong; Singapore; Sydney, Australia; Tokyo, Japan; London, U.K.; Paris, France; Frankfurt,Munich and Dusseldorf, Germany; Zurich and Geneva, Switzerland and Enschede, Zwolle and Amsterdam, Netherlands. We own certain of our IBX centersin Ashburn, Virginia; Chicago, Illinois; Los Angeles and San Jose, California and Frankfurt, Germany. We own campuses in Ashburn, Virginia andFrankfurt, Germany that house some of our IBX centers mentioned in the preceding sentence. ITEM 3.LEGAL PROCEEDINGSOn July 30, 2001 and August 8, 2001, putative shareholder class action lawsuits were filed against us, certain of our officers and directors (the“Individual Defendants”), and several investment banks that were underwriters of our initial public offering (the “Underwriter Defendants”). The cases werefiled in the United States District Court for the Southern District of New York. Similar lawsuits were filed against approximately 300 other issuers and relatedparties. These lawsuits have been coordinated before a single judge. The purported class action alleges violations of Sections 11 and 15 of the Securities Act of1933 and Sections 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 against us and the Individual Defendants. The plaintiffs have sincedismissed the Individual Defendants without prejudice. The suits allege that the Underwriter Defendants agreed to allocate stock in our initial public offering tocertain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases in the aftermarket atpre-determined prices. The plaintiffs allege that the prospectus for our initial public offering was false and misleading and in violation of the securities lawsbecause it did not disclose these arrangements. The action seeks damages in an unspecified amount. On February 19, 2003, the Court dismissed theSection 10(b) claim against us, but denied the motion to dismiss the Section 11 claim. On December 5, 2006, the Second Circuit vacated a decision by thedistrict court granting class certification in six “focus” cases, which are intended to serve as test cases. Plaintiffs selected these six cases, which do not includeEquinix. On April 6, 2007, the Second Circuit denied a petition for rehearing filed by plaintiffs, but noted that plaintiffs could ask the district court to certify 28Table of Contentsmore narrow classes than those that were rejected. On August 14, 2007, plaintiffs filed amended complaints in the six focus cases. On September 27, 2007,plaintiffs moved to certify a class in the six focus cases. On November 14, 2007, the issuers and the underwriters named as defendants in the six focus casesmoved to dismiss the amended complaints against them. On March 26, 2008, the district court dismissed the Section 11 claims of those members of theputative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previouslycertified class period. With respect to all other claims, the motions to dismiss were denied. On October 10, 2008, at the request of the plaintiffs, plaintiffs’motion for class certification was withdrawn, without prejudice.The parties in the approximately 300 coordinated class actions, including Equinix, the underwriter defendants in the Equinix class action, and theplaintiffs in the Equinix class action, have reached an agreement in principle under which the insurers for the issuer defendants in the coordinated cases willmake the settlement payment on behalf of the issuers, including Equinix. The settlement is subject to approval by the parties and is also subject to CourtApproval.Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the matter. We are unable at this time to determinewhether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows. We intend to continue todefend the action vigorously.On August 22, 2008, a complaint was filed against Equinix, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors inPihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant towhich Equinix merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of Equinix.Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuatedimproperly, by Pihana’s majority shareholders, officers and directors, with the alleged assistance of Equinix and others. Among other things, plaintiffscontend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they improperly received noconsideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees and costs, and compensatorydamages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725.0 million value of Equinix held byDefendants” (a group that includes more than 30 individuals and entities). An amended complaint, which adds new plaintiffs (other alleged holders of Pihanacommon stock) but is otherwise substantially similar to the original pleading, was filed on September 29, 2008 (the “Amended Complaint”). On October 13,2008, a complaint was filed in a separate action by another purported holder of Pihana common stock, naming the same defendants and assertingsubstantially similar allegations as the August 22, 2008 and September 29, 2008 pleadings. On December 12, 2008, the court entered a stipulated order,which consolidated the two actions under one case number and set January 22, 2009 as the last day for Defendants to move to dismiss or otherwise respond tothe Amended Complaint, the operative complaint in this case. On January 22, 2009, motions to dismiss the Amended Complaint were filed by Equinix andother Defendants. The court has not yet ruled on any of the motions to dismiss. We believe that plaintiffs’ claims and alleged damages are without merit andwe intend to defend the litigation vigorously.Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the matter. We are unable at this time to determinewhether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows. ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNone during the fourth quarter of the fiscal year ended December 31, 2008. 29Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIESOur common stock is quoted on the NASDAQ Global Select Market under the symbol of “EQIX.” Our common stock began trading in August 2000.The following table sets forth on a per share basis the low and high closing prices of our common stock as reported by the NASDAQ Global Select Marketduring the last two years. Low HighFiscal 2008: Fourth Fiscal Quarter $35.14 $67.59Third Fiscal Quarter 65.71 93.84Second Fiscal Quarter 69.31 100.75First Fiscal Quarter 57.78 99.62Fiscal 2007: Fourth Fiscal Quarter $90.91 $116.66Third Fiscal Quarter 81.91 96.99Second Fiscal Quarter 78.21 91.47First Fiscal Quarter 75.38 90.00As of January 31, 2009, we had issued 37,769,926 shares of our common stock outstanding held by approximately 242 registered holders.We have never declared or paid any cash dividends on our common stock and we do not anticipate paying cash dividends in the foreseeable future. Wecurrently intend to retain our earnings, if any, for future growth. Future dividends on our common stock, if any, will be at the discretion of our Board ofDirectors and will depend on, among other things, our operations, capital requirements and surplus, general financial condition, contractual restrictions andsuch other factors that our Board of Directors may deem relevant.During the year ended December 31, 2008, we did not issue or sell any securities on an unregistered basis. 30Table of ContentsStock Performance GraphThe graph set forth below compares the cumulative total stockholder return on Equinix’s common stock between December 31, 2003 and December 31,2008 with the cumulative total return of (i) The NASDAQ Composite Index and (ii) The NASDAQ Telecommunications Index. This graph assumes theinvestment of $100.00 on December 31, 2003 in Equinix’s common stock, in The NASDAQ Composite Index, and in The NASDAQ TelecommunicationsIndex, and assumes the reinvestment of dividends, if any.Equinix cautions that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential futureperformance of Equinix’s common stock.Notwithstanding anything to the contrary set forth in any of Equinix’s previous or future filings under the Securities Act of 1933, as amended, orSecurities Exchange Act of 1934, as amended, that might incorporate this Form 10-K or future filings made by Equinix under those statutes, the StockPerformance Graph shall not be deemed filed with the Securities and Exchange Commission and shall not be deemed incorporated by reference into any ofthose prior filings or into any future filings made by Equinix under those statutes. 31Table of ContentsITEM 6.SELECTED FINANCIAL DATAThe following consolidated statement of operations data for the five years ended December 31, 2008 and the consolidated balance sheet data as ofDecember 31, 2008, 2007, 2006, 2005 and 2004 have been derived from our audited consolidated financial statements and the related notes. Our historicalresults are not necessarily indicative of the results to be expected for future periods. The following selected consolidated financial data for the three years endedDecember 31, 2008 and as of December 31, 2008 and 2007, should be read in conjunction with our audited consolidated financial statements and the relatednotes in Item 8 of this Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7of this Annual Report on Form 10-K. In addition, in September 2007, we completed our acquisition of IXEurope plc, a significant acquisition. For furtherinformation on this acquisition, refer to Note 2 of our Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. Years ended December 31, 2008 2007 2006 2005 2004 (dollars in thousands, except per share data) Consolidated Statement of Operations Data: Revenues $704,680 $419,442 $286,915 $221,057 $163,671 Costs and operating expenses: Cost of revenues 414,659 263,745 188,379 158,354 136,950 Sales and marketing 66,913 40,719 32,619 20,552 18,604 General and administrative 146,564 105,794 72,123 45,110 32,494 Restructuring charges 3,142 407 1,527 33,814 17,685 Gains on asset sales — (1,338) (9,647) — — Total costs and operating expenses 631,278 409,327 285,001 257,830 205,733 Income (loss) from operations 73,402 10,115 1,914 (36,773) (42,062)Interest income 7,413 15,406 6,627 3,584 1,291 Interest expense (55,041) (27,334) (14,630) (8,905) (11,572)Other income (expense) 1,307 3,047 (245) 25 76 Loss on debt extinguishment and conversion — (5,949) — — (16,211)Income tax benefit (expense) 104,457 (473) (439) (543) (153)Cumulative effect of a change in accounting principle — — 376 — — Net income (loss) $131,538 $(5,188) $(6,397) $(42,612) $(68,631)Earnings per share: Basic $3.58 $(0.16) $(0.22) $(1.78) $(3.87)Weighted average shares—basic 36,774 32,136 28,551 23,956 17,719 Diluted $3.31 $(0.16) $(0.22) $(1.78) $(3.87)Weighted average shares—diluted 43,728 32,136 28,551 23,956 17,719 Other Financial Data: Net cash provided by operating activities $267,558 $120,020 $75,412 $67,595 $36,912 Net cash used in investing activities (486,724) (1,054,725) (158,470) (108,722) (56,865)Net cash provided by financing activities 143,690 1,145,013 46,107 134,611 19,239 As of December 31, 2008 2007 2006 2005 2004 (dollars in thousands)Consolidated Balance Sheet Data: Cash, cash equivalents and short-term and long-term investments $307,945 $383,900 $156,481 $188,855 $108,092Accounts receivable, net 66,029 60,089 26,864 17,237 11,919Property, plant and equipment, net 1,488,402 1,162,720 546,395 438,790 343,361Total assets 2,448,266 2,181,868 771,832 680,997 501,798Capital lease and other financing obligations, excluding current portion 133,031 93,604 92,722 94,653 34,529Mortgage and loans payable, excluding current portion 386,446 313,915 96,746 58,841 — Convertible debt, excluding current portion 645,986 678,236 86,250 86,250 122,074Total stockholders’ equity 892,715 814,432 355,028 288,673 273,706 32Table of ContentsITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following commentary should be read in conjunction with the financial statements and related notes contained elsewhere in this AnnualReport on Form 10-K. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Actof 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations thatinvolve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-lookingstatements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identifyforward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in “Liquidity and Capital Resources”and “Risk Factors” elsewhere in this Annual Report on Form 10-K. All forward-looking statements in this document are based on informationavailable to us as of the date hereof and we assume no obligation to update any such forward-looking statements.Our management’s discussion and analysis of financial condition and results of operations is intended to assist readers in understanding our financialinformation from our management’s perspective and is presented as follows: • Overview • Results of Operations • Liquidity and Capital Resources • Contractual Obligations and Off-Balance-Sheet Arrangements • Critical Accounting Estimates • Recent Accounting PronouncementsOverviewEquinix provides network-neutral colocation, interconnection and managed services to global enterprises, content providers, financial companies and theworld’s largest network service providers. As of December 31, 2008, we operated IBX centers in the Chicago, Dallas, Los Angeles, New York, Silicon Valleyand Washington, D.C. metro areas in the United States, France, Germany, the Netherlands, Switzerland and the United Kingdom in the Europe region, andAustralia, Hong Kong, Japan and Singapore in the Asia-Pacific region. We entered the European region in September 2007 through our acquisition of IXEuropePlc, or IXEurope, headquartered in London, U.K. We refer to this transaction as the IXEurope acquisition. We then acquired Virtu Secure Webservices B.V.,or Virtu, based in the Netherlands to supplement our European operations in February 2008. We refer to this transaction as the Virtu acquisition.Direct interconnection to our aggregation of networks, which serve more than 90% of the world’s Internet routes, allows our customers to increaseperformance while significantly reducing costs. Based on our network-neutral model and the quality of our IBX centers, we believe we have established acritical mass of customers. As more customers locate in our IBX centers, it benefits their suppliers and business partners to do so as well to gain the fulleconomic and performance benefits of direct interconnection. These partners, in turn, pull in their business partners, creating a “network effect” of customeradoption. Our interconnection services enable scalable, reliable and cost-effective interconnection and traffic exchange thus lowering overall cost and increasingflexibility. Our focused business model is based on our critical mass of customers and the resulting network effect. This critical mass and the resultingnetwork effect, combined with our strong financial position, continue to drive new customer growth and bookings.Historically, our market has been served by large telecommunications carriers who have bundled their telecommunications products and services withtheir colocation offerings. Each of these colocation providers own and operate a network. We do not own or operate a network, yet have greater than 300networks operating 33Table of Contentsout of our IBX centers. As a result, we are able to offer our customers a substantial choice of networks given our network neutrality thereby allowing ourcustomers to choose from numerous network service providers. We believe this is a distinct and sustainable competitive advantage.On a consolidated basis our customer count increased to 2,272, excluding the impact of the Virtu acquisition, as of December 31, 2008 versus 1,881 asof December 31, 2007, an increase of 21%. Including the impact of the Virtu acquisition, our customer count was 2,757 as of December 31, 2008, an increaseof 47%. Our utilization rate represents the percentage of our cabinet space billing versus net sellable cabinet space available taking into account powerlimitations. Excluding the impact of the IXEurope and the Virtu acquisitions, our utilization rate increased to 81% as of December 31, 2008 versus 73% as ofDecember 31, 2007; however, further excluding the impact of our IBX center expansion projects that have opened during the last 12 months, our utilizationrate would have been 85% as of December 31, 2008. Our utilization rate varies from market to market among our IBX centers across the U.S., Europe andAsia-Pacific. We continue to monitor the available capacity in each of our selected markets. To the extent we have limited capacity available in a given market itmay limit our ability for growth in that market. We perform demand studies on an ongoing basis to determine if future expansion is warranted in a market. Inaddition, power and cooling requirements for most customers are growing on a per unit basis. As a result, customers are consuming an increasing amount ofpower per cabinet. Although we generally do not control the amount of power our customers draw from installed circuits, we have negotiated powerconsumption limitations with certain of our high power demand customers. This increased power consumption has driven the requirement to build out ournew IBX centers to support power and cooling needs twice that of previous IBX centers. We could face power limitations in our centers even though we mayhave additional physical cabinet capacity available within a specific IBX center. This could have a negative impact on the available utilization capacity of agiven center, which could have a negative impact on our ability to grow revenues, affecting our financial performance, operating results and cash flows.Strategically, we will continue to look at attractive opportunities to grow our market share and selectively improve our footprint and service offerings. Aswas the case with our recent expansions and acquisitions, our expansion criteria will be dependent on a number of factors such as demand from new andexisting customers, quality of the design, power capacity, access to networks, capacity availability in current market location, amount of incrementalinvestment required by us in the targeted property, lead-time to break-even and in-place customers. Like our recent expansions and acquisitions, the rightcombination of these factors may be attractive to us. Dependent on the circumstances, these transactions may require additional capital expenditures funded byupfront cash payments or through long-term financing arrangements in order to bring these properties up to Equinix standards. Property expansion may be inthe form of purchases of real property, long-term leasing arrangements or acquisitions. Future purchases, construction or acquisitions may be completed by usor with partners or potential customers to minimize the outlay of cash, which can be significant.Our business is based on a recurring revenue model comprised of colocation, interconnection and managed infrastructure services. We consider theseservices recurring as our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which is generally one tothree years in length. Our recurring revenues comprise greater than 90% of our total revenues. Over the past few years, greater than half of our then existingcustomers ordered new services in any given quarter representing greater than half of the new orders received in each quarter, contributing to our revenuegrowth.Our non-recurring revenues are primarily comprised of installation services related to a customer’s initial deployment and professional services that weperform. These services are considered to be non-recurring as they are billed typically once and upon completion of the installation or professional serviceswork performed. The majority of these non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initialinstallation. As a percentage of total revenues, we expect non-recurring revenues to represent less than 10% of total revenues for the foreseeable future.Our U.S. revenues are derived primarily from colocation and interconnection services while our Europe and Asia-Pacific revenues are derived primarilyfrom colocation and managed infrastructure services. 34Table of ContentsThe largest cost components of our cost of revenues are depreciation, rental payments related to our leased IBX centers, utility costs, including electricityand bandwidth, IBX center employees’ salaries and benefits, including stock-based compensation, repairs and maintenance, supplies and equipment andsecurity services. A substantial majority of our cost of revenues is fixed in nature and should not vary significantly from period to period, unless we expandour existing IBX centers or open new IBX centers. However, there are certain costs which are considered more variable in nature, including utilities andsupplies that are directly related to growth in our existing and new customer base. We expect the cost of our utilities, specifically electricity, will increase in thefuture on a per-unit or fixed basis in addition to the variable increase related to the growth of consumption by the customer. In addition, the cost of electricity isgenerally higher in the summer months as compared to other times of the year.Sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, including stock-basedcompensation, sales commissions, marketing programs, public relations, promotional materials and travel, as well as bad debt expense and amortization ofcustomer contract intangible assets.General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, accounting, legal and otherprofessional service fees, and other general corporate expenses such as our corporate headquarters office lease and some depreciation expense.Due to our recurring revenue model and a cost structure which has a large base that is fixed in nature and generally does not grow in proportion torevenue growth, we expect our cost of revenues, sales and marketing expenses and general and administrative expenses to decline as a percentage of revenueover time, although we expect each of them to grow in absolute dollars in connection to our growth. This is evident in the trends noted below in our discussionon our results of operations. However, for cost of revenues, this trend may periodically be impacted when a large expansion project opens and before it startsgenerating any meaningful revenue.Results of OperationsOur results of operations for the year ended December 31, 2008 include the operations of Virtu from February 5, 2008 to December 31, 2008. Ourresults of operations for the year ended December 31, 2007 include the operations of IXEurope from September 14, 2007 to December 31, 2007, but do notinclude the operations of Virtu. 35Table of ContentsYears Ended December 31, 2008 and 2007Revenues. Our revenues for the years ended December 31, 2008 and 2007 were generated from the following revenue classifications and geographicregions (dollars in thousands): Years ended December 31, Change 2008 % 2007 % $ % U.S: Recurring revenues $425,964 61% $311,776 74% $114,188 37%Non-recurring revenues 16,839 2% 13,102 3% 3,737 29% 442,803 63% 324,878 77% 117,925 36%Europe: Recurring revenues 165,931 23% 35,309 9% 130,622 370%Non-recurring revenues 11,571 2% 2,181 0% 9,390 431% 177,502 25% 37,490 9% 140,012 373%Asia-Pacific: Recurring revenues $78,192 11% $52,571 13% $25,621 49%Non-recurring revenues 6,183 1% 4,503 1% 1,680 37% 84,375 12% 57,074 14% 27,301 48%Total: Recurring revenues 670,087 95% 399,656 95% 270,431 68%Non-recurring revenues 34,593 5% 19,786 5% 14,807 75% $704,680 100% $419,442 100% $285,238 68%U.S. Revenues. The period over period growth in recurring revenues was primarily the result of an increase in orders from both our existing customersand new customers during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existingIBX centers, as well as selective price increases in each of our IBX markets. During the year ended December 31, 2008, we recorded $30.6 million of revenuegenerated from our newly-opened IBX centers or IBX center expansions in the Chicago, New York, Silicon Valley and Washington, D.C. metro areas. Weexpect that our U.S. revenues will continue to grow in future periods as a result of continued growth in these newly-opened IBX centers and additionalexpansions currently taking place in the Los Angeles and New York metro areas, both of which are expected to open during mid-2009.Europe Revenues. Our revenues from the United Kingdom, the largest revenue contributor in the Europe region, represented approximately 38% and37%, respectively, of the regional revenues for the years ended December 31, 2008 and 2007. Our Europe revenues have increased over the course of 2008 asthis region has grown due to our expansion efforts and we expect our Europe revenues to continue to grow in future periods, as a result of our newly-openedIBX center expansions in the Amsterdam, Frankfurt, London and Paris metro areas and additional expansions currently taking place in the Amsterdam,Frankfurt, London and Paris metro areas, all of which are expected to open during the first half of 2009, with the exception of the current London expansionwhich is expected to open during the first half of 2010.Asia-Pacific Revenues. Our revenues from Singapore, the largest revenue contributor in the Asia-Pacific region, represented approximately 36% and35%, respectively, of the regional revenues for the years ended December 31, 2008 and 2007. As in the U.S., Asia-Pacific revenue growth was due to anincrease in orders from both our existing customers and new customers during the period as reflected in the growth in our customer count and utilization rate,as discussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the year endedDecember 31, 2008, we recorded $12.5 million of revenue generated from our IBX center expansions in the Hong Kong, Singapore and Tokyo metro areas. We 36Table of Contentsexpect that our Asia-Pacific revenues will continue to grow in future periods as a result of continued growth in these newly-opened IBX center expansions andadditional expansions currently taking place in the Sydney metro area, which is expected to open during the first half of 2009, and the Hong Kong andSingapore metro areas which are expected to open during the second half of 2009.Cost of Revenues. Our cost of revenues for the years ended December 31, 2008 and 2007 were split among the following geographic regions (dollars inthousands): Years ended December 31, Change 2008 % 2007 % $ % U.S. $238,443 57% $198,432 75% $40,011 20%Europe 122,658 30% 30,245 12% 92,413 306%Asia-Pacific 53,558 13% 35,068 13% 18,490 53%Total $414,659 100% $263,745 100% $150,914 57% Years endedDecember 31, 2008 2007 Cost of revenues as a percentage of revenues: U.S. 54% 61%Europe 69% 81%Asia-Pacific 63% 61%Total 59% 63%U.S. Cost of Revenues. U.S. cost of revenues for the years ended December 31, 2008 and 2007 included $91.8 million and $73.6 million, respectively,of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation, the increase in U.S. cost ofrevenues was primarily due to overall growth related to our revenue growth and costs associated with our expansion projects, including (i) an increase of $15.7million in utility costs as a result of increased customer installations, (ii) $6.0 million in higher compensation costs and (iii) an increase of $2.3 million inrepair and maintenance costs, partially offset by a decrease of $3.0 million in rent and facility costs as a result of certain property acquisitions in 2007 and2008. We anticipate that our U.S. cost of revenues will continue to increase in the foreseeable future to the extent that the occupancy levels in our U.S. IBXcenters increase and as our newly-opened IBX centers or IBX center expansions commence operations more fully during 2009 and from our additionalexpansion activity currently taking place in the Los Angeles and New York metro areas. We expect U.S. cost of revenues to increase as we continue to grow ourbusiness.Europe Cost of Revenues. Europe cost of revenues for the years ended December 31, 2008 and 2007 included $33.5 million and $7.6 million,respectively, of depreciation expense. Our Europe cost of revenues have increased over the course of 2008 as this region has grown due to our expansion effortsand we anticipate our Europe cost of revenues will continue to increase in future periods, as we sell out the available space in our existing data centers, as ournewly-opened IBX centers or IBX center expansions commence operations more fully during 2009 and from our additional expansion activity currently takingplace in the Amsterdam, Frankfurt, London and Paris metro areas. We expect Europe cost of revenues to increase as we continue to grow our business.Asia-Pacific Cost of Revenues. Asia-Pacific cost of revenues for the years ended December 31, 2008 and 2007 included $17.6 million and $9.3million, respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, theincrease in Asia-Pacific cost of revenues was primarily the result of costs associated with our expansion projects and overall growth in connection with revenuegrowth, such as $4.2 million of higher utility costs arising from increased customer installations and revenues attributed to customer growth, as well as $2.5million of additional rent 37Table of Contentsexpense associated with new leases in connection with our recently-opened IBX center expansions and with our additional expansion activity currently takingplace in the Hong Kong, Singapore and Sydney metro areas. We expect Asia-Pacific cost of revenues to increase as we continue to grow our business.Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2008 and 2007 were split among the followinggeographic regions (dollars in thousands): Years ended December 31, Change 2008 % 2007 % $ % U.S. $38,219 57% $31,291 77% $6,928 22%Europe 19,331 29% 2,987 7% 16,344 547%Asia-Pacific 9,363 14% 6,441 16% 2,922 45%Total $66,913 100% $40,719 100% $26,194 64% Years endedDecember 31, 2008 2007 Sales and marketing expenses as a percentage of revenues: U.S. 9% 10%Europe 11% 8%Asia-Pacific 11% 11%Total 9% 10%U.S. Sales and Marketing Expenses. The increase in U.S. sales and marketing expenses was primarily due to an increase of $3.3 million in salescompensation costs as a result of revenue growth and $2.6 million of higher expenditures related to our branding initiatives. We expect U.S. sales andmarketing expenses to increase as we continue to grow our business and invest further in various branding initiatives; however, as a percentage of revenues,we expect them to decrease.Europe Sales and Marketing Expenses. Our Europe sales and marketing expenses for the years ended December 31, 2008 and 2007 included $6.0million and $1.8 million of amortization expense related to customer contract intangible assets. Excluding amortization expense, our Europe sales andmarketing expenses have grown over the course of 2008 as we grew this business and invested in various branding and integration initiatives. During the yearended December 31, 2008, we also recorded $1.3 million of bad debt expense in the Europe region due largely to integration of accounting policies in connectionwith internal control compliance initiatives. We expect Europe sales and marketing expenses to increase as we continue to grow our business; however, as apercentage of revenues, we expect them to decrease.Asia-Pacific Sales and Marketing Expenses. The increase in Asia-Pacific sales and marketing expenses was primarily due to an increase in salescompensation over the prior period associated with the overall growth in this region and with expenditures related to our branding initiatives. We expect Asia-Pacific sales and marketing expenses to increase as we continue to grow our business; however, as a percentage of revenues, we expect them to decrease. 38Table of ContentsGeneral and Administrative Expenses. Our general and administrative expenses for the years ended December 31, 2008 and 2007 were split amongthe following geographic regions (dollars in thousands): Years ended December 31, Change 2008 % 2007 % $ % U.S. $96,657 66% $83,215 79% $13,442 16%Europe 34,071 23% 8,292 7% 25,779 311%Asia-Pacific 15,836 11% 14,287 14% 1,549 11%Total $146,564 100% $105,794 100% $40,770 39% Years endedDecember 31, 2008 2007 General and administrative expenses as a percentage of revenues: U.S. 22% 26%Europe 19% 22%Asia-Pacific 19% 25%Total 21% 25%U.S. General and Administrative Expenses. The increase in U.S. general and administrative expenses was primarily due to (i) $7.9 million of highercompensation costs, including increases in general salary, bonuses and stock-based compensation, and headcount growth (259 U.S. general andadministrative employees as of December 31, 2008 versus 220 as of December 31, 2007), (ii) an increase of $2.6 million in professional fees related to variousconsulting projects to support our growth and (iii) an increase in depreciation expense as a result of our continued investment in information technologysystems to support our growth. Going forward, we expect U.S. general and administrative expenses to increase as we continue to scale our operations tosupport our growth; however, as a percentage of revenues, we expect them to decrease.Europe General and Administrative Expenses. Our Europe general and administrative expenses for the years ended December 31, 2008 and 2007included $7.8 million and $862,000, respectively, of stock-based compensation expense. Excluding stock-based compensation expense, our Europe generaland administrative expenses have increased over the course of 2008 in connection with our growth and integration initiatives. We expect our Europe general andadministrative expenses to increase in future periods as we continue to scale our operations to support our growth and in connection with various ongoingintegration initiatives related to investments in systems and internal control compliance; however, as a percentage of revenues, we expect them to decrease.Asia-Pacific General and Administrative Expenses. The increase in Asia-Pacific general and administrative expenses was primarily due to highercompensation costs, including general salary increases and bonuses. Going forward, we expect Asia-Pacific general and administrative expenses to increase aswe continue to scale our operations to support our growth; however, as a percentage of revenues, we expect them to decrease.Restructuring Charges. During the year ended December 31, 2008, we recorded a restructuring charge adjustment of $3.1 million from revisedsublease assumptions on our two excess space leases in the Los Angeles and New York metro areas as a result of new information becoming available. Duringthe year ended December 31, 2007, we recorded a restructuring charge adjustment of $407,000 from revised sublease assumptions for the excess space lease inthe Los Angeles metro area as a result of new information becoming available. The original restructuring charge for these two leases was recorded in the fourthquarter of 2004 and totaled $17.7 million. We are contractually committed to these two excess space leases through 2015. In February 2009, we decided toutilize the space we previously abandoned in order to expand our original Los Angeles IBX center. Accordingly, we will reverse the restructuring reserve duringthe three months ended March 31, 2009 associated with the Los Angeles lease (see Note 17 of Notes to Consolidated Financial 39Table of ContentsStatements in Item 8 of this Annual Report on Form 10-K). We estimate that this restructuring reserve reversal is approximately $5.7 million, which will bereflected in our financial statements for the three months ended March 31, 2009. Our excess space lease in the New York metro area will remain abandonedand continue to carry a restructuring charge.Gains on Asset Sales. During the year ended December 31, 2007, we recorded a $1.3 million gain in connection with the sale of our Equinix mailservice offering, which we sold for $1.7 million in gross cash proceeds. No gains on asset sales were recorded during the year ended December 31, 2008.Interest Income. Interest income decreased to $7.4 million for the year ended December 31, 2008 from $15.4 million for the year ended December 31,2007. Interest income decreased primarily due to lower yields on invested balances and lower average cash balances. The average yield for the year endedDecember 31, 2008 was 2.77% versus 5.08% for the year ended December 31, 2007. In addition, during the year ended December 31, 2008, we recordedrealized losses from our investment portfolio, including a $1.5 million loss on one of our money market accounts as more fully described in Note 5 of Notesto Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. We expect our interest income to decrease for the foreseeable future dueprimarily to lower yields on our investment portfolio and lower average cash balances.Interest Expense. Interest expense increased to $55.0 million for the year ended December 31, 2008 from $27.3 million for the year endedDecember 31, 2007. The increase in interest expense was primarily due to new financings entered into during 2007 and 2008 consisting of (i) our $110.0million Chicago IBX financing, which was drawn down during the construction period of the Chicago metro area IBX expansion project and which becamefully drawn in March 2008, with an approximate interest rate of 4.19% per annum; (ii) our $250.0 million 2.50% convertible subordinated notes offering inMarch 2007; (iii) our approximately $91.0 million Asia-Pacific financing, of which approximately $63.2 million was drawn during 2008 and, which wasfully drawn as of December 31, 2008, with an approximate blended interest rate of 3.69% per annum; (iv) our $396.0 million 3.00% convertible subordinatednotes offering in September 2007; (v) our approximately $131.0 million European financing, of which approximately $72.7 million was drawn during 2008leaving only approximately $2.9 million remaining available to draw, with an approximate blended interest rate of 4.39% per annum and (vi) our Netherlandsfinancing of approximately $6.5 million, acquired as a result of the Virtu acquisition, with an approximate interest rate of 4.18% per annum. This increasewas partially offset by the partial conversion of $13.1 million of our 2.50% convertible subordinated debentures in November 2008 that resulted in a decreasein interest expense. During the years ended December 31, 2008 and 2007, we capitalized $6.0 million and $7.7 million, respectively, of interest expense toconstruction in progress. Going forward, we expect to incur higher interest expense as we fully utilize or recognize the full impact of our existing financings tofund our expansion efforts and as we complete expansion efforts and cease to capitalize interest expense. In addition, commencing in 2009, interest expense willincrease due to a new accounting pronouncement, FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled inCash upon Conversion.” For further information, refer to “Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements inItem 8 of this Annual Report on Form 10-K.Other Income (Expense). For the year ended December 31, 2008, we recorded $1.3 million of other income, primarily attributable to foreign currencyexchange gains during the year. For the year ended December 31, 2007, we recorded $3.0 million of other income, primarily due to foreign currency exchangegains including a foreign exchange gain of $1.5 million as a result of hedging a portion of the IXEurope acquisition purchase price with forward contracts.Loss on Conversion and Extinguishment of Debt. In March 2007, we retired $54.0 million of our convertible subordinated debentures in exchangefor approximately 1.4 million newly issued shares of our common stock. As a result, we recorded a $3.4 million loss on debt conversion in accordance withFASB No. 84, “Induced Conversions of Convertible Debt,” due to the inducement fee paid. In September 2007, a senior bridge loan was terminated unusedand, as a result, we recorded a $2.5 million loss on debt extinguishment reflecting 40Table of Contentsthe immediate write-off of capitalized debt issuance costs to secure the senior bridge loan. As a result of these two events, during the year ended December 31,2007 we recognized a total of $5.9 million of loss on debt conversion and extinguishment. During the year ended December 31, 2008, we did not record anyloss on conversion or extinguishment of debt in our statements of operations.Income Taxes. For the year ended December 31, 2008, we recorded $104.5 million of income tax benefits primarily due to recognition of deferred taxassets of $101.9 million and $6.1 million associated with our U.S. and Australian operations, respectively, partially offset by tax provisions from otherjurisdictions. For the year ended December 31, 2007, we recorded $473,000 of income tax expense primarily attributable to our foreign operations. As ofDecember 31, 2008, we had a total valuation allowance of $40.3 million against our deferred tax assets, which is attributable to certain of our foreignoperations. Once we release this remaining valuation allowance, it will impact our results of operations in the periods such a determination is made. We havenot paid any significant cash income taxes since inception and we do not expect to pay any significant cash income taxes during 2009. Going forward,primarily as a result of the recognition of our U.S. deferred tax assets, we will commence the recording of income tax expense at the expected effective blendedtax rates.As of December 31, 2008, we had total net deferred tax assets of $98.6 million consisting primarily of favorable temporary differences and netoperating loss carryforwards, the majority of which are attributable to our U.S. operations. Approximately $195.0 million of future pretax earnings forfinancial reporting purposes would need to be generated to realize these favorable temporary differences associated with our U.S. operations. In addition,approximately $54.0 million of future taxable income would need to be generated in future years to realize these net operating loss carryforwards associatedwith our U.S. operations. We believe it is achievable based on our current level of pretax earnings and our profitability forecast for future years. Historically,the difference between the pretax earnings for financial reporting purposes and the taxable income for income tax purposes in our U.S. operations has primarilyincluded temporary adjustments such as depreciation expense, stock-based compensation and capital lease expenses. The temporary differences either increaseor decrease the pretax earnings for financial reporting purposes to arrive at the taxable income for income tax purposes. However, it is expected that thesetemporary differences will generally increase the taxable income in the foreseeable future. The majority of the net operating loss carryforwards for income taxpurposes in our U.S. operations does not start to expire until 2023. 41Table of ContentsYears Ended December 31, 2007 and 2006Revenues. Our revenues for the years ended December 31, 2007 and 2006 were generated from the following revenue classifications and geographicregions (dollars in thousands): Years ended December 31, Change 2007 % 2006 % $ % U.S: Recurring revenues $311,776 74% $235,363 82% $76,413 32%Non-recurring revenues 13,102 3% 10,703 4% 2,399 22% 324,878 77% 246,066 86% 78,812 32%Asia-Pacific: Recurring revenues 52,571 13% 37,797 13% 14,774 39%Non-recurring revenues 4,503 1% 3,052 1% 1,451 48% 57,074 14% 40,849 14% 16,225 40%Europe: Recurring revenues 35,309 9% — — 35,309 100%Non-recurring revenues 2,181 0% — — 2,181 100% 37,490 9% — — 37,490 100%Total: Recurring revenues 399,656 95% 273,160 95% 126,496 46%Non-recurring revenues 19,786 5% 13,755 5% 6,031 44% $419,442 100% $286,915 100% $132,527 46%U.S. Revenues. The period over period growth in recurring revenues was primarily the result of an increase in orders from both our existing customersand new customers during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existingIBX centers, as well as selective price increases in each of our IBX markets. During the year ended December 31, 2007, we recorded $15.3 million of revenuesgenerated from our newly-opened IBX centers in the Chicago, New York, and Washington, D.C. metro areas.Asia-Pacific Revenues. Our revenues from Singapore, the largest revenue contributor in this region, represented approximately 35% and 39%,respectively, of the regional revenues for the years ended December 31, 2007 and 2006. As in the U.S., Asia-Pacific revenue growth was due to an increase inorders from both our existing customers and new customers during the period as reflected in the growth in our customer count and utilization rate, asdiscussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the year endedDecember 31, 2007, we recorded $1.7 million of revenues generated from our new IBX center in Tokyo, which we acquired in December 2006, and $1.2million from our IBX center expansion in Singapore.Europe Revenues. Our revenues from the United Kingdom, the largest revenue contributor in this region, represented approximately 37% of the regionalrevenues for the year ended December 31, 2007. 42Table of ContentsCost of Revenues. Our cost of revenues for the years ended December 31, 2007 and 2006 were split among the following geographic regions (dollars inthousands): Years ended December 31, Change 2007 % 2006 % $ % U.S. $198,432 75% $165,413 88% $33,019 20%Asia-Pacific 35,068 13% 22,966 11% 12,102 53%Europe 30,245 12% — — 30,245 100%Total $263,745 100% $188,379 100% $75,366 40% Years endedDecember 31, 2007 2006 Cost of revenues as a percentage of revenues: U.S. 61% 67%Asia-Pacific 61% 56%Europe 81% — Total 63% 66%U.S. Cost of Revenues. U.S. cost of revenues for the years ended December 31, 2007 and 2006 included $73.6 million and $65.0 million,respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increasein U.S. cost of revenues was primarily due to overall growth related to our revenue growth and costs associated with our expansion projects, including (i) $6.0million of higher compensation costs, (ii) $5.0 million of higher rent and facility costs as a result of IBX center expansion activity and (iii) an increase of$10.3 million in utility costs from increasing customer installations.Asia-Pacific Cost of Revenues. Asia-Pacific cost of revenues for the years ended December 31, 2007 and 2006 included $9.3 million and $3.5 million,respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increasein Asia-Pacific cost of revenues was primarily the result of costs associated with our expansion projects and overall growth in connection with revenue growth,such as higher compensation costs, an increase in rent and facility costs and increasing utility and bandwidth costs in line with increasing customerinstallations and revenues attributed to customer growth.Europe Cost of Revenues. Europe cost of revenues for the year ended December 31, 2007 included $7.6 million of depreciation expense.Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2007 and 2006 were split among the followinggeographic regions (dollars in thousands): Years ended December 31, Change 2007 % 2006 % $ % U.S. $31,291 77% $28,052 86% $3,239 12%Asia-Pacific 6,441 16% 4,567 14% 1,874 41%Europe 2,987 7% — — 2,987 100%Total $40,719 100% $32,619 100% $8,100 25% 43Table of Contents Years endedDecember 31, 2007 2006 Sales and marketing expenses as a percentage of revenues: U.S. 10% 11%Asia-Pacific 11% 11%Europe 8% — Total 10% 11%U.S. Sales and Marketing Expenses. The increase in U.S. sales and marketing expenses was primarily due to increased sales compensation as a resultof revenue growth, including increases in salaries, bonuses and stock-based compensation.Asia-Pacific Sales and Marketing Expenses. The increase in Asia-Pacific sales and marketing expenses was primarily due to increased salescompensation as a result of revenue growth, including increases in salaries, bonuses and stock-based compensation.Europe Sales and Marketing Expenses. Europe sales and marketing expenses during the year ended December 31, 2007 included $1.8 million ofintangible asset amortization expense.General and Administrative Expenses. Our general and administrative expenses for the years ended December 31, 2007 and 2006 were split amongthe following geographic regions (dollars in thousands): Years ended December 31, Change 2007 % 2006 % $ % U.S. $83,215 79% $60,645 84% $22,570 37%Asia-Pacific 14,287 14% 11,478 16% 2,809 24%Europe 8,292 7% — — 8,292 100%Total $105,794 100% $72,123 100% $33,671 47% Years endedDecember 31, 2007 2006 General and administrative expenses as a percentage of revenues: U.S. 26% 25%Asia-Pacific 25% 28%Europe 22% — Total 25% 25%U.S. General and Administrative Expenses. The increase in U.S. general and administrative expenses was primarily due to $13.4 million of highercompensation costs, including increases in general salaries, bonuses and stock-based compensation and headcount growth (220 U.S. general andadministrative employees as of December 31, 2007 versus 175 as of December 31, 2006), an increase of $3.8 million in depreciation expense as a result of ourcontinued investment in information technology systems to support our growth and an increase in professional services due to an increase in variousconsulting projects in connection with our growth strategies.Asia-Pacific General and Administrative Expenses. The increase in Asia-Pacific general and administrative expenses was primarily due to highercompensation costs, including increases in general salaries, bonuses and stock-based compensation.Europe General and Administrative Expenses. Europe general and administrative expenses during the year ended December 31, 2007 included $1.1million of stock-based compensation and depreciation expense. 44Table of ContentsRestructuring Charges. During the year ended December 31, 2007, we recorded a restructuring charge adjustment of $407,000 as a result of revisedsublease assumptions for our excess space lease in the Los Angeles metro area as a result of new information becoming available. During the year endedDecember 31, 2006, we recorded a restructuring charge adjustment of $1.5 million as a result of revised sublease assumptions on two of our excess spaceleases in the New York and Los Angeles metro areas as a result of new information becoming available. The original restructuring charge for these two leaseswas recorded in the fourth quarter of 2004 and totaled $17.7 million. We are contractually committed to these two leases through 2015.Gains on Asset Sales. During the year ended December 31, 2007, we recorded a $1.3 million gain in connection with the sale of our Equinix mailservice offering, which we sold for $1.7 million in gross cash proceeds. During the year ended December 31, 2006, we recorded a $9.6 million gain inconnection with the sale of our Honolulu IBX center. We sold this IBX center for $9.8 million in gross cash proceeds.Interest Income. Interest income increased to $15.4 million from $6.6 million for the years ended December 31, 2007 and 2006, respectively. Interestincome increased due to higher invested balances during these periods, as well as higher yields on those balances due to increased interest rates. The averageannualized yield for the year ended December 31, 2007 was 5.08% versus 4.53% for the year ended December 31, 2006.Interest Expense. Interest expense increased to $27.3 million from $14.9 million for the years ended December 31, 2007 and 2006, respectively. Theincrease in interest expense was primarily due to new financings entered into during 2007 and 2006: (i) an additional financing of $40.0 million under theAshburn campus mortgage payable during the three months ended December 31, 2006, which bears interest at 8.0% per annum, (ii) our $110.0 millionChicago IBX financing, which was drawn down during the construction period of the Chicago metro area IBX expansion project, of which $105.6 millionwas outstanding as of December 31, 2007 with an approximate interest rate of 8.375% per annum, (iii) our $250.0 million 2.50% convertible subordinatednotes offering in March 2007, (iv) our approximately $40.0 million Asia-Pacific financing, of which approximately $25.9 million was outstanding as ofDecember 31, 2007, with an approximate blended interest rate of 3.65% per annum, (v) our $396.0 million 3.00% convertible subordinated notes offering inSeptember 2007 and (vi) our approximately $162.9 million European financing, of which $83.5 million was outstanding as of December 31, 2007 with anapproximate blended interest rate of 7.74% per annum. This increase was partially offset by the $54.0 million partial conversion of our 2.50% convertiblesubordinated debentures in March 2007 that resulted in a decrease in interest expense. During the years ended December 31, 2007 and 2006, we capitalized$7.7 million and $1.6 million, respectively, of interest expense to construction in progress.Other Income (Expense). For the year ended December 31, 2007, we recorded $3.0 million of other income, primarily consisting of a foreign exchangegain of $1.5 million as a result of hedging a portion of the IXEurope acquisition purchase price with forward contracts and a $621,000 foreign exchange gainrelated to the liquidation of a wholly-owned subsidiary in the Netherlands. As a result, this historical foreign exchange gain of $621,000, accumulated withinother comprehensive income associated with this dormant subsidiary, was recognized in our results of operations. For the year ended December 31, 2006, werecorded $245,000 of other expense, which was primarily attributable to foreign currency losses during the period.Loss on Conversion and Extinguishment of Debt. In March 2007, we retired $54.0 million of our convertible subordinated debentures in exchangefor approximately 1.4 million newly issued shares of our common stock. As a result, we recorded a $3.4 million loss on debt conversion in accordance withFASB No. 84, “Induced Conversions of Convertible Debt,” due to the inducement fee paid. In September 2007, a senior bridge loan was terminated unusedand, as a result, we recorded a $2.5 million loss on debt extinguishment reflecting the immediate write-off of capitalized debt issuance costs to secure thesenior bridge loan. As a result of these two events, during the year ended December 31, 2007 we recognized a total of $5.9 million of loss on debt conversionand extinguishment. During the year ended December 31, 2006, we did not record any loss on conversion or extinguishment of debt in our statements ofoperations. 45Table of ContentsIncome Taxes. During 2007, we recorded $473,000 of income tax expense primarily attributable to our foreign operations. During 2006, we recorded$439,000 of income tax expense primarily representing U.S. alternative minimum tax and a net tax benefit from our operations in Singapore, which resultedfrom the release of the valuation allowance in that jurisdiction.Cumulative Effect of a Change in Accounting Principle. As a result of our adoption of SFAS No. 123(R), “Share-Based Payment,” during the yearended December 31, 2006, we recorded a reduction of expense totaling $376,000, which is reflected as a cumulative effect of a change in accounting principleon our statement of operations for this period. This amount reflects the application of an estimated forfeiture rate to partially vested employee equity awards asof January 1, 2006 that we accounted for under APB 25, which was primarily for restricted stock awards to our executive officers that were granted duringthe three months ended March 31, 2005. During the year ended December 31, 2007 no cumulative effect of a change in accounting principle was recorded inour statement of operations.Liquidity and Capital ResourcesAs of December 31, 2008, our total indebtedness was comprised of (i) convertible debt totaling $665.1 million from our convertible subordinateddebentures, our 2.50% convertible subordinated notes and our 3.00% convertible subordinated notes and (ii) non-convertible debt and financing obligationstotaling $576.0 million from our Washington D.C. metro area IBX capital lease, San Jose IBX equipment and fiber financing, Chicago IBX equipmentfinancing, Los Angeles IBX financing, Paris metro area IBX capital lease, Ashburn campus mortgage payable, Chicago IBX financing, Asia-Pacificfinancing, European financing, Netherlands financing and other financing obligations.We believe we have sufficient cash, coupled with anticipated cash generated from operating activities, to meet our operating requirements, includingrepayment of our current portion of debt due, and complete our publicly announced expansion projects for at least the next 12 months. As of December 31,2008, we had $307.9 million of cash, cash equivalents and short-term and long-term investments. During the year ended December 31, 2008, we recorded animpairment loss of $1.5 million on our investment in the Reserve Primary Fund, which is referred to as the Reserve, as more fully described in Note 5 ofNotes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. If the current capital market conditions continue to deteriorate, wemay suffer further losses on our investment portfolio, which could have a material adverse effect on our liquidity. Besides our investment portfolio and anyfinancing activities we may pursue, customer collections are our primary source of cash. While we believe we have a well diversified customer base with noconcentration of credit risk with any single customer, we have a number of large customers in the financial services sector. Further, while we believe we have astrong customer base and have experienced strong collections in the past, if the current market conditions continue to deteriorate our customers may havedifficulty paying us, we may experience increased churn in our customer base, and there may be reductions in their commitments to us, all of which couldhave a material adverse effect on our liquidity.As of December 31, 2008, we had a total of $2.9 million of additional liquidity available to us under the European financing for general working capitaland expansion projects in France, Germany, Switzerland and the United Kingdom, which we believe we will utilize. In addition, in February 2009, we enteredinto a $25.0 million one-year revolving credit facility with Bank of America, which will be used to fund our working capital and will enable us to issue lettersof credit under the Bank of America credit line (see Note 18 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K). Werefer to this transaction as the $25.0 million Bank of America revolving credit line. Our indebtedness as of December 31, 2008, as noted above, consisted of$576.0 million of non-convertible senior debt, of which $251.7 million of this amount was held by a single lender. Although these are committed facilities,most of which are fully drawn or advanced for which we are amortizing debt repayments of either principal and/or interest only, and we are in full compliancewith all covenants related to them effective December 31, 2008 (we amended certain provisions in connection with one of our financings related to certainfinancial covenants effective December 31, 2008), deteriorating market and liquidity conditions may give rise to issues which may impact the lenders’ abilityto hold these debt commitments to their full term. 46Table of ContentsWhile we believe we have sufficient liquidity and capital resources to meet our current operating requirements and to complete our publicly-announcedIBX expansion plans, we may pursue additional expansion opportunities, primarily the build-out of new IBX centers, in certain of our existing markets whichare at or near capacity within the next year. While we will be able to fund some of these expansion plans with our existing resources, additional financing,either debt or equity, may be required to pursue certain of these additional expansion plans. However, if current market conditions continue to persist, ordeteriorate further, we may be unable to secure additional financing or any such additional financing may be available to us on unfavorable terms. An inabilityto pursue additional expansion opportunities will have a material adverse effect on our ability to maintain our desired level of revenue growth in future periods.Sources and Uses of Cash Years ended December 31, 2008 2007 2006 (in thousands) Net cash provided by operating activities $267,558 $120,020 $75,412 Net cash used in investing activities (478,040) (1,054,725) (158,470)Net cash provided by financing activities 145,106 1,145,013 46,107 Operating ActivitiesThe increase in net cash provided by operating activities was primarily due to improved operating results as discussed above, strong collections ofaccounts receivable, management of vendor payments and growth in customer installations, which increases deferred installation revenue. We expect that wewill continue to generate cash from our operating activities throughout 2009 and beyond.Investing ActivitiesThe significant increase in net cash used in investing activities during 2007 compared to 2008 and 2006 included (i) $541.8 million spent to acquireIXEurope, net of cash acquired, and (ii) $120.5 million spent to acquire real estate properties in San Jose and Los Angeles, California. Excluding these uniqueand significant events, the changes in our investing activities over the past three years is primarily related to our capital expenditure investment in property,plant and equipment for our IBX center expansion activity, which has increased each year during this three-year period. During the three years endedDecember 31, 2008, these capital expenditures were $471.1 million, $416.8 million and $162.3 million, respectively. We expect that our IBX expansionactivity will decrease during 2009 as we carefully manage investing activities during the current turbulent economy.Financing ActivitiesThe significant increase in net cash provided by financing activities during 2007 compared to 2008 and 2006 included approximately $967.0 million ofnet proceeds raised in a common stock offering and two convertible debt offerings, the majority of which was used to fund the IXEurope acquisition and ourIBX center expansion activities. Excluding this significant amount of fundraising in 2007, the changes in our financing activities primarily relate to the netproceeds from our mortgage and notes payable and credit line totaling $123.1 million, $147.5 million and $8.9 million, respectively, for the three years endedDecember 31, 2008. We expect that, unless we are successful in obtaining new financing, our financing activities will decrease in 2009. In February 2009, weentered into the $25.0 million Bank of America revolving credit line to fund our working capital and enable us to issue letters of credit. 47Table of ContentsDebt Obligations—Convertible DebtConvertible Subordinated Debentures. During February 2004, we sold $86.3 million in aggregate principal amount of 2.50% convertible subordinateddebentures due 2024, convertible into 2.2 million shares of our common stock, to qualified institutional buyers. The interest on the convertible subordinateddebentures is payable semi-annually every February 15th and August 15th, and commenced in August 2004. The convertible subordinated debentures areconvertible into shares of our common stock. Each $1,000 principal amount of convertible subordinated debentures is convertible into 25.3165 shares of ourcommon stock. This represents an initial conversion price of approximately $39.50 per share of common stock. In March 2007, we entered into agreementswith the holders of $54.0 million of these convertible subordinated debentures to exchange an aggregate of 1.4 million newly issued shares of our commonstock for such holders’ convertible subordinated debentures. The number of shares of common stock issued equals the amount issuable upon conversion ofthe convertible subordinated debentures in accordance with their original terms. In addition, each holder received cash consideration equal to accrued andunpaid interest through the redemption date totaling $110,000, as well as the present value of future interest due through February 15, 2009 and anincremental fee, totaling $3.4 million, as an inducement fee. In November 2008, certain holders of these convertible subordinated debentures converted $13.1million principal amount of their convertible subordinated debentures into 331,644 newly issued shares of our common stock. As of December 31, 2008, atotal of $19.2 million convertible subordinated debentures remained outstanding and were convertible into 484,813 shares of our common stock. Holders ofthe convertible subordinated debentures had the right to require us to purchase all or a portion of these remaining convertible subordinated debentures totaling$19.2 million on February 15, 2009; however, none of them did so. In addition, in December 2008, due to a combination of factors, including the fact thatthe small number of convertible subordinated debentures remaining outstanding has resulted in small and infrequent trades of the convertible subordinateddebentures creating an illiquid market and the depressed price of our common stock during this period, the parity provision clause (see “ConvertibleSubordinated Debentures” in Note 8 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K) was triggered. As a result,as of December 31, 2008, holders of the convertible subordinated debentures have the right to convert their individual debentures into shares of our commonstock at any time. Therefore, we have reclassified the remaining convertible subordinated debentures as a current liability as of December 31, 2008.2.50% Convertible Subordinated Notes. In March 2007, we issued $250.0 million in aggregate principal amount of 2.50% convertible subordinatednotes due 2012. The interest on the 2.50% convertible subordinated notes is payable semi-annually every April 15th and October 15th, and commenced inOctober 2007. The initial conversion rate is 8.9259 shares of common stock per $1,000 principal amount of convertible subordinated notes, subject toadjustment. This represents an initial conversion price of approximately $112.03 per share of common stock or 2.2 million shares of our common stock.Upon conversion, holders will receive, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock.Holders of the 2.50% convertible subordinated notes may convert their notes under certain defined circumstances, including during any fiscal quarter(and only during that fiscal quarter) ending after June 30, 2007, if the sale price of our common stock, for at least 20 trading days during the period of 30consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than 130% of the conversion price per share of common stockon such last trading day, which was $145.64 per share as of December 31, 2008. In addition, holders of the 2.50% convertible subordinated notes mayconvert their individual notes at any time on or after March 15, 2012.We may redeem all or a portion of the 2.50% convertible subordinated notes at any time after April 16, 2010 for cash but only if the closing sale price ofour common stock for at least 20 of the 30 consecutive trading days immediately prior to the day we give notice of redemption is greater than 130% of theapplicable conversion price per share of common stock on the date of the notice, which was $145.64 per share as of December 31, 2008. The redemption pricewill equal 100% of the principal amount of the convertible subordinated notes, plus accrued and unpaid interest, if any, to, but excluding, the date ofredemption. 48Table of ContentsUpon conversion, due to the conversion formulas associated with the 2.50% convertible subordinated notes, if our stock is trading at levels exceeding130% of the conversion price per share of common stock, and if we elect to pay any portion of the consideration in cash, additional consideration beyond the$250.0 million of gross proceeds received would be required. However, in no event would the total number of shares issuable upon conversion of the 2.50%convertible subordinated notes exceed 11.6036 per $1,000 principal amount of convertible subordinated notes, subject to anti-dilution adjustments, or theequivalent of $86.18 per share of common stock or a total of 2.9 million shares of our common stock. As of December 31, 2008, the 2.50% convertiblesubordinated notes were convertible into 2.2 million shares of our common stock.The 2.50% convertible subordinated notes fall under the scope of a new accounting pronouncement, FASB Staff Position No. APB 14-1, “Accountingfor Convertible Debt Instruments That May Be Settled in Cash upon Conversion,” applicable to us commencing in 2009. For further information, refer to“Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.3.00% Convertible Subordinated Notes. In September 2007, we issued $396.0 million aggregate principal amount of 3.00% Convertible SubordinatedNotes due October 15, 2014. Interest is payable semi-annually on April 15 and October 15 of each year, and commenced in April 2008.Holders of the 3.00% convertible subordinated notes may convert their notes at their option on any day up to and including the business day immediatelypreceding the maturity date into shares of our common stock. The base conversion rate is 7.436 shares of common stock per $1,000 principal amount of3.00% convertible subordinated notes, subject to adjustment. This represents a base conversion price of approximately $134.48 per share of common stock. If,at the time of conversion, the applicable stock price of our common stock exceeds the base conversion price, the conversion rate will be determined pursuant toa formula resulting in the receipt of up to 4.4616 additional shares of common stock per $1,000 principal amount of the 3.00% convertible subordinated notes,subject to adjustment. However, in no event would the total number of shares issuable upon conversion of the 3.00% convertible subordinated notes exceed11.8976 per $1,000 principal amount of 3.00% convertible subordinated notes, subject to anti-dilution adjustments, or the equivalent of $84.05 per share ofour common stock or a total of 4.7 million shares of our common stock. As of December 31, 2008, the 3.00% convertible subordinated notes were convertibleinto 2.9 million shares of our common stock.Debt Obligations—Non-Convertible DebtCapital Lease and Other Financing ObligationsWashington D.C. Metro Area IBX Capital Lease. In April 2004, we entered into a long-term lease for a 95,000 square foot data center in theWashington, D.C. metro area. The center is adjacent to our existing Washington D.C. metro area IBX center. This lease, which includes the leasing of all of theIBX plant and machinery equipment located in the building, is a capital lease. We took possession of this property during the fourth quarter of 2004, and as aresult, recorded property, plant and equipment assets, as well as a capital lease obligation, totaling $35.3 million. Payments under this lease will be mademonthly through October 2019 at an effective interest rate of 8.50% per annum. As of December 31, 2008, principal of $31.5 million remained outstandingunder this capital lease.San Jose IBX Equipment and Fiber Financing. In December 2004, we entered into a long-term lease for a 103,000 square foot data center in San Jose,and at the same time entered into separate agreements to purchase the equipment located within this new IBX center and to interconnect all three of our SiliconValley area IBX centers to each other through redundant dark fiber links. Under U.S. generally accepted accounting principles, these three separate agreementswere considered to be a single arrangement. Furthermore, while the building component of this transaction is classified as a long-term operating lease, theequipment and fiber portions of the transaction were classified as financed assets. We took possession of this property during the first quarter of 2005, and asa result, recorded property, plant and equipment and prepaid fiber assets, as well as a financing 49Table of Contentsobligation, totaling $18.7 million. Payments under this financing obligation will be made monthly through May 2020 at an effective interest rate of 8.50% perannum. As of December 31, 2008, principal of $14.2 million remained outstanding under this financing obligation.Chicago IBX Equipment Financing. In July 2005, we entered into a long-term sublease for a 107,000 square foot data center in Chicago, and at thesame time entered into a separate agreement to purchase the equipment located within this IBX center. Under U.S. generally accepted accounting principles,these two separate agreements were considered to be a single arrangement. Furthermore, while the building component of this transaction is classified as a long-term operating lease, the equipment portion of the transaction is classified as financed assets. We took possession of this property and title to the equipmentassets in November 2005, and as a result, recorded IBX equipment assets, as well as a financing obligation, totaling $9.7 million at that time. Paymentsunder this financing obligation will be made monthly through August 2015 at an effective interest rate of 7.50% per annum. As of December 31, 2008,principal of $6.9 million remained outstanding under this financing obligation.Los Angeles IBX Financing. In September 2005, we purchased a 107,000 square foot data center in the Los Angeles metro area for $34.7 million,which we paid for in full with cash in September 2005. In October 2005, we entered into a purchase and sale agreement to sell this Los Angeles IBX for $38.7million and to lease it back from the purchaser pursuant to a long-term lease, which closed in December 2005, and we received net proceeds from the sale ofthis property of $38.1 million. However, due to our continuing involvement concerning certain aspects of this property, the sale and leaseback of this propertydoes not qualify as a sale-leaseback under U.S. generally accepted accounting principles, but rather is accounted for as a financing of the property. We refer tothis portion of the transaction as the Los Angeles IBX financing. Pursuant to the Los Angeles IBX financing, we recorded a financing obligation liabilitytotaling $38.1 million in December 2005. Payments under the Los Angeles IBX financing will be made monthly through December 2025 at an effective interestrate of 7.75% per annum. As of December 31, 2008, principal of $37.7 million remained outstanding under this financing obligation.Paris Metro Area IBX Capital Lease. In September 2008, we entered into a long-term lease for 10,850 square meters of vacant space within awarehouse building in the Paris metro area. The center is adjacent to one of our existing Paris metro area IBX centers. This lease is a capital lease andcommenced on October 1, 2008. We took possession of this property during the fourth quarter of 2008, and as a result, recorded property, plant andequipment assets, as well as a capital lease obligation, totaling $39.3 million. Monthly payments under this lease commencing in April 2009 will be madethrough September 2020 at an effective interest rate of 7.43% per annum. As of December 31, 2008, principal of $40.0 million remained outstanding under thiscapital lease.Other Capital Lease and Financing Obligations. We have various other capital leases and financing obligations under which principal of $7.2million remained outstanding as of December 31, 2008.Mortgage and Loans PayableAshburn Campus Mortgage Payable. In December 2005, we completed the financing of our October 2005 purchase of the Ashburn campus propertywith a $60.0 million mortgage to be amortized over 20 years. Upon receipt of the $60.0 million of cash in December 2005, we recorded a $60.0 millionmortgage payable. Payments under the Ashburn campus mortgage payable will be made monthly through January 2026 at an effective interest rate of 8.1% perannum. In December 2006, we obtained an additional financing of $40.0 million under the Ashburn campus mortgage payable, which increased the totalamount financed under the Ashburn campus mortgage payable to $100.0 million, on the same terms as the initial mortgage payable. As of December 31, 2008,principal of $94.4 million remained outstanding under this mortgage payable.Chicago IBX Financing. In February 2007, one of our wholly-owned subsidiaries obtained a loan of up to $110.0 million to finance up to 60% of thedevelopment and construction costs of the Chicago metro area IBX 50Table of Contentsexpansion project, which we refer to as the Chicago IBX financing. Funds were advanced at up to 60% of project costs incurred. As of December 31, 2008, wehad received advances representing a final loan payable totaling $110.0 million. The loan payable has an initial maturity date of January 31, 2010, withoptions to extend for up to an additional two years, in one-year increments, upon satisfaction of certain extension conditions. The loan payable bears interest ata floating rate (one, three or six month LIBOR plus 2.75%) with interest payable monthly, which commenced in March 2007. As of December 31, 2008, theloan payable had an approximate interest rate of 4.19% per annum. The Chicago IBX financing has no specific financial covenants, contains a limited parentcompany guaranty and is collateralized by the assets of one of our Chicago IBX centers.In May 2008, we entered into an interest rate swap agreement with one counterparty to hedge the interest payments on principal of $105.0 million of theChicago IBX financing, which will mature in February 2011. Under the terms of the interest rate swap transaction, we receive interest payments based onrolling one-month LIBOR terms and pay interest at the fixed interest rate of 6.34% (swap rate of 3.59% plus borrowing margin of 2.75%).Asia-Pacific Financing. In August 2007, two of our wholly-owned subsidiaries, located in Singapore and Tokyo, Japan, entered into an approximately$48.4 million multi-currency credit facility agreement (using the exchange rates as of December 31, 2008), which is comprised of 23.0 million Singaporedollars and 2.9 billion Japanese yen, respectively. In January 2008, the Asia-Pacific financing was amended to enable our subsidiary in Australia to borrow upto 32.0 million Australian dollars, or approximately $22.5 million (using the exchange rate as of December 31, 2008), under the same general terms, amendingthe Asia-Pacific financing into an approximately $70.9 million multi-currency credit facility agreement. In June 2008, the Asia-Pacific financing was furtheramended to enable our subsidiary in Hong Kong to borrow up to 156.0 million Hong Kong dollars, or approximately $20.1 million (using the exchange rate asof December 31, 2008), under the same general terms, amending the Asia-Pacific financing into an approximately $91.0 million multi-currency credit facilityagreement. The Asia-Pacific financing has a four-year term that allows these four subsidiaries to borrow up to their credit limits during the first 12-monthperiod with repayment to occur over the remaining three years in 12 equal quarterly installments. The Asia-Pacific financing bears interest at a floating rate (therelevant three-month local cost of funds), as applicable, plus 1.85%-2.50% depending on the ratio of our senior indebtedness to our earnings before interest,taxes, depreciation and amortization, or EBITDA, with interest payable quarterly. Loans payable under the Asia-Pacific financing have a final maturity date ofJune 2012. The Asia-Pacific financing may be used by these four subsidiaries to fund capital expenditures on leasehold improvements, equipment, and otherinstallation costs related to expansion plans in Singapore, Tokyo, Sydney and Hong Kong. The Asia-Pacific financing is guaranteed by the parent companyand is secured by the assets of these four subsidiaries, including a pledge of their shares, and has several financial covenants specific to our Asia-Pacificoperations with which we must comply quarterly. As of December 31, 2008, we had fully drawn the Asia-Pacific financing and a total of $87.0 million wasoutstanding under the Asia-Pacific financing at an approximate blended interest rate of 3.69%. As of December 31, 2008, we were in compliance with allfinancial covenants in connection with the Asia-Pacific financing.European Financing. In September 2007, as a result of the IXEurope acquisition, our wholly-owned subsidiary acquired a senior facilities agreementtotaling approximately 82.0 million British pounds, or approximately $135.5 million (using the exchange rate as of December 31, 2008). The Europeanfinancing is comprised of three facilities: (i) Facility A, which was available to draw upon through March 2008, provides for a term loan of up toapproximately 40.0 million British pounds and bears a floating interest rate per annum of between 0.875% and 2.25% above LIBOR or EURIBOR;(ii) Facility B, which was available to draw upon through June 2010, provides for a term loan of up to approximately 40.0 million British pounds and bears afloating interest rate per annum of between 0.875% and 2.25% above LIBOR or EURIBOR and (iii) Facility C, which is available to draw upon through May2014, provides for a revolving credit facility of up to approximately 2.0 million British pounds and bears a floating interest rate per annum of between 0.875%and 2.125% above LIBOR or EURIBOR. The European financing has a final maturity date of June 30, 2014 and interest is payable in periods of one, two,three or six months at our election. Facility A will be repaid in 13 semi- 51Table of Contentsannual installments, which commenced June 30, 2008. Facility B will be repaid in nine semi-annual installments commencing June 30, 2010. Facility C willbe repaid at the final maturity date. The European financing is available to fund our subsidiary’s current or future operations in Europe, including capitalexpenditures, for certain approved subsidiaries in Europe, and amounts can be drawn in British pounds, Euros or Swiss francs. The European financing iscollateralized by certain of our assets in Europe and contains several financial covenants specific to our European operations with which we must complyquarterly. In January 2009, we amended certain provisions of the European financing related to certain financial covenants and acknowledgment of theappointment of an executive officer in Europe, which were effective December 31, 2008. As a result of this amendment, we are in compliance with all financialcovenants in connection with the European financing.Upon a written request from us at any time after December 31, 2007 and through the final maturity date, and upon approval by the lenders, anadditional term loan of up to 15.0 million British pounds, or approximately $21.9 million, may be made available to us. The European financing requires usto hedge the floating interest rates inherent in the European financing (on just a portion of the total amounts outstanding). As of December 31, 2008,approximately $131.0 million was outstanding under the European financing at an approximate blended interest rate of 4.39% per annum as we had fullyutilized Facility A and Facility B, leaving 2.0 million British pounds of Facility C, or approximately $2.9 million, available to borrow under the Europeanfinancing.In May 2008, we entered into three interest rate swap agreements and re-designated two older ineffective interest rate swap agreements with a total of twocounterparties to hedge the interest payments on the equivalent principal of $101.0 million of the European financing, which will mature in August 2009 andMay 2011. Under the terms of the interest rate swap transactions, we receive interest payments based on rolling one-month EURIBOR and LIBOR terms andpay fixed interest rates ranging from 5.97% to 8.16% (swap rates ranging from 3.72% to 5.91% plus borrowing margin).Netherlands Financing. In February 2008, as a result of the Virtu acquisition, our wholly-owned subsidiary assumed senior credit facilities totalingapproximately 5.5 million Euros, which are callable by the lender and bear interest at a floating rate (three month EURIBOR plus 1.25%). As of December 31,2008, a total of 4.6 million Euros, or approximately $6.5 million, was outstanding under the Netherlands financing with an approximate blended interest rateof 4.18% per annum. The Netherlands financing is collateralized by substantially all of our operations in the Netherlands. The Netherlands financingcontains several financial covenants specific to our operations in the Netherlands, which must be complied with on an annual basis. As of December 31,2008, our wholly-owned subsidiary in the Netherlands was not in compliance with certain of the financial covenants; however, the lender agreed to waive suchnon-compliance while we renegotiate the entire Netherlands financing, which should be completed by April 2009. If we are unable to renegotiate the Netherlandsfinancing by April 2009, the financial covenants in their original form will go back into effect. Although the Netherlands financing has a payment schedulewith a final payment date in January 2016, as of December 31, 2008, we had reflected the total amount outstanding of $6.5 million under the Netherlandsfinancing as a current liability within the current portion of mortgage and loans payable on the accompanying balance sheet as it is not currently a committedfacility (it is callable by the lender).Other Note Payable. The other note payable arises from a 2005 lease restructuring and is a non-interest bearing note with an imputed interest rate of6.14% per annum. Payments under the other note payable, which originally totaled $20.0 million, are payable quarterly and will be payable through the fourthquarter of 2009. As of December 31, 2008, $9.7 million was outstanding under the other note payable. 52Table of ContentsContractual Obligations and Off-Balance-Sheet ArrrangementsWe lease a majority of our IBX centers and certain equipment under non-cancelable lease agreements expiring through 2027. The following represents ourcontractual obligations as of December 31, 2008 (in thousands): 2009 2010 2011 2012 2013 2014 andthereafter TotalConvertible debt (1) $19,150 $— $— $250,000 $ $395,986 $665,136Chicago IBX financing (1) — 109,991 (5) — — — — 109,991Asia-Pacific financing (1) 25,121 30,348 26,312 5,228 — — 87,009European financing (1) 8,170 14,895 16,530 19,892 23,977 47,517 130,981Netherlands financing (1) 6,485 — — — — — 6,485Interest (2) 31,530 25,447 23,305 17,538 14,772 10,458 123,050Mortgage payable (3) 10,164 10,164 10,164 10,165 10,165 123,338 174,160Other note payable (3) 10,000 — — — — — 10,000Capital lease and other financing obligations (3) 15,242 16,562 16,810 16,695 16,785 138,595 220,689Operating leases under accrued restructuring charges (3) 4,779 4,871 5,024 5,296 5,397 8,346 33,713Operating leases (4) 52,077 49,578 45,598 44,583 44,391 197,434 433,661Other contractual commitments (4) 228,586 23,467 5,375 2,201 2,200 29,376 291,205 $411,304 $285,323 $149,118 $371,598 $117,687 $951,050 $2,286,080 (1)Represents principal only.(2)Represents interest on convertible debt, Chicago IBX financing, Asia-Pacific financing, European financing and Netherlands financing based on theirapproximate interest rates as of December 31, 2008.(3)Represents principal and interest.(4)Represents off-balance sheet arrangements. Other contractual commitments are described below.(5)The loan payable under the Chicago IBX financing has an initial maturity date of January 31, 2010, with options to extend for up to an additional twoyears, in one-year increments, upon satisfaction of certain extension conditions. Given the current market climate, we intend to extend the maturity of theloan payable under the Chicago IBX financing.Primarily as a result of our various IBX expansion projects, as of December 31, 2008, we were contractually committed for $174.9 million ofunaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided, in connection with the work necessary to open theseIBX centers prior to making them available to customers for installation. This amount, which is expected to be paid during 2009 and 2010, is reflected in thetable above as “other contractual commitments.”We have other, non-capital purchase commitments in place as of December 31, 2008, such as commitments to purchase power in select locations,primarily in the U.S., Singapore and the United Kingdom, through 2009 and thereafter, and other open purchase orders, which contractually bind us forgoods or services to be delivered or provided during 2009. Such other purchase commitments as of December 31, 2008, which total $80.0 million, are alsoreflected in the table above as “other contractual commitments.”Additionally, in October 2008, we entered into an agreement for lease for a property located in the London metro area, which is currently being developedby the landlord. Upon completion of the property development, which is expected to occur in November 2009, we will enter into a lease for this property for 20years. This commitment to lease, which totals approximately $36.3 million, is also reflected in the table above as “other contractual commitments.” 53Table of ContentsIn addition, although we are not contractually obligated to do so, we expect to incur additional capital expenditures beyond the $174.9 millioncontractually committed as of December 31, 2008 in our various IBX expansion projects during 2009 and thereafter of approximately $100.0 million to $150.0million in order to complete the work needed to open these IBX centers. These non-contractual capital expenditures are not reflected in the table above.Other Off-Balance-Sheet ArrangementsWe have various guarantor arrangements with both our directors and officers and third parties, including customers, vendors and business partners (see“Guarantor Arrangements” in Note 14 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K). As of December 31,2008, there were no liabilities recorded for these arrangements.Critical Accounting EstimatesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Thepreparation of our financial statements requires management to make estimates and assumptions about future events that affect the reported amounts of assetsand liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expensesduring the reporting period. On an ongoing basis, management evaluates the accounting policies, assumptions, estimates and judgments to ensure that ourconsolidated financial statements are presented fairly and in accordance with GAAP. Management bases its assumptions, estimates and judgments onhistorical experience, current trends and various other factors that are believed to be reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, because future events andtheir effects cannot be determined with certainty, actual results may differ from these assumptions and estimates, and such differences could be material.Our significant accounting policies are discussed in Note 1 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. Management believes that the following critical accounting estimates, among others, are the most critical to aid in fully understanding and evaluating ourconsolidated financial statements, and they require significant judgments, resulting from the need to make estimates about the effect of matters that areinherently uncertain: • Accounting for income taxes; • Accounting for impairment of goodwill; and • Accounting for property, plant and equipment. 54Table of ContentsDescription Judgments and Uncertainties Effect if Actual Results Differ FromAssumptionsAccounting for Income Taxes. Deferred tax assets and liabilities are recognizedbased on the future tax consequences attributableto temporary differences that exist between thefinancial statement carrying value of assets andliabilities and their respective tax bases, andoperating loss and tax credit carryforwards on ataxing jurisdiction basis. We measure deferredtax assets and liabilities using enacted tax ratesthat will apply in the years in which we expectthe temporary differences to be recovered orpaid. SFAS No. 109, “Accounting for IncomeTaxes,” requires a reduction of the carryingamounts of deferred tax assets by recording avaluation allowance if, based on the availableevidence, it is more likely than not (defined bySFAS No. 109 as a likelihood of more than 50percent) such assets will not be realized. The valuation of deferred tax assets requiresjudgment in assessing the likely future taxconsequences of events that have been recognizedin our financial statements or tax returns. Ouraccounting for deferred tax consequencesrepresents our best estimate of those future events. In assessing the need for a valuation allowance,we consider both positive and negative evidencerelated to the likelihood of realization of thedeferred tax assets. If, based on the weight ofavailable evidence, it is more likely than not thedeferred tax assets will not be realized, we record avaluation allowance. The weight given to thepositive and negative evidence is commensuratewith the extent to which the evidence may beobjectively verified. This assessment, which is completed on a taxingjurisdiction basis, takes into account a number oftypes of evidence, including the following: 1) thenature, frequency and severity of current andcumulative financial reporting losses, 2) sourcesof future taxable income and 3) tax planningstrategies. As of December 31, 2008, we had total netdeferred tax assets of $98.6 million. As ofDecember 31, 2007, we had total net deferred taxliabilities of $19.6 million. As of December 31,2008 and 2007, we had a total valuationallowance of $40.3 million and $163.1 million,respectively. In the fourth quarter of 2008, wedecided to release our valuation allowancesassociated with our U.S. and Australianoperations, which resulted in an income taxbenefit of $101.9 million and $6.1 million,respectively, in our results of operations for thisperiod. We believe that both our U.S. and Australianoperations have achieved a sufficient level ofprofitability and will sustain a sufficient level ofprofitability in 2009 and beyond to support therelease of these valuation allowances based oncurrent facts and circumstances. However, if ourassumptions on the future performance of theseregions prove not to be correct and these regionsare not able to sustain a sufficient level ofprofitability to support the associated deferred taxassets on our balance sheet, we will have toimpair our deferred tax assets through anadditional valuation allowance, which wouldimpact our financial position and results ofoperations in the period such a determination ismade. Our remaining valuation allowance as ofDecember 31, 2008 relates to certain of oursubsidiaries outside of the U.S. Once we releaseour remaining valuation allowance, it will havean impact to our financial position and results ofoperations in the periods such a determination ismade. We will continue to assess the need for ourvaluation allowances, by country or location, inthe future. 55Table of ContentsDescription Judgments and Uncertainties Effect if Actual Results Differ FromAssumptionsAccounting for Impairment of Goodwill In accordance with SFAS No. 142, “Goodwilland Other Intangible Assets,” we performgoodwill impairment reviews annually, orwhenever events or changes in circumstancesindicate that the carrying value of an asset maynot be recoverable. During the year ended December 31, 2008, wecompleted annual goodwill impairment reviews ofboth the Europe reporting unit and the Asia-Pacific reporting unit and concluded that therewas no impairment as the fair value of bothreporting units exceeded their carrying value. We use both the income and market approach instep one of our goodwill impairment reviews andweight the results of both equally. Under the incomeapproach, we develop a five-year cash flow forecastand use our weighted-average cost of capitalapplicable to our reporting units as discount rates.This requires assumptions and estimates derivedfrom a review of our actual and forecasted operatingresults, approved business plans, future economicconditions and other market data. These assumptions require significant managementjudgment and are inherently subject to uncertainties. Future events, changing market conditions andany changes in key assumptions may result inan impairment charge. While we have neverrecorded an impairment charge against ourgoodwill to date, the development of adversebusiness conditions in our Asia-Pacific orEuropean reporting units, such as higher thananticipated customer churn or significantlyincreased operating costs, or significantdeterioration of our market comparables that weuse in the market approach, could result in animpairment charge in future periods. As of December 31, 2008, goodwill attributableto the Asia-Pacific reporting unit and the Europereporting unit was $18.2 million and $325.0million, respectively. Any potential impairmentcharge against our goodwill would not exceed theamounts recorded on our consolidated balancesheets. 56Table of ContentsDescription Judgments and Uncertainties Effect if Actual Results Differ FromAssumptionsAccounting for Property, Plant andEquipment We have a substantial amount of property, plantand equipment recorded on our balance sheet. Thevast majority of our property, plant andequipment represent the costs incurred to buildout or acquire our IBX centers around the world.Our IBX centers are long-lived assets. Themajority of our IBX centers are in properties thatare leased. We depreciate our property, plant andequipment using the straight-line method over theestimated useful lives of the respective assets(subject to the term of the lease in the case ofleased assets or leasehold improvements). Accounting for property, plant and equipmentinvolves a number of accounting issues includingdetermining the appropriate period in which todepreciate such assets, making assessments forleased properties to determine whether they arecapital or operating leases, capitalizing interestduring periods of construction and assessing theinitial asset retirement obligations required forcertain leased properties that require us to returnthe leased properties back to their originalcondition at the time we decide to exit a leasedproperty. While there are numerous judgments anduncertainties involved in accounting for property,plant and equipment that are significant, arriving atthe estimated useful life of an asset requires themost critical judgment for us and changes to theseestimates would have the most significant impact toour financial position and results of operations. Inmany cases, we arrived at these estimates during1999 when we opened our first three IBX centers.When we lease a property for our IBX centers, wegenerally enter into long-term arrangements withinitial lease terms of at least 8-10 years and withrenewal options available to us. During the nextseveral years, a number of leases for our IBXcenters will start to come up for renewal. As we startapproaching the ends of these initial lease terms, wewill need to reassess the estimated useful lives ofour property, plant and equipment. In addition, wemay find that our estimates for the useful lives ofnon-leased assets may also need to be revised. As of December 31, 2008 and 2007, we hadproperty, plant and equipment of $1.4 billionand $1.2 billion, respectively, and for the yearsended December 31, 2008, 2007 and 2006, werecorded depreciation expense of $152.8 million,$97.9 million and $71.7 million, respectively. A change in our estimated useful lives of ourproperty, plant and equipment could have asignificant impact to our results of operations.For example, in the U.S. alone, if we extended byfive years the estimated remaining useful lives ofjust our leasehold improvements and IBX plantand machinery, the two largest sub-componentsof our property, plant and equipment, it wouldhave resulted in approximately $22.6 millionless of depreciation expense during 2008. This ispresented simply as an example of how a changein an estimated useful life assumption couldimpact our results of operations.Recent Accounting PronouncementsSee “Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKMarket RiskThe 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 impairments of our investment portfolio, changes in interest rates and foreigncurrency exchange rates and fluctuations in the prices of certain commodities, primarily electricity. 57Table of ContentsWe currently employ interest rate swaps and foreign currency forward exchange contracts for the purpose of hedging certain specifically-identifiedexposures. The use of these financial instruments is intended to mitigate some of the risks associated with either fluctuations in interest rates or currencyexchange rates, but does not eliminate such risks. We do not use financial instruments for trading or speculative purposes.Investment Portfolio RiskAll of our marketable securities are designated as available-for-sale and are therefore recorded at fair market value on our consolidated balance sheetswith the unrealized gains or losses reported as a separate component of other comprehensive income or loss. We consider various factors in determiningwhether we should recognize an impairment charge for our securities, including the length of time and extent to which the fair value has been less than our costbasis and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. As more fullydescribed in Note 5 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K, in September 2008, we incurred a realizedloss from our investment portfolio (consisting of a single money market account) totaling $1.5 million. If market conditions continue to deteriorate andliquidity constraints become even more pronounced, we could sustain more losses from our investment portfolio. As our securities mature, we have beenincreasing our holdings in U.S. government securities, such as Treasury bills and Treasury notes of a short-term duration and lower yield. As a result, weexpect our interest income to decrease in future periods.As of December 31, 2008, our investment portfolio of cash equivalents and marketable securities consisted of money market fund investments,commercial paper, corporate bonds, asset backed securities, certificates of deposit and U.S government and agency obligations. Excluding the U.S.government holdings which carry a lower risk and lower return in comparison to other securities in the portfolio, the remaining amount in our investmentportfolio that could be more susceptible to market risk totaled $176.9 million.Interest Rate RiskOur exposure to market risk resulting from changes in interest rates relates primarily to our investment portfolio and variable-rate financings in place inthe U.S., Europe and Asia-Pacific. The fair market value of our marketable securities could be adversely impacted due to a rise in interest rates, but we do notbelieve such impact would be material. Securities with longer maturities are subject to a greater interest rate risk than those with shorter maturities and as ofDecember 31, 2008 our portfolio maturity was relatively short. If current interest rates were to increase or decrease by 10% from their position as ofDecember 31, 2008, the fair market value of our investment portfolio could increase or decrease by approximately $93,000.An immediate 10% increase or decrease in current interest rates from their position as of December 31, 2008 would not have a material impact on ourdebt obligations due to the fixed nature of the majority of our debt obligations. However, the interest expense associated with our Chicago IBX financing, Asia-Pacific financing, European financing and Netherlands financing, which bear interest at variable rates tied to local cost of funds orLIBOR/SIBOR/EURIBOR, could be affected. For every 100 basis point change in interest rates, our annual interest expense could increase or decrease by atotal of approximately $3.3 million based on the total balance of our borrowings under the Chicago IBX financing, Asia-Pacific financing, European financingand Netherlands financing as of December 31, 2008. To mitigate the risk of fluctuations in floating rates, we utilize interest rate swaps (receive floating/payfixed). As of December 31, 2008, we had entered into a total of six swap agreements with maturity dates of less than three years, comprised of five swapagreements for the European financing with an aggregate notional amount of 38.3 million British pounds and 32.3 million Euros, or approximately $101.0million, and one swap agreement for the Chicago IBX financing with an aggregate notional amount of $105.0 million. Under the five swap agreements for theEuropean financing, we pay fixed interest rates ranging from 5.97% to 8.16% (swap rates ranging from 3.72% to 5.91% plus borrowing margin) on thenotional amount and the counterparty pays us rates of interest on the notional amount based on LIBOR/EURIBOR. Under the swap agreement for the ChicagoIBX financing, we pay a fixed interest rate of 6.34% (swap rate of 3.59% plus 58Table of Contentsborrowing margin of 2.75%) on the notional amount and the counterparty pays us rates of interest on the notional amount based on one-month LIBOR. Thefair values or changes in fair value of these swaps are recorded on our consolidated balance sheets in accumulated other comprehensive income or loss.The fair value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair value of fixed interest rate debt will increase asinterest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair value of the fixed interest rate debt but do not impact ourearnings or cash flows. The fair value of our convertible subordinated debentures and convertible subordinated notes is based on quoted market prices. Thefollowing represents the estimated fair value of our convertible debt as of December 31, 2008 (in thousands): CarryingValue Fair ValueConvertible subordinated debentures $19,150 $19,2902.50% convertible subordinated notes 250,000 175,0003.00% convertible subordinated notes 395,986 251,451We may enter into additional interest rate hedging agreements in the future to mitigate our exposure to interest rate risk.Foreign Currency RiskThe majority of our revenue is denominated in U.S. dollars, generated mostly from customers in the U.S. However, approximately 37% of our revenuesand 41% of our operating costs are attributable to the Europe and Asia-Pacific regions and a large portion of those revenues and costs are denominated in acurrency other than the U.S. dollar, primarily the British pound, Euro, Swiss franc, Singapore dollar, Japanese yen and Hong Kong and Australian dollars.As a result, our operating results and cash flows are impacted by currency fluctuations relative to the U.S. dollar. To protect against certain reductions invalue caused by changes in currency exchange rates, we have established a risk management program to offset some of the risk of carrying assets andliabilities denominated in foreign currency. As a result, we enter into foreign currency forward contracts to manage the risk associated with certain foreigncurrency-denominated assets and liabilities. Our risk management program reduces, but does not entirely eliminate, the impact of currency exchange ratemovements and its impact to the statements of operations. As of December 31, 2008, the outstanding foreign currency forward contracts had maturities of oneyear or less.For the foreseeable future, we anticipate that approximately 35-45% of our revenues and operating costs will continue to be generated and incurredoutside of the U.S. in currencies other than the U.S. dollar. While we hedge certain of our balance sheet foreign currency assets and liabilities, we do not hedgerevenue. During fiscal 2007 and the first half of 2008, the U.S. dollar had been generally weaker relative to the currencies of the foreign countries in which weoperate. This overall weakness of the U.S. dollar had a positive impact on our consolidated results of operations because the foreign denominations translatedinto more U.S. dollars. However, during the last several months of 2008, the U.S. dollar strengthened relative to certain of the currencies of the foreigncountries in which we operate. This has significantly impacted our consolidated financial position and results of operations as amounts in foreign currenciesare generally translating into less U.S. dollars. To the extent the U.S. dollar strengthens further, this will continue to have a significant impact to ourconsolidated financial position and results of operations including the amount of revenue that we report in future periods. For example, while our Europeanoperations incurred revenue growth in local currencies during the fourth quarter of 2008, as compared to the third quarter of 2008, of approximately 11%,when translated to U.S. dollars, our European operations reported a quarter to quarter decline in revenues of 4%.We may enter into additional hedging activities in the future to mitigate our exposure to foreign currency risk as our exposure to foreign currency riskcontinues to increase due to our growing foreign operations; however, we do not currently intend to eliminate all foreign currency transaction exposure. 59Table of ContentsCommodity Price RiskCertain 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 price changes are electricity, supplies and equipment used in our IBX centers. We closelymonitor the cost of electricity at all of our locations. We have entered into several power contracts to purchase power at fixed prices during 2009 and beyond incertain locations in the U.S., as well as Australia, Germany, Singapore and the United Kingdom.In addition, as we are building new, “greenfield” IBX centers, we are subject to commodity price risk for building materials related to the construction ofthese IBX centers, such as steel and copper. In addition, the lead-time to procure certain pieces of equipment, such as generators, is substantial. Any delays inprocuring the necessary pieces of equipment for the construction of our IBX centers could delay the anticipated openings of these new IBX centers and, as aresult, increase the cost of these projects.We do not currently employ forward contracts or other financial instruments to address commodity price risk other than the power contracts discussedabove. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe 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 Annual Report on Form10-K. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREThere is no disclosure to report pursuant to Item 9. ITEM 9A.CONTROLS AND PROCEDURESConclusion Regarding the Effectiveness of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, weconducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities ExchangeAct of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in ExchangeAct Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conductedan evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission. 60Table of ContentsBased on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control overfinancial reporting was effective as of December 31, 2008. There were no significant changes in internal control over financial reporting during 2008 that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting.The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which is included herein on page F-1 of this Annual Report on Form 10-K.Changes in Internal Control Over Financial ReportingThere has been no change in our internal controls over financial reporting during the fourth quarter of fiscal 2008 that has materially affected, or isreasonably likely to materially affect, our internal controls over financial reporting. ITEM 9B.OTHER INFORMATIONThere is no disclosure to report pursuant to Item 9B. 61Table of ContentsPART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation required by this item is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders.We have adopted a Code of Ethics applicable for the Chief Executive Officer and Senior Financial Officers and a Code of Business Conduct. Thisinformation is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders and is also available on our website,www.equinix.com. ITEM 11.EXECUTIVE COMPENSATIONInformation required by this item is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSInformation required by this item is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required by this item is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders. ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESInformation required by this item is incorporated by reference to the Equinix proxy statement for the 2009 Annual Meeting of Stockholders. 62Table of ContentsPART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)(1) Financial Statements: Report of Independent Registered Public Accounting Firm F-1Consolidated Balance Sheets F-2Consolidated Statements of Operations F-3Consolidated Statements of Stockholders’ Equity and Other Comprehensive Income (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: Incorporated by Reference ExhibitNumber Exhibit Description Form Filing Date/Period EndDate Exhibit FiledHerewith 2.1 Combination Agreement, dated as of October 2, 2002, by and amongEquinix, Inc., Eagle Panther Acquisition Corp., Eagle Jaguar AcquisitionCorp., i-STT Pte Ltd, STT Communications Ltd., Pihana Pacific, Inc.and Jane Dietze, as representative of the stockholders of Pihana Pacific,Inc. Def. Proxy 14A 12/12/02 3.1 Amended and Restated Certificate of Incorporation of the Registrant, asamended to date. 10-K/A 12/31/02 3.1 3.2 Certificate of Designation of Series A and Series A-1 Convertible PreferredStock. 10-K/A 12/31/02 3.3 3.3 Amended and Restated Bylaws of the Registrant. 8-K 12/22/08 3.2 4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3. 4.2 Indenture dated February 11, 2004 by and between Equinix, Inc. and U.S.Bank National Association, as trustee. 10-Q 3/31/04 10.99 4.3 Indenture dated March 30, 2007 by and between Equinix, Inc. and U.S.Bank National Association, as trustee. 8-K 3/30/07 4.4 4.4 Form of 2.50% Convertible Subordinated Note Due 2012 (see Exhibit 4.4). 4.5 Indenture dated September 26, 2007 by and between Equinix, Inc. and U.S.Bank National Association, as trustee. 8-K 9/26/07 4.4 4.6 Form of 3.00% Convertible Subordinated Note Due 2014 (see Exhibit 4.6). 63Table of Contents Incorporated by Reference ExhibitNumber Exhibit Description Form Filing Date/Period EndDate Exhibit FiledHerewith10.1 Form of Indemnification Agreement between the Registrant and each of itsofficers and directors. S-4 (File No. 333-93749) 12/29/99 10.5 10.2 2000 Equity Incentive Plan, as amended. 10-K 12/31/07 10.3 10.3 2000 Director Option Plan, as amended. 10-K 12/31/07 10.4 10.4 2001 Supplemental Stock Plan, as amended. 10-K 12/31/07 10.5 10.5+ Lease Agreement dated as of April 21, 2004 between Eden Ventures LLCand Equinix, Inc. 10-Q 6/30/04 10.103 10.6 Equinix, Inc. 2004 International Employee Stock Purchase Plan effectiveas of June 3, 2004. 10-Q 6/30/04 10.105 10.7 Equinix, Inc. Employee Stock Purchase Plan effective as of June 3, 2004. 10-Q 6/30/04 10.106 10.8 Form of Restricted Stock Agreement for Equinix’s executive officers underthe Company’s 2000 Equity Incentive Plan. 10-K 12/31/05 10.115 10.9 Letter Agreement dated October 6, 2005 among Equinix, Inc., STTCommunications Ltd. and I-STT Investments Pte. Ltd. 8-K 10/6/05 99.1 10.10 Lease Agreement dated December 21, 2005 between Equinix OperatingCo., Inc. and iStar El Segundo, LLC and associated Guaranty ofEquinix, Inc. 10-K 12/31/05 10.126 10.11+ Loan and Security Agreement and Note between Equinix RP II, LLC andSFT I, Inc. dated December 21, 2005 and associated Guaranty ofEquinix, Inc. 10-K 12/31/05 10.127 10.12 Lease Agreement dated as of December 21, 2005 between Equinix RP II,LLC and Equinix, Inc. 10-K 12/31/05 10.128 10.13 First Omnibus Modification Agreement dated December 27, 2006 by andamong SFT I, Inc. (“SFT I”), Equinix RP II, LLC (“RP II”) andEquinix, Inc. (“Equinix”), Amended and Restated Promissory Notedated December 27, 2006 by RP II in favor of SFT I and Reaffirmationof Guaranty dated December 27, 2006 by RP II and Equinix in favor ofSFT I. 10-K 12/31/06 10.37 10.14 First Amendment to Deed of Lease dated December 27, 2006 by andbetween Equinix RP II, LLC and Equinix Operating Co., Inc. 10-K 12/31/06 10.38 10.15 Development Loan and Security Agreement dated February 2, 2007 by andbetween CHI 3, LLC and SFT I, Inc. and related Promissory Notes Onethrough Four. 10-Q 3/31/07 10.37 64Table of Contents Incorporated by Reference ExhibitNumber Exhibit Description Form Filing Date/Period EndDate Exhibit FiledHerewith10.16 Guaranty dated February 2, 2007 by and between Equinix, Inc. and SFT I,Inc. 10-Q 3/31/07 10.38 10.17 Completion and Payment Guaranty dated February 2, 2007 by and betweenEquinix, Inc. and SFT I, Inc. 10-Q 3/31/07 10.39 10.18 Master Lease dated February 2, 2007 by and between CHI 3, LLC andEquinix Operating Co., Inc. and associated Guaranty of Lease byEquinix, Inc. 10-Q 3/31/07 10.40 10.19 Form of Restricted Stock Agreements for Stephen M. Smith under theEquinix, Inc. 2000 Equity Incentive Plan. 10-Q 3/31/07 10.45 10.20 Facility Agreement dated August 31, 2007 by and among Equinix SingaporePte. Ltd., Equinix Japan K.K., the Additional Borrowers (as definedtherein), the Lenders (as defined therein), and ABN AMRO BANK N.V.,and related Guarantee dated August 31, 2007 by Equinix, Inc. 10-Q 9/30/07 10.47 10.21 £82,000,000 Senior Facilities Agreement dated June 29, 2007 by and amongIXEurope plc, CIT Bank Limited, as arranger, CIT Capital Finance(UK) Limited, as administrative agent and security trustee and theLenders (as defined therein). 10-Q 9/30/07 10.49 10.22 Amendment and Accession Agreement, dated as of January 31, 2008, byand among Equinix Singapore Pte. Ltd., Equinix Japan K.K. andEquinix Australia Pty. Limited, as Borrowers, ABN AMRO Bank N.V.,Singapore Branch, ABN AMRO Bank N.V., Japan Branch and ABNAMRO Australia Pty Limited, as Lenders and ABN AMRO Bank N.V.,as Facility Agent, Arranger and Collateral Agent and related AmendmentNo. 1 to Guarantee by Equinix, Inc. 10-K 12/31/07 10.32 10.23 Form of Restricted Stock Unit Agreement for Equinix’s executive officersunder the Company’s 2000 Equity Incentive Plan. 10-K 12/31/07 10.34 10.24 Equinix, Inc. Sub-Plan to the 2004 International Employee Stock PurchasePlan for Participants Located in the European Economic Area. 10-Q 3/31/08 10.32 10.25 Letter Agreement, dated April 22, 2008, by and between Eric Schwartz andEquinix, Inc. 10-Q 6/30/08 10.34 65Table of Contents Incorporated by Reference ExhibitNumber Exhibit Description Form Filing Date/Period EndDate Exhibit FiledHerewith10.26 Letter Amendment, dated May 6, 2008, to £82,000,000 Senior Facilities Agreementdated June 29, 2007, by and among Equinix Group Limited, CIT BankLimited, as arranger, CIT Capital Finance (UK) Limited, as administrativeagent and security trustee and the Lenders (as defined therein). 10-Q 6/30/08 10.37 10.27 Second Amendment and Accession Agreement, dated as of June 6, 2008, by andamong Equinix Singapore Pte. Ltd., Equinix Japan K.K., Equinix AustraliaPty. Limited and Equinix Hong Kong Limited, as Borrowers, ABN AMROBank N.V. and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., HongKong Branch, as Lenders and ABN AMRO Bank N.V., as Facility Agent,Arranger and Collateral Agent and related Amendment No. 2 to Guarantee byEquinix, Inc. 10-Q 6/30/08 10.38 10.28 Lease Agreement, dated September 30, 2008, by and between Equinix Paris SASand Digital Realty (Paris 2) SCI, and related guarantee by Equinix, Inc. 10-Q 9/30/08 10.40 10.29 Agreement for Lease, dated October 21, 2008, by and between Equinix (London)Limited and Slough Trading Estate Limited, and related guarantee by Equinix,Inc. X10.30 Letter of Approval & Consent, dated January 15, 2009, to £82,000,000 SeniorFacilities Agreement dated June 29, 2007, by and among Equinix GroupLimited, CIT Bank Limited, as arranger, CIT Capital Finance (UK) Limited,as administrative agent and security trustee and the Lenders (as definedtherein). X10.31 Severance Agreement by and between Stephen Smith and Equinix, Inc. datedDecember 18, 2008. X10.32 Severance Agreement by and between Peter Van Camp and Equinix, Inc. datedDecember 10, 2008. X10.33 Severance Agreement by and between Keith Taylor and Equinix, Inc. datedDecember 19, 2008. X10.34 Severance Agreement by and between Peter Ferris and Equinix, Inc. datedDecember 17, 2008. X10.35 Change in Control Severance Agreement by and between Eric Schwartz andEquinix, Inc. dated December 19, 2008. X 66Table of Contents Incorporated by Reference ExhibitNumber Exhibit Description Form Filing Date/Period EndDate Exhibit FiledHerewith10.36 Change in Control Severance Agreement by and between Jarrett Appleby andEquinix, Inc. dated December 11, 2008. X10.37 Offer Letter from Equinix, Inc. to Jarrett Appleby dated November 6, 2008. X10.38 Restricted Stock Unit Agreement for Jarrett Appleby under the Equinix, Inc.2000 Equity Incentive Plan. X21.1 Subsidiaries of Equinix, Inc. X23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered PublicAccounting Firm. X31.1 Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X31.2 Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X32.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X32.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X +Confidential treatment has been requested for certain portions which are omitted in the copy of the exhibit electronically filed with the Securities andExchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Equinix’s applicationfor confidential treatment. (b)Exhibits.See (a) (3) above. (c)Financial Statement Schedule.See (a) (2) above. 67Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form10-K to be signed on its behalf by the undersigned, thereunto duly authorized. EQUINIX, INC.(Registrant)February 26, 2009 By /S/ STEPHEN M. SMITH Stephen M. SmithPresident and Chief Executive OfficerPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen M. Smith orKeith D. Taylor, or either of them, each with the power of substitution, their attorney-in-fact, to sign any amendments to this Annual Report on Form 10-K(including post-effective amendments), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities andExchange 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 byvirtue 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/ STEPHEN M. SMITH Stephen M. Smith President and Chief Executive Officer (PrincipalExecutive Officer) February 26, 2009/S/ KEITH D. TAYLOR Keith D. Taylor Chief Financial Officer (Principal Financial andAccounting Officer) February 26, 2009/S/ PETER F. VAN CAMP Peter F. Van Camp Executive Chair February 26, 2009/S/ STEVEN T. CLONTZ Steven T. Clontz Director February 26, 2009/S/ STEVEN P. ENG Steven P. Eng Director February 26, 2009/S/ GARY F. HROMADKO Gary F. Hromadko Director February 26, 2009/S/ SCOTT G. KRIENS Scott G. Kriens Director February 26, 2009/S/ IRVING F. LYONS, III Irving F. Lyons, III Director February 26, 2009/S/ CHRISTOPHER B. PAISLEY Christopher B. Paisley Director February 26, 2009 68Table of ContentsINDEX TO EXHIBITS ExhibitNumber Description of Document10.29 Agreement for Lease, dated October 21, 2008, by and between Equinix (London) Limited and Slough Trading Estate Limited, and relatedguarantee by Equinix, Inc.10.30 Letter of Approval & Consent, dated January 15, 2009, to £82,000,000 Senior Facilities Agreement dated June 29, 2007, by and among Equinix GroupLimited, CIT Bank Limited, as arranger, CIT Capital Finance (UK) Limited, as administrative agent and security trustee and the Lenders (as defined therein).10.31 Severance Agreement by and between Stephen Smith and Equinix, Inc. dated December 18, 2008.10.32 Severance Agreement by and between Peter Van Camp and Equinix, Inc. dated December 10, 2008.10.33 Severance Agreement by and between Keith Taylor and Equinix, Inc. dated December 19, 2008.10.34 Severance Agreement by and between Peter Ferris and Equinix, Inc. dated December 17, 2008.10.35 Change in Control Severance Agreement by and between Eric Schwartz and Equinix, Inc. dated December 19, 2008.10.36 Change in Control Severance Agreement by and between Jarrett Appleby and Equinix, Inc. dated December 11, 2008.10.37 Offer Letter from Equinix, Inc. to Jarrett Appleby dated November 6, 2008.10.38 Restricted Stock Unit Agreement for Jarrett Appleby under the Equinix, Inc. 2000 Equity Incentive Plan.21.1 Subsidiaries of Equinix.23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.31.1 Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2 Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 69Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors andStockholders of Equinix, Inc.:In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, thefinancial position of Equinix, Inc. (the “Company”) and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cashflows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States ofAmerica. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and forits assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reportingappearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financialreporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financialstatements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control overfinancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.As discussed in Note 1 to the consolidated financial statements, Equinix, Inc. adopted Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 in 2007 and Statement of Financial Accounting StandardsNo. 157, Fair Value Measurements in 2008.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPSan Jose, CAFebruary 25, 2009 F-1Table of ContentsEQUINIX, INC.Consolidated Balance Sheets(in thousands, except share and per share data) December 31, 2008 2007 Assets Current assets: Cash and cash equivalents $220,207 $290,633 Short-term investments 42,112 63,301 Accounts receivable, net of allowance for doubtful accounts of $2,037 and $446 66,029 60,089 Current portion of deferred tax assets, net 35,936 — Other current assets 15,227 12,738 Total current assets 379,511 426,761 Long-term investments 45,626 29,966 Property, plant and equipment, net 1,488,402 1,162,720 Goodwill 342,829 442,926 Intangible assets, net 50,918 67,207 Deferred tax assets, net 82,066 6,404 Other assets 58,914 45,884 Total assets $2,448,266 $2,181,868 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $74,317 $65,096 Accrued property, plant and equipment 89,518 76,504 Current portion of capital lease and other financing obligations 4,499 3,808 Current portion of mortgage and loans payable 52,054 16,581 Current portion of convertible debt 19,150 — Other current liabilities 50,455 29,473 Total current liabilities 289,993 191,462 Capital lease and other financing obligations, less current portion 133,031 93,604 Mortgage and loans payable, less current portion 386,446 313,915 Convertible debt 645,986 678,236 Other liabilities 100,095 90,219 Total liabilities 1,555,551 1,367,436 Commitments and contingencies (Note 14) Stockholders’ equity: Preferred stock, $0.001 par value per share; 100,000,000 shares authorized in 2008 and 2007; zero shares issued andoutstanding in 2008 and 2007 — — Common stock, $0.001 par value per share; 300,000,000 shares authorized in 2008 and 2007; 37,745,366 and36,561,238 shares issued and outstanding in 2008 and 2007 38 37 Additional paid-in capital 1,472,571 1,376,915 Accumulated other comprehensive income (loss) (152,800) (3,888)Accumulated deficit (427,094) (558,632)Total stockholders’ equity 892,715 814,432 Total liabilities and stockholders’ equity $2,448,266 $2,181,868 See accompanying notes to consolidated financial statements. F-2Table of ContentsEQUINIX, INC.Consolidated Statements of Operations(in thousands, except per share data) Years ended December 31, 2008 2007 2006 Revenues $704,680 $419,442 $286,915 Costs and operating expenses: Cost of revenues 414,659 263,745 188,379 Sales and marketing 66,913 40,719 32,619 General and administrative 146,564 105,794 72,123 Restructuring charges 3,142 407 1,527 Gains on asset sales — (1,338) (9,647)Total costs and operating expenses 631,278 409,327 285,001 Income from operations 73,402 10,115 1,914 Interest income 7,413 15,406 6,627 Interest expense (55,041) (27,334) (14,630)Other income (expense) 1,307 3,047 (245)Loss on debt extinguishment and conversion — (5,949) — Income (loss) before income taxes and cumulative effect of a change in accounting principle 27,081 (4,715) (6,334)Income tax benefit (expense) 104,457 (473) (439)Net income (loss) before cumulative effect of a change in accounting principle 131,538 (5,188) (6,773)Cumulative effect of a change in accounting principle for stock-based compensation (net of tax of $0) — — 376 Net income (loss) $131,538 $(5,188) $(6,397)Basic earnings per share: Basic earnings per share before cumulative effect of a change in accounting principle $3.58 $(0.16) $(0.23)Cumulative effect of a change in accounting principle, net of tax of $0 — — 0.01 Basic earnings per share $3.58 $(0.16) $(0.22)Weighted average shares 36,774 32,136 28,551 Diluted earnings per share: Diluted earnings per share before cumulative effect of a change in accounting principle $3.31 $(0.16) $(0.23)Cumulative effect of a change in accounting principle, net of tax of $0 — — 0.01 Diluted earnings per share $3.31 $(0.16) $(0.22)Weighted average shares 43,728 32,136 28,551 See accompanying notes to consolidated financial statements. F-3Table of ContentsEQUINIX, INC.Consolidated Statements of Stockholders’ Equity and Other Comprehensive Income (Loss)For the Three Years Ended December 31, 2008(in thousands, except share data ) Common stock Additionalpaid-incapital Deferredstock-basedcompensation Accumulatedothercomprehensiveincome (loss) Accumulateddeficit Totalstockholders’equity Shares Amount Balances as of December 31, 2005 27,444,566 $27 $839,497 $(4,930) $1,126 $(547,047) $288,673 Issuance of common stock upon exercise of common stock options and vesting of restricted stock 1,937,010 2 34,922 — — — 34,924 Issuance of stock upon exercise of stock warrants 26 — — — — — — Issuance of common stock under employee stock purchase plans 135,325 — 3,912 — — — 3,912 Settlement of stock price guarantee — — 9 — — — 9 Tax benefit from employee stock plans — — 727 — — — 727 Cumulative effect adjustment upon adoption of FAS123(R) — — (5,306) 4,930 — — (376)Stock-based compensation, net of estimated forfeitures — — 30,812 — — — 30,812 Comprehensive income (loss): Net loss — — — — — (6,397) (6,397)Foreign currency translation gain — — — — 2,408 — 2,408 Unrealized gain on investments, net of tax of $0 — — — — 336 — 336 Net comprehensive income (loss) — — — — 2,744 (6,397) (3,653)Balances as of December 31, 2006 29,516,927 29 904,573 — 3,870 (553,444) 355,028 Issuance of common stock upon follow-on offering 4,211,939 4 339,904 — — — 339,908 Issuance of common stock upon exercise of common stock options and vesting of restricted stock 1,336,049 2 31,583 — — — 31,585 Issuance of common stock upon conversion of convertible subordinated debentures 1,367,090 2 53,227 — — — 53,229 Issuance of common stock under employee stock purchase plans 120,787 — 4,771 — — — 4,771 Issuance of stock upon exercise of stock warrants 8,446 — — — — — — Stock-based compensation, net of estimated forfeitures — — 42,857 — — — 42,857 Comprehensive income (loss): Net loss — — — — — (5,188) (5,188)Foreign currency translation loss — — — — (8,069) — (8,069)Unrealized gain on investments, net of tax of $0 — — — — 311 — 311 Net comprehensive loss — — — — (7,758) (5,188) (12,946)Balances as of December 31, 2007 36,561,238 37 1,376,915 — (3,888) (558,632) 814,432 Issuance of common stock upon exercise of common stock options and vesting of restricted stock 733,130 1 19,914 — — — 19,915 Issuance of common stock under employee stock purchase plans 119,354 — 6,315 — — — 6,315 Issuance of common stock upon conversion of convertible subordinated debentures 331,644 — 13,072 — — — 13,072 Tax benefit from employee stock plans — — 696 — — — 696 Stock-based compensation, net of estimated forfeitures — — 55,659 — — — 55,659 Comprehensive income (loss): Net income — — — — — 131,538 131,538 Foreign currency translation loss — — — — (142,140) — (142,140)Unrealized loss on interest rate swaps, net of tax of $4,660 — — — — (6,350) — (6,350)Unrealized loss on investments, net of tax of $169 — — — — (422) — (422)Net comprehensive loss — — — — (148,912) 131,538 (17,374)Balances as of December 31, 2008 37,745,366 $38 $1,472,571 $— $(152,800) $(427,094) $892,715 See accompanying notes to consolidated financial statements. F-4Table of ContentsEQUINIX, INC.Consolidated Statements of Cash Flows(in thousands) Years ended December 31, 2008 2007 2006 Cash flows from operating activities: Net income (loss) $131,538 $(5,188) $(6,397)Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 152,297 97,887 71,737 Stock-based compensation 55,085 42,731 30,767 Restructuring charges 3,142 407 1,527 Amortization of intangible assets 6,610 2,193 781 Accretion of asset retirement obligation & accrued restructuring charges 1,682 3,136 3,554 Amortization of debt issuance costs 4,887 3,227 880 Allowance for doubtful accounts 1,582 94 39 Cumulative effect of a change in accounting principle — — (376)Gains on asset sales — (1,338) (9,647)Gain on foreign currency hedge — (1,494) — Other items 968 (1,087) (205)Changes in operating assets and liabilities: Accounts receivable (9,152) (17,997) (9,666)Deferred tax assets, net (111,067) (5,995) (337)Other assets (7,137) 12,460 (2,937)Accounts payable and accrued expenses 9,937 (6,682) 4,756 Accrued restructuring charges (2,763) (13,669) (12,804)Other liabilities 29,949 11,335 3,740 Net cash provided by operating activities 267,558 120,020 75,412 Cash flows from investing activities: Purchases of investments (240,556) (114,322) (88,422)Sales of investments 131,631 16,000 2,969 Maturities of investments 114,361 80,221 81,948 Purchase of Los Angeles IBX property — (49,059) — Purchase of Chicago IBX property — — (9,766)Purchase of San Jose IBX property — (71,471) — Purchase of IXEurope, net of cash acquired — (541,792) — Purchase of Virtu, net of cash acquired (23,241) — — Purchases of other property, plant and equipment (471,128) (416,811) (162,291)Accrued property, plant and equipment 24,096 39,975 7,554 Proceeds from asset sales — 1,657 9,530 Purchase of restricted cash (14,234) (598) — Release of restricted cash 1,031 — — Other investing activities — 1,475 8 Net cash used in investing activities (478,040) (1,054,725) (158,470)Cash flows from financing activities: Proceeds from employee equity awards 26,230 36,356 38,836 Proceeds from issuance of common stock — 339,908 — Proceeds from borrowings under credit line — — 40,000 Proceeds from mortgage payable and loans payable 142,373 149,606 40,000 Proceeds from convertible debt — 645,986 — Repayment of borrowings from credit line — — (70,000)Repayment of capital leases and other financing obligations (3,832) (2,406) (1,506)Repayment of mortgage and notes payable (19,296) (2,150) (1,104)Debt issuance costs (948) (22,287) (811)Other financing activities 579 — 692 Net cash provided by financing activities 145,106 1,145,013 46,107 Effect of foreign currency exchange rates on cash and cash equivalents (5,050) (2,238) 247 Net increase (decrease) in cash and cash equivalents (70,426) 208,070 (36,704)Cash and cash equivalents at beginning of year 290,633 82,563 119,267 Cash and cash equivalents at end of year $220,207 $290,633 $82,563 Supplemental disclosure of cash flow information: Cash paid for taxes $98 $242 $545 Cash paid for interest $53,373 $26,900 $13,344 See accompanying notes to consolidated financial statements. F-5Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Nature of Business and Summary of Significant Accounting PoliciesNature of BusinessEquinix, Inc. (“Equinix” or the “Company”) was incorporated in Delaware on June 22, 1998. Equinix provides global data center services. Globalenterprises, content providers, financial companies and network service providers rely upon Equinix’s insight and expertise to protect and connect their mostvalued information assets. The Company operates 42 International Business Exchange (“IBX”) data centers, or IBX centers, across 18 markets in NorthAmerica, Europe and Asia-Pacific where customers directly interconnect with a network ecosystem of partners and customers. More than 300 network serviceproviders offer access to more than 90% of the world’s Internet routes inside the Company’s IBX centers. This access to Internet routes provides Equinixcustomers improved reliability and streamlined connectivity while significantly reducing costs by reaching a critical mass of networks within a centralizedphysical location.Basis of Presentation, Consolidation and Foreign CurrencyThe accompanying consolidated financial statements include the accounts of Equinix and its subsidiaries, including the operations of IXEurope plc(“IXEurope”) from September 14, 2007 and Virtu Secure Webservices B.V. (“Virtu”) from February 5, 2008 (see Note 2). All significant intercompanyaccounts and transactions have been eliminated in consolidation.Foreign exchange gains or losses resulting from foreign currency transactions, including intercompany foreign currency transactions, that are anticipatedto be repaid within the foreseeable future, are reported within other income (expense) on the Company’s accompanying statements of operations. For additionalinformation on the impact of foreign currencies to the Company’s consolidated financial statements, see “Comprehensive Income (Loss)” below.ReclassificationCertain amounts in the accompanying consolidated financial statements have been reclassified to conform to the consolidated financial statementpresentation as of and for the year ended December 31, 2008.Use of EstimatesThe 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 and Long-Term InvestmentsThe 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, commercial paper and certificates of deposit with financial institutions with maturities up to 90days. Short-term investments generally consist of certificates of deposits and commercial paper with original maturities of between 90 days and one year andhighly liquid debt securities of corporations, agencies of the U.S. government and the U.S. government. Long-term investments generally consist of debtsecurities of corporations, agencies of the U.S. government and the U.S. government with maturities greater than one year. Short-term and long-term F-6Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) investments are classified as “available-for-sale” and are carried at fair value based on quoted market prices with unrealized gains and losses reported instockholders’ equity as a component of other comprehensive income. The cost of securities sold is based on the specific identification method. The Companyreviews its investment portfolio at least quarterly to determine if any securities may be other-than-temporarily impaired due to increased credit risk, changes inindustry or sector of a certain instrument or ratings downgrades.Financial Instruments and Concentration of Credit RiskFinancial instruments which potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and short-term and long-term investments, to the extent outstanding balances exceed federal insurance limits, and accounts receivable. Risks associated with cash, cash equivalentsand short-term and long-term investments are mitigated by the Company’s investment policy, which limits the Company’s investing to only those marketablesecurities rated at least A-1/P-1 and A-/A3, as determined by independent credit rating agencies.A significant portion of the Company’s customer base is comprised of businesses throughout the U.S. However, a portion of the Company’s revenuesare derived from the Company’s Europe and Asia-Pacific operations. For the year ended December 31, 2008 the Company’s revenues were split approximately63% in the U.S., 25% in Europe and 12% in Asia-Pacific. For the year ended December 31, 2007 the Company’s revenues were split approximately 77% inthe U.S., 9% in Europe and 14% in Asia-Pacific. For the year ended December 31, 2006 the Company’s revenues were split approximately 86% in the U.S.and 14% in Asia-Pacific. No single customer accounted for greater than 10% of accounts receivables or revenues as of or for the years ended December 31,2008, 2007 and 2006.As of December 31, 2008 the Company had outstanding commitments of $251,725,000 due to one lender. These commitments are associated with realestate financing obligations in connection with the Other Note Payable (see Note 9), the Los Angeles IBX Financing (see Note 10), the Mortgage Payable (seeNote 9) and the Chicago IBX Financing (see Note 9).Property, Plant and EquipmentProperty, plant and equipment are stated at the Company’s original cost or relative fair value for acquired property, plant and equipment. Depreciation iscomputed using the straight-line method over the estimated useful lives of the respective assets, generally two to five years for non-IBX center equipment andfurniture and fixtures and two to 13 years for IBX center equipment. Leasehold improvements and assets acquired under capital leases are amortized over theshorter of the lease term or the estimated useful life of the asset or improvement, which is generally 10 to 15 years for the leasehold improvements, unless theyare considered integral equipment, in which case they are amortized over the lease term. Buildings owned by the Company are depreciated over the estimateduseful life of the building, which is generally 40 to 50 years. Site improvements are improvements to owned property versus leasehold improvements, whichare improvements to leased property. Site improvements are depreciated using the straight-line method over the estimated useful life of the respective asset,generally 10 to 15 years. Pursuant to EITF Issue 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception orAcquired in a Business Combination”, (i) leasehold improvements acquired in a business combination are amortized over the shorter of the useful life of theassets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date of acquisition and (ii) leaseholdimprovements that are placed into service significantly after and not contemplated at or near the beginning of the lease term are amortized over the shorter of theuseful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leaseholdimprovements are purchased. F-7Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Construction in ProgressConstruction in progress includes direct and indirect expenditures for the construction and expansion of IBX centers and is stated at original cost. TheCompany has contracted out substantially all of the construction and expansion efforts of its IBX centers to independent contractors under constructioncontracts. Construction in progress includes certain costs incurred under a construction contract including project management services, engineering andschematic design services, design development, construction services and other construction-related fees and services. In addition, the Company hascapitalized certain interest costs during the construction phase. Once an IBX center or expansion project becomes operational, these capitalized costs areallocated to certain property, plant and equipment categories and are depreciated over the estimated useful life of the underlying assets.Interest incurred is capitalized in accordance with SFAS No. 34, “Capitalization of Interest Costs.” The following table sets forth total interest costincurred and total interest cost capitalized during the year ended December 31 (in thousands): 2008 2007 2006Interest expense $55,041 $27,334 $14,630Interest capitalized 6,030 7,705 1,575Interest charges incurred $61,071 $35,039 $16,205Asset Retirement CostsThe fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value canbe made. The associated retirement costs are capitalized and included as part of the carrying value of the long-lived asset and amortized over the useful life ofthe asset. Subsequent to the initial measurement, the Company accretes the liability in relation to the asset retirement obligations over time and the accretionexpense is recorded as a cost of revenue. The Company’s asset retirement obligations are primarily related to its IBX centers, of which the majority are leasedunder long-term arrangements, and, in certain cases, are required to be returned to the landlords in their original condition. All of the Company’s IBX centerleases have been subject to significant development by the Company in order to convert them from, in most cases, vacant buildings or warehouses into IBXcenters. The majority of the Company IBX centers’ initial lease terms expire at various dates ranging from 2009 to 2027 and all of them enable the Companyto extend the lease terms.The following table summarizes the activity of the Company’s asset retirement obligation liability (in thousands): Asset retirement obligations as of December 31, 2005 $3,649 Additions — Reductions (200)Accretion expense 536 Impact of foreign currency exchange — Asset retirement obligations as of December 31, 2006 3,985 Additions 4,294 Reductions (166)Accretion expense 646 Impact of foreign currency exchange — Asset retirement obligations as of December 31, 2007 8,759 Additions 2,865 Reductions — Accretion expense 890 Impact of foreign currency exchange (250)Asset retirement obligations as of December 31, 2008 $12,264 F-8Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Goodwill and Other Intangible AssetsEquinix currently operates in three reportable segments, which are also the Company’s reporting units for the purposes of SFAS No. 142, “Goodwilland Other Intangible Assets” (“SFAS 142), which consist of the Company’s geographic operations in 1) the United States, 2) Europe and 3) Asia-Pacific. Asof December 31, 2008 and 2007, the Company had goodwill attributable to both the Europe and Asia-Pacific reporting units. The Company performed itsannual impairment review of the Europe reporting unit in the third quarter of 2008 and the Asia-Pacific reporting unit in the fourth quarter of 2008. TheCompany concluded that its goodwill attributed to the Company’s Europe and Asia-Pacific reporting units was not impaired as the fair value of its Europe andAsia-Pacific reporting units exceeded the carrying value of these reporting units, including goodwill. The recent market declines have not had an impact on thisdetermination. The primary methods used to determine the fair values for SFAS 142 impairment purposes were the discounted cash flow and market methods.The assumptions supporting the discounted cash flow method, including the discount rate, which was assumed to be 9.5% for the Europe reporting unit and13.0% for the Asia-Pacific reporting unit, were determined using the Company’s best estimates as of the date of the impairment reviews. The Asia-Pacificreporting unit uses a higher discount rate due to it smaller size and lack of a direct public company comparable, which currently exists for the Company’sEurope reporting unit. Impairment assessments inherently involve judgment as to assumptions about expected future cash flows and the impact of marketconditions on those assumptions. Future events and changing market conditions may impact the Company’s assumptions as to prices, costs, growth rates orother factors that may result in changes in the Company’s estimates of future cash flows. Although the Company believes the assumptions it used in testingfor impairment are reasonable, significant changes in any one of the Company’s assumptions could produce a significantly different result.As of December 31, 2008 and 2007, the Company’s only significant intangible assets still subject to amortization consisted of customer contracts andleases, both of which are being amortized on a straightline basis. Customer contracts are amortized over 11 years and leases are amortized over the life of theleases.For further information on goodwill and other intangible assets, see Note 5 below.Derivatives and Hedging ActivitiesThe Company follows SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), which requires theCompany to recognize all derivatives on the consolidated balance sheet at fair value. The accounting for changes in the value of a derivative depends onwhether the contract is for trading purposes or has been designated and qualifies for hedge accounting. In order to qualify for hedge accounting, a derivativemust be considered highly effective at reducing the risk associated with the exposure being hedged. In order for a derivative to be designated as a hedge, theremust be documentation of the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the riskexposure, and how effectiveness is to be assessed prospectively and retrospectively.To assess effectiveness, the Company uses a regression analysis. The extent to which a hedging instrument has been and is expected to continue to beeffective at achieving offsetting changes in cash flows is assessed and documented at least quarterly. Any ineffectiveness is reported in current-period earnings.If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. For qualifying cash flowhedges, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income (loss) and recognized in the consolidatedstatements of operations when the hedged cash flows affect earnings. The ineffective portions of cash flow hedges are immediately recognized in earnings. If thehedge relationship is terminated, then the change in fair value of the derivative recorded in other comprehensive income (loss) is recognized in earnings whenthe cash flows that were hedged occur, consistent F-9Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) with the original hedge strategy. For hedge relationships discontinued because the forecasted transaction is not expected to occur according to the originalstrategy, any related derivative amounts recorded in other comprehensive income (loss) are immediately recognized in earnings. The Company does not usederivatives for speculative or trading purposes.For further information on derivatives and hedging activities, see Note 6 below.Fair Value of Financial InstrumentsThe carrying value amounts of many of the Company’s financial instruments, including cash and cash equivalents, short-term and long-terminvestments, accounts receivable, accounts payable and accrued expenses and accrued property, plant and equipment approximate their fair value dueprimarily to the short-term maturity of the related instruments. The fair value of the Company’s convertible debt (see Note 8), which is traded in the market, isbased on quoted market prices. The fair value of the Company’s mortgage and loans payable (see Note 9), which are not traded in the market, is estimated byconsidering the Company’s credit rating, current rates available to the Company for debt of the same remaining maturities and the terms of the debt.The following table sets forth the estimated fair values of the Company’s convertible debt and mortgage and loans payable as of December 31(inthousands): 2008 2007 CarryingValue Fair Value CarryingValue Fair ValueConvertible Debt: Convertible subordinated debentures $19,150 $19,290 $32,250 $83,7472.50% convertible subordinated notes 250,000 175,000 250,000 284,3333.00% convertible subordinated notes 395,986 251,451 395,986 487,205 $665,136 $445,741 $678,236 $855,285Mortgage and Loans Payable: Mortgage payable $94,362 $80,221 $96,746 $111,724Chicago IBX financing 109,991 103,184 105,612 112,453Asia-Pacific financing 87,009 77,382 25,933 20,381European financing 130,981 96,853 83,544 62,871Other note payable 9,672 9,672 18,661 18,661Netherlands financing 6,485 6,485 — — $438,500 $373,797 $330,496 $326,090Fair Value MeasurementsEffective January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), as amended. SFAS 157defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date,” or the “exit price.” Accordingly, an entity must now determine the fair value of an asset or liability based on the assumptions that marketparticipants would use in pricing the asset or liability, not those of the reporting entity itself. Additionally, SFAS 157 establishes a fair value hierarchy, whichgives precedence to fair value measurements, calculated using observable inputs to those using unobservable inputs. SFAS No. 157 requires entities todisclose financial instruments measured at fair value according to the F-10Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) hierarchy in each reporting period after implementation. As allowed under SFAS 157, the Company elected to defer certain provisions of SFAS 157 to fiscalyears beginning after November 15, 2008 for nonrecurring, nonfinancial instruments shown at fair value. The Company did not elect to adopt fair valueaccounting for any assets and liabilities allowed by SFAS No. 159, “Fair Value Option for Financial Assets and Liabilities” (“SFAS 159”).For further information on fair value measurements, see Note 7 below.Impairment of Long-Lived AssetsThe Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimated undiscountedfuture net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.Revenue RecognitionEquinix derives more than 90% of its revenues from recurring revenue streams, consisting primarily of (1) colocation services, such as the licensing ofcabinet space and power; (2) interconnection services, such as cross connects and Equinix Exchange ports; (3) managed infrastructure services, such asEquinix Direct and bandwidth and (4) other services consisting of rent. The remainder of the Company’s revenues are from non-recurring revenue streams,such as from the recognized portion of deferred installation revenues, professional services, contract settlements and equipment sales. Revenues from recurringrevenue streams are generally billed monthly and recognized ratably over the term of the contract, generally one to three years for IBX center space customers.Non-recurring installation fees, although generally paid in a lump sum upon installation, are deferred and recognized ratably over the longer of the term of therelated contract or expected life of the installation. Professional service fees are recognized in the period in which the services were provided and represent theculmination of a separate earnings process as long as they meet the criteria for separate recognition under EITF No. 00-21, “Revenue Arrangements withMultiple Deliverables.” Revenue from bandwidth and equipment sales is recognized on a gross basis in accordance with EITF No. 99-19, “RecordingRevenue as a Principal versus Net as an Agent”, primarily because the Company acts as the principal in the transaction, takes title to products and servicesand bears inventory and credit risk. To the extent the Company does not meet the criteria for recognizing bandwidth and equipment services as gross revenue,the Company records the revenue on a net basis. Revenue from contract settlements, when a customer wishes to terminate their contract early, is generallyrecognized on a cash basis, when no remaining performance obligations exist, to the extent that the revenue has not previously been recognized.The Company occasionally guarantees certain service levels, such as uptime, as outlined in individual customer contracts. To the extent that theseservice levels are not achieved, the Company reduces revenue for any credits given to the customer as a result. The Company generally has the ability todetermine such service level credits prior to the associated revenue being recognized, and historically, these credits have generally not been significant. Therewere no significant service level credits issued during the years ended December 31, 2008, 2007 and 2006.Revenue is recognized only when the service has been provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinableand collection of the receivable is reasonably assured. It is F-11Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) customary business practice to obtain a signed master sales agreement and sales order prior to recognizing revenue in an arrangement. Taxes collected fromcustomers and remitted to governmental authorities are reported on a net basis and are excluded from revenue.The Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of thecustomer. The Company generally does not request collateral from its customers although in certain cases the Company obtains a security interest in acustomer’s equipment placed in its IBX centers or obtains a deposit. If the Company determines that collection of a fee is not reasonably assured, the fee isdeferred and revenue is recognized at the time collection becomes reasonably assured, which is generally upon receipt of cash. In addition, the Company alsomaintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for which theCompany had expected to collect the revenues. If the financial condition of the Company’s customers were to deteriorate or if they became insolvent, resultingin an impairment of their ability to make payments, greater allowances for doubtful accounts may be required. Management specifically analyzes accountsreceivable and current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customerpayment terms when evaluating revenue recognition and the adequacy of the Company’s reserves. A specific bad debt reserve of up to the full amount of aparticular invoice value is provided for certain problematic customer balances. An additional reserve is established for all other accounts based on the age ofthe invoices and an analysis of historical credits issued. Delinquent account balances are written-off after management has determined that the likelihood ofcollection is not probable.Income TaxesIncome taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences areexpected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes theenactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected more likely than not to berealized in the future.In January 2007, the Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies theaccounting for uncertainty in income taxes recognized in the consolidated financial statements in accordance with FASB Statement No. 109, “Accounting forIncome Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax positiontaken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition. The adoption of FIN 48 resulted in no cumulative effect of a change in accounting principle being recorded on theCompany’s consolidated financial statements during the year ended December 31, 2007. The Company will continue to classify the income tax related tointerest and penalties recognized on uncertain tax positions, if any, in income taxes.Stock-Based CompensationOn January 1, 2006, the Company adopted the provisions of, and accounts for stock-based compensation in accordance with, SFAS No. 123(R),“Share-Based Payment,” and its related pronouncements (“SFAS 123(R)”). Under the fair value recognition provisions of this statement, stock-basedcompensation cost is measured at the F-12Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) grant date for all stock-based awards made to employees and directors based on the fair value of the award and is recognized as expense over the requisiteservice period, which is generally the vesting period.Commencing in March 2008, the Company began granting restricted stock units exclusively to its employees in lieu of stock options. As a result, theCompany ceased granting stop options in July 2008. The Company used the Black-Scholes option-pricing model to determine the fair value of stock optionsas they only had a service condition. Certain of the Company’s employee equity awards had vesting criteria based upon the achievement of certain pre-determined Company stock price targets, which the Company refers to as market price conditions. The Company used a Monte Carlo simulation option-pricing model to determine the fair value of restricted stock or restricted stock unit grants that have both a service and market price condition. However,commencing in February 2008, the Company ceased granting equity awards with market price conditions. The determination of the fair value of stock-basedawards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complexand subjective variables. These variables include the Company’s expected stock price volatility over the term of the awards, and actual and projected employeestock option exercise behaviors. The Company estimates the expected volatility by using the average historical volatility of its common stock that it believes isthe best representative of future volatility. The risk-free interest rate used is based on U.S. Treasury zero-coupon issues with remaining terms similar to theexpected term of the equity awards. The Company does not anticipate paying any cash dividends in the foreseeable future and, therefore, the expected dividendrate used is zero. The expected term of options used was calculated by taking the average of the vesting term and the contractual term of the option (theCompany ceased granting stock options in 2008).As noted above, beginning in 2008, the Company only grants restricted stock or restricted stock units to its employees in lieu of stock options and theseequity awards have only either a service condition or a service and performance condition. Any performance conditions contained in an equity award are tied tothe performance of the Company or a specific region of the Company. The Company assesses the probability of meeting these performance conditions on aquarterly basis. The majority of the Company’s equity awards vest over four years, although certain of the equity awards for executives vest over a range oftwo to four years. The valuation of restricted stock or restricted stock units with only a service condition or a service and performance condition requires nosignificant assumptions as the fair value for these types of equity awards is based solely on the fair value of the Company’s stock price on the date of grant.SFAS No.123(R) does not allow the recognition of a deferred tax asset for unrealized tax benefits associated with the tax deductions in excess of thecompensation recorded (excess tax benefit). The Company will recognize a benefit from stock-based compensation in equity if the excess tax benefit is realizedby following the “with-and-without” approach. The excess tax benefit that the Company recorded during the years ended December 31, 2008 and 2006 wasapproximately $696,000 and $727,000, respectively. During the year ended December 31, 2007, the Company did not record any excess tax benefitassociated with its stock-based compensation.For further information on stock-based compensation, see Note 12 below.Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstancesexcluding transactions resulting from investments by owners and distributions to owners. The primary difference between net income (loss) andcomprehensive income (loss) for Equinix results from foreign currency translation adjustments and unrealized gains and losses on available-for-sale securitiesand cash flow hedges (interest rate swaps). F-13Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The financial position of foreign subsidiaries is translated using the exchange rates in effect at the end of the period, while income and expense items aretranslated at average rates of exchange during the period. Gains or losses from translation of foreign operations where the local currency is the functionalcurrency are included as other comprehensive income (loss). The net gains and losses resulting from foreign currency transactions are recorded in net income(loss) in the period incurred and reported within other income and expense. Certain inter-company balances are designated as long-term. Accordingly, exchangegains and losses associated with these long-term inter-company balances are recorded as a component of other comprehensive income (loss), along withtranslation adjustments. During the year ended December 31, 2008, the U.S. dollar strengthened against certain of the currencies of the foreign countries inwhich the Company operates. This has significantly impacted the Company’s consolidated balance sheets (as evidenced in the Company’s foreign currencytranslation losses), as well as its consolidated statements of operations as amounts denominated in foreign currencies are generally translating into less U.S.dollars. To the extent that the U.S. dollar strengthens further, this will continue to impact the Company’s consolidated balance sheets and consolidatedstatements of operations including the amount of revenue that the Company reports in future periods.The components of the Company’s accumulated other comprehensive income (loss) consisted of the following as of December 31 (in thousands): 2008 2007 Foreign currency translation loss $(146,219) $(4,078)Unrealized loss on interest rate swaps, net of tax of $4,660 (6,350) — Unrealized gain (loss) on investments, net of tax of $169 and $0 (231) 190 (152,800) (3,888)For further information on derivatives and hedging instruments, see Note 6 below.Earnings Per ShareThe Company computes earnings per share in accordance with SFAS No. 128, “Earnings per Share;” and its related pronouncements. Basic earningsper share is computed using net income (loss) and the weighted-average number of common shares outstanding. Diluted earnings per share is computed usingnet income, adjusted for interest expense as a result of the assumed conversion of the Company’s Convertible Subordinated Debentures, 2.50% ConvertibleSubordinated Notes and 3.00% Convertible Subordinated Notes, if dilutive, and the weighted-average number of common shares outstanding plus any dilutivepotential common shares outstanding. Dilutive potential common shares include the assumed exercise, vesting and issuance activity of employee equityawards using the treasury stock method, as well as warrants and shares issuable upon the conversion of the Convertible Subordinated Debentures, 2.50%Convertible Subordinated Notes and 3.00% Convertible Subordinated Notes. F-14Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31 (in thousands, except per shareamounts): 2008 2007 2006 Numerator: Numerator for basic earnings per share $131,538 $(5,188) $(6,397)Effect of assumed conversion of convertible subordinated debentures and notes: Interest expense, net of tax 13,366 — — Numerator for diluted earnings per share $144,904 $(5,188) $(6,397)Denominator: Weighted-average shares 37,120 32,595 28,796 Weighted-average unvested restricted shares issued subject to forfeiture (346) (459) (245)Denominator for basic earnings per share 36,774 32,136 28,551 Effect of dilutive securities: Convertible subordinated debentures 772 — — 2.50% convertible subordinated notes 2,232 — — 3.00% convertible subordinated notes 2,945 — — Employee equity awards 1,005 — — Warrants — — — Total dilutive potential shares 6,954 — — Denominator for diluted earnings per share 43,728 — — Earnings per share: Basic $3.58 $(0.16) $(0.22)Diluted $3.31 $(0.16) $(0.22)The following table sets forth potential shares of common stock that are not included in the diluted earnings per share calculation above because to do sowould be anti-dilutive for December 31 (in thousands): 2008 2007 2006Shares reserved for conversion of convertible subordinated debentures — 816 2,183Shares reserved for conversion of convertible 2.50% convertible subordinated notes — 2,232 — Shares reserved for conversion of convertible 3.00% convertible subordinated notes — 2,945 — Unvested restricted shares issued subject to forfeiture — 457 248Common stock warrants 1 1 9Common stock related to employee equity awards 1,843 3,678 3,627 1,844 10,129 6,067Recent Accounting PronouncementsIn December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS 141,“Business Combinations.” SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired or a gain from a bargain purchase.SFAS 141R also determines disclosure requirements to enable the F-15Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) evaluation of the nature and financial effects of the business combination. SFAS 141(R) will apply to the Company’s business combinations that close on orafter January 1, 2009. Additionally, to the extent the Company has not released its valuation allowances for certain deferred tax assets associated with anysubsidiaries acquired in previous business combinations for which goodwill exists, such as for certain of the Company’s European subsidiaries, such releaseof the valuation allowance in these cases will now be charged to the Company’s consolidated statements of operations at such time this decision is made versusreducing the amount of goodwill, which was the accounting treatment in place prior to SFAS 141(R).In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160amends ARB 51, Consolidated Financial Statements, and requires all entities to report non-controlling (minority) interests in subsidiaries within equity in theconsolidated financial statements, but separate from the parent shareholders’ equity. SFAS 160 also requires any acquisitions or dispositions of non-controlling interests that do not result in a change of control to be accounted for as equity transactions. Further, SFAS 160 requires that a parent recognize again or loss in net income when a subsidiary is deconsolidated. SFAS 160 is effective for the Company beginning January 1, 2009. As of December 31, 2008,all of the Company’s subsidiaries were wholly-owned. As a result, SFAS 160 is not presently expected to impact the Company’s financial statements.In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASBStatement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and is designed to improve thetransparency of financial reporting. SFAS 161 is effective for the Company beginning January 1, 2009. The Company does not expect the adoption of SFAS161 to have significant impact on its financial statement disclosures.In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSPFAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life or recognizedintangible assets under SFAS 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 applies prospectively to intangible assets that are acquiredindividually or with a group of other assets in business combinations and asset acquisitions. FSP FAS 142-3 is effective for the Company beginningJanuary 1, 2009. Early adoption is prohibited. FSP FAS 142-3 will not have an immediate impact to the Company’s financial statements.In May 2008, the FASB issued FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash uponConversion” (“FSP APB 14-1”). FSP APB 14-1 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion (includingpartial cash settlement) should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debtborrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is effective for the Company beginning January 1, 2009 and is appliedrestrospectively to all periods presented. The impact of FSP APB 14-1 to the Company will be significant. Specifically, the Company’s 2.50% ConvertibleSubordinated Notes, which were issued in March 2007 for total proceeds of $250,000,000, fall into the scope of FSP APB 14-1 due to the fact that they maybe settled in cash, shares of the Company’s common stock or a combination of cash or shares of the Company’s common stock at the Company’s election(the Company’s other convertible debt instruments do not fall into the scope of FSP APB 14-1) (see Note 8). As a result, the Company will bifurcate the 2.50%Convertible Subordinated Notes between its debt and equity components and then accrete the value of the debt back to its face value through additional non-cash interest expense. The Company estimates that this will result in approximately $36,000,000 of additional interest expense being recorded through 2012, ofwhich approximately $10,000,000 will be recorded during 2009. F-16Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 2. AcquisitionsVirtu AcquisitionOn February 5, 2008, a wholly-owned subsidiary of the Company acquired all of the issued and outstanding share capital of Virtu, a provider ofnetwork-neutral data center services in the Netherlands, for a cash payment of $23,345,000, including closing costs (the “Virtu Acquisition”). Under theterms of the Virtu Acquisition, the Company may also pay additional future contingent consideration, which will be payable in the form of up to 20,000shares of the Company’s common stock and cash of up to 1,500,000 Euros, contingent upon meeting certain pre-determined future annual operating targetsfrom 2008 to 2011 (the 2008 targets were not met and, therefore, no accrual was recognized). Such contingent consideration, if paid, will be recorded asadditional goodwill. Virtu, a similar business to that of the Company, operated data centers in the Netherlands, and supplements the Company’s existingEuropean operations. The combined company predominantly operates under the Equinix name. The results of operations for Virtu are not significant to theCompany; therefore, the Company does not present pro forma combined results of operations.IXEurope AcquisitionOn September 14, 2007, a wholly-owned subsidiary of the Company purchased the entire issued and to be issued share capital of IXEurope plc(“IXEurope”), a publicly-held company headquartered in London, U.K. (the “IXEurope Acquisition”). Under the final terms of the IXEurope Acquisition,IXEurope shareholders received 140 British pence in cash for each IXEurope share. The purchase price, including direct transaction costs, totaled271,113,000 British pounds or $549,217,000. IXEurope, a similar business to that of the Company, operated data centers in the United Kingdom, France,Germany and Switzerland and provided the Company with an immediate entry into the European data center market, supplementing the Company’s existingU.S. and Asia-Pacific operations. This is the primary reason the Company paid significantly more than the carrying amount of IXEurope’s net book value,resulting in a significant amount of goodwill and intangible assets being recorded by the Company.Fully-diluted shares of IXEurope held by IXEurope’s two top officers, representing 1,974,000 British pounds of the total purchase price, were notexchanged for cash upon closing. Instead, equity awards of the Company’s common stock with a fair value of $4,007,000 were issued to the two top officersof IXEurope and were subject to vesting based on continuous employment through the end of 2008, as well as certain financial performance criteria of theEurope operations (the “IXEurope Equity Compensation”). The IXEurope Equity Compensation was not accounted for as part of the purchase price ofIXEurope. Rather, the IXEurope Equity Compensation is expensed into the operations of the Company over the vesting life of such awards. During the secondquarter of 2008, the Company entered into agreements with these officers in connection with their resignations and modified these equity awards to acceleratevesting. As a result, the Company recorded an incremental charge of $2,256,000 during the year ended December 31, 2008, which is included in general andadministrative expenses in the Company’s accompanying consolidated statements of operations. F-17Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Purchase Price AllocationUnder the purchase method of accounting, the total purchase price was allocated to IXEurope’s net tangible and intangible assets based upon their fairvalue as of the date of acquisition. Based upon the purchase price and the valuation of IXEurope, the purchase price allocation was as follows (in thousands): Cash and cash equivalents $7,425 Accounts receivable 15,322 Other current assets 16,611 Property, plant and equipment 172,444 Goodwill 428,605 Intangible asset—customer contracts 65,831 Intangible asset—leases 4,319 Other assets 11,588 Total assets acquired 722,145 Accounts payable and accrued expenses (44,528)Accrued property, plant and equipment (13,192)Current portion of capital leases (1,430)Current portion of loan payable (826)Other current liabilities (8,333)Capital leases, less current portion (3,504)Loan payable (65,196)Deferred tax liability (22,123)Unfavorable lease obligations (6,525)Other liabilities (7,271)Net assets acquired $549,217 A total of $65,831,000 has been allocated to customer contracts, an intangible asset with an estimated useful life of 11 years. A total of $4,319,000 hasbeen allocated to favorable lease obligations, an intangible asset with an estimated life of 15.8 years. A total of $6,525,000 has been allocated to unfavorablelease obligations, a liability with an estimated life of 11.7 years.A total of $428,605,000 has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible andintangible assets acquired. In accordance with SFAS 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized, is tested for impairment at leastannually. Goodwill is not deductible for federal tax purposes under U.S. income tax laws.Unaudited Pro forma Consolidated Combined ResultsThe consolidated financial statements of the Company include the operations of IXEurope from September 14, 2007 to December 31, 2007 and reflectthe net assets acquired. The following unaudited pro forma combined financial information has been prepared to give effect to the IXEurope Acquisition by theCompany using the purchase method of accounting and the related financings, the Common Stock Offering and the sale of 3.00% Convertible SubordinatedNotes, to fund this acquisition. The unaudited pro forma combined financial information presents the consolidated results of the Company as if the IXEuropeAcquisition and the related financings had been completed as of the beginning of each period presented. This pro forma financial information is presented forillustrative purposes only and is not necessarily indicative of the results of operations F-18Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) that would have actually been reported had the IXEurope Acquisition and the related financings occurred as of January 1, 2006 or 2007, nor is it necessarilyindicative of the future results of operations of the combined company.The following table sets forth the unaudited pro forma consolidated combined results of operations for the years ended December 31(in thousands, exceptper share data): 2007 2006 Revenues $497,397 $352,030 Net loss (21,568) (36,660)Basic and diluted earnings per share (0.67) (1.12)3. IBX Acquisitions and ExpansionsAlthough the Company owns certain of its IBX centers through property acquisitions, the Company leases a majority of its IBX centers under non-cancellable operating lease agreements. For further information on the Company’s operating lease commitments, see “Operating Lease Commitments” in Note14 below. For those IBX acquisition and expansion projects not subject to operating lease arrangements, the Company presents the following information for2008 and 2007:London IBX Expansion ProjectIn October 2008, an indirect wholly-owned subsidiary of the Company entered into an agreement for lease for property and a warehouse building locatedin the London, England metro area (the “Agreement for Lease”). The Agreement for Lease provides for the completion of certain works within a specified timeframe and the entry into a definitive lease (the “Lease”) upon the completion of those works. The Lease will have a term of 20 years, with an option to terminateon the part of the tenant after 15 years upon six months’ prior notice, and a total cumulative rent obligation of approximately $36,344,000 (using the exchangerate as of December 31, 2008) over the first 15 years of the Lease. On the fifteenth anniversary of the Lease, the rent can be reviewed and adjusted to marketrents, as set out in the Lease. The Company expects to enter into the Lease in November 2009. There was no accounting impact for the Agreement for Leasethrough December 31, 2008.Paris IBX Expansion ProjectIn September 2008, the Company entered into a capital lease for a space within a warehouse building in the Paris, France metro area adjacent to one of itsexisting Paris IBX centers, which will become the Company’s third IBX center in the Paris metro area (the “Paris IBX Expansion Project”). The Companytook possession of this property in the fourth quarter of 2008, and as a result, recorded a property, plant and equipment asset, as well as a capital leaseobligation, totaling 28,137,000 Euros or approximately $39,311,000 (the “Paris Metro Area IBX Capital Lease”) . Monthly payments under the Paris MetroArea IBX Capital Lease, which commence in April 2009, will be made through September 2020 at an effective interest rate of 7.43% per annum (see Note 9).Sydney IBX Expansion ProjectIn January 2008, the Company entered into a long-term lease for a new building located adjacent to its existing Sydney IBX center and at the same timeterminated the existing lease for the Company’s original Sydney IBX center by incorporating it into the new lease. The Company extended the original leaseterm for an additional seven years in a single, revised lease agreement for both buildings (collectively, the “Building”). F-19Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Cumulative minimum payments under this lease total 18,260,000 Australian dollars, or approximately $14,500,000, of which 12,202,000 Australian dollars,or approximately $9,700,000, is incremental to the previous lease. Payments are due monthly and commenced in January 2008. As a result of the Companysignificantly altering the Building’s footprint in order to meet the Company’s IBX center needs, the Company followed the accounting provisions of EITF 97-10, “The Effect of Lessee Involvement in Asset Construction” (“EITF 97-10”). Pursuant to EITF 97-10, the Building is considered a financed asset (the“Sydney IBX Building Financing”) and subject to a ground lease for the underlying land, which is considered an operating lease. Pursuant to the Sydney IBXBuilding Financing, the Company recorded the Building asset and a corresponding financing obligation liability totaling 5,805,000 Australian dollars (orapproximately $4,600,000) in January 2008. Monthly payments under the Sydney IBX Building Financing, which commenced in January 2008, are payablethrough December 2022, at an effective interest rate of approximately 7.90% per annum.Los Angeles Property AcquisitionIn June 2007, the Company purchased property, comprised of land and an empty building, located in El Segundo, California, for $49,059,000,including closing costs, which the Company paid in full in a cash transaction in June 2007. The Company is building an IBX center on this property, whichwill be the Company’s fourth IBX center in the Los Angeles metro area.San Jose Property AcquisitionIn January 2007, the Company entered into a purchase agreement to purchase the building and property where its original Silicon Valley IBX center islocated (the “San Jose Property Acquisition”) for $65,232,000, including closing costs, which was paid in full in a cash transaction during July 2007following an initial $6,500,000 cash deposit paid in January 2007. In conjunction with the San Jose Property Acquisition, the Company wrote-off theassociated deferred rent and asset retirement obligations totaling $1,386,000 and $138,000, respectively, and as a result, recorded property, plant andequipment totaling $63,708,000. Furthermore, in August 2007, the Company purchased an adjacent piece of land for $6,239,000, including closing costs,for potential future expansion.4. Gains on Asset SalesEMS SaleIn December 2007, the Company sold its Equinix mail service (“EMS”) offering located in Singapore for cash gross proceeds of $1,657,000 (the “EMSSale”) in a related party transaction (see Note 14) resulting in a gain of $1,338,000. EMS was a service offering unique to Singapore and was acquired by theCompany in its acquisition of i-STT Pte Ltd (“i-STT Acquisition”) on December 31, 2002; however, it was not considered a core service offering for theCompany and the sale enables the Company to focus on its core IBX service offerings in Singapore.Honolulu IBX SaleIn December 2006, the Company sold its Honolulu IBX center for $9,750,000 of gross cash proceeds (the “Honolulu IBX Sale”) to a company led byformer Equinix personnel. The Honolulu IBX center was originally acquired by the Company in its acquisition of Pihana Pacific, Inc. on December 31, 2002(the “Pihana Acquisition”). The Honolulu IBX was ascribed a nominal book value in the Pihana Acquisition and was the Company’s smallest IBX center inthe Company’s smallest market. F-20Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company accounted for the Honolulu IBX Sale under the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of long-LivedAssets,” which resulted in a gain of $9,647,000 in continuing operations comprised of the following (in thousands): Cash proceeds $9,750 Cash transaction costs (220)Net cash proceeds 9,530 Adjustments: Prepaid expenses (4)Property, plant and equipment (280)Asset retirement obligation 200 Deferred rent 201 Subtotal 117 Gain on Honolulu IBX sale $9,647 5. Balance Sheet ComponentsCash, Cash Equivalents and Short-Term and Long-Term InvestmentsCash, cash equivalents and short-term and long-term investments consisted of the following as of December 31 (in thousands): 2008 2007 U.S. government and agency obligations $131,002 $32,801 Money market 112,208 272,099 Reserve fund 9,250 — Commercial paper — 24,218 Corporate bonds 34,535 36,604 Asset-backed securities 17,724 16,578 Certificates of deposits 2,005 1,600 Other securities 1,221 — Total available-for-sale securities 307,945 383,900 Less amounts classified as cash and cash equivalents (220,207) (290,633)Total securities classified as investments 87,738 93,267 Less amounts classified as short-term investments (42,112) (63,301)Total market value of long-term investments $45,626 $29,966 As of December 31, 2008 and 2007, cash equivalents included investments which were readily convertible to cash and had maturity dates of 90 days orless. The maturities of securities classified as short-term investments were one year or less as of December 31, 2008 and 2007. The maturities of securitiesclassified as long-term investments were greater than one year and less than three years as of December 31, 2008 and 2007.For the year ended December 31, 2008, the Company recorded a $1,527,000 realized loss resulting from its investments in the Reserve Primary Fund(the “Reserve”), a money market fund that suffered a decline in its Net Asset Value (“NAV”) of below $1 per share when the Reserve valued its exposure toinvestments held in F-21Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Lehman Brothers Holdings, Inc. (“Lehman Brothers”) at zero. The Reserve held investments in commercial paper and short term-notes issued by LehmanBrothers, which filed for Chapter 11 bankruptcy protection in September 2008. This realized loss is included in interest income, net in the Company’saccompanying consolidated statements of operations. The Company has issued a redemption notice to redeem in full all of its holdings with the Reserve andhas received distributions totaling $40,163,000. As of December 31, 2008, the fair value of the funds held by the Reserve totaling $9,250,000 remainedoutstanding. In February 2009, the Company received an additional distribution of $3,379,000 from the Reserve.The Company expects that distributions from the Reserve will occur over the remaining nine months as the investments held in the fund mature. TheReserve has announced that this fund is in liquidation and they have filed their plan of liquidation with the Securities and Exchange Commission (the“SEC”). As of December 31, 2008, the Company has classified its investment in the Reserve as a short-term investment on its consolidated balance sheet.This classification is based on the Company’s assessment of each of the individual securities which make-up the underlying portfolio holdings in the Reserve,which primarily consisted of commercial paper, certificates of deposits and discount notes. While the Company expects to receive substantially all of itscurrent holdings in the Reserve within the next nine months, it is possible the Company may encounter difficulties in receiving distributions given the currentcredit market conditions. If market conditions were to deteriorate even further such that the current fair value were not achievable, or if the Reserve is delayedin its ability to accurately complete their account reconciliations, the Company could realize additional losses in its holdings with the Reserve and distributionscould be further delayed. A number of litigation claims have been filed against the Reserve’s management which could potentially delay the timing and amountof the final distributions of the fund. If the litigation were to continue for an extended period of time it is possible that the Reserve management’s cost ofdefending these claims could also reduce the final amount of distribution to the Company.As of December 31, 2008, the Company’s net unrealized gains (losses) on its available-for-sale securities were comprised of the following (inthousands): Unrealizedgains Unrealizedlosses Net unrealizedlosses Short-term investments $135 $(155) $(20)Long-term investments 323 (704) (380) $458 $(858) $(400)The following table summarizes the fair value and gross unrealized losses related to 63 available-for-sale securities with an aggregate cost basis of$87,136,000, aggregated by type of investment and length of time that individual securities have been in continuous unrealized loss position, as ofDecember 31, 2008 (in thousands): Securities in a lossposition for less than12 months Securities in a lossposition for 12 monthsor more Fair value Grossunrealizedlosses Fair value GrossunrealizedlossesU.S. government and agency obligations $43,925 $(12) $— $— Corporate bonds 27,537 (547) — — Asset-backed securities 14,816 (299) — — $86,278 $(858) $— $— F-22Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) While the Company does not believe it holds investments that are other-than-temporarily impaired and believes that the Company’s investments willmature at par, as of December 31, 2008, the Company’s investments are subject to the currently adverse market conditions, which include constraints relatedto liquidity. If market conditions continue to deteriorate and liquidity constraints become even more pronounced, the Company could sustain other-than-temporary impairments to its investment portfolio which could result in additional realized losses being recorded in interest income, net or securities marketscould become inactive which could affect the liquidity of the Company’s investments. As securities mature, the Company has reinvested the proceeds in U.S.government securities, such as Treasury bills and Treasury notes, of a short-term duration and lower yield in order to meet its capital expenditurerequirements. As a result, the Company expects to recognize lower interest income in future periods.As of December 31, 2007, the Company’s net unrealized gains (losses) on its available-for-sale securities were comprised of the following (inthousands): Unrealizedgains Unrealizedlosses Net unrealizedgain (losses)Cash and cash equivalents $1 $(1) $— Short-term investments 90 (16) 74Long-term investments 137 (21) 116 $228 $(38) $190None of the securities held at December 31, 2007 were other-than-temporarily impaired.While certain marketable securities carry unrealized losses, the Company expects that it will receive both principal and interest according to the statedterms of each of the securities and that the decline in market value is primarily due to changes in the interest rate environment from the time the securities werepurchased as compared to interest rates at December 31, 2007.The following table summarizes the fair value and gross unrealized losses related to 18 available-for-sale securities with an aggregate cost basis of$31,396,000, aggregated by type of investment and length of time that individual securities have been in continuous unrealized loss position, at December 31,2007 (in thousands): Securities in a lossposition for less than12 months Securities in a lossposition for 12 monthsor more Fair value Grossunrealizedlosses Fair value GrossunrealizedlossesCommercial paper $16,963 $(1) $— $— Corporate bonds 9,988 (33) — — Asset-backed securities 2,807 (3) — — Certificates of deposit 1,600 (1) — — $31,358 $(38) $— $— F-23Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Accounts ReceivableAccounts receivable, net, consisted of the following as of December 31 (in thousands): 2008 2007 Accounts receivable $119,030 $98,141 Unearned revenue (50,964) (37,606)Allowance for doubtful accounts (2,037) (446) $66,029 $60,089 Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. The Company invoices its customers at the end of acalendar month for services to be provided the following month. Accordingly, unearned revenue consists of pre-billing for services that have not yet beenprovided, but which have been billed to customers in advance in accordance with the terms of their contract.Additions to the allowance for doubtful accounts were approximately $1,582,000, $94,000 and $39,000 for the years ended December 31, 2008, 2007and 2006, respectively. Recoveries against the allowance were approximately ($9,000), ($79,000) and ($89,000), respectively, for the years endedDecember 31, 2008, 2007 and 2006.Other Current AssetsOther current assets consisted of the following as of December 31 (in thousands): 2008 2007Prepaid expenses $9,550 $6,979Taxes receivable 3,434 3,437Foreign currency forward contract receivable 377 — Debt issuance costs, net 18 — Other current assets 1,848 2,322 $15,227 $12,738Property, Plant and EquipmentProperty, plant and equipment consisted of the following as of December 31 (in thousands): 2008 2007 IBX plant and machinery $651,820 $503,755 Leasehold improvements 534,186 481,409 Buildings 196,009 153,692 Site improvements 151,295 96,041 IBX equipment 147,832 128,423 Computer equipment and software 74,179 60,881 Land 48,950 50,979 Furniture and fixtures 9,866 5,698 Construction in progress 277,208 133,501 2,091,345 1,614,379 Less accumulated depreciation (602,943) (451,659) $1,488,402 $1,162,720 F-24Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Leasehold improvements, IBX plant and machinery, computer equipment and software and buildings recorded under capital leases aggregated$80,239,000 and $40,486,000 at December 31, 2008 and December 31, 2007, respectively. Amortization on the assets recorded under capital leases isincluded in depreciation expense and accumulated depreciation on such assets totaled $11,734,000 and $7,539,000 for the years ended December 31, 2008and 2007.As of December 31, 2008 and December 31, 2007, the Company had accrued property, plant and equipment expenditures of $89,518,000 and$76,504,000, respectively. The Company’s planned capital expenditures during 2009 in connection with recently acquired IBX properties and expansionefforts are substantial. For further information, refer to “Other Purchase Commitments” in Note 14.Goodwill and Other IntangiblesGoodwill and other intangible assets, net, consisted of the following as of December 31 (in thousands): 2008 2007 Goodwill: Europe $324,674 $424,916 Asia-Pacific 18,155 18,010 342,829 442,926 Other intangibles: Intangible asset—customer contracts 58,605 69,209 Intangible asset—leases 4,349 5,254 Intangible asset—tradename 420 361 Intangible asset—workforce 160 160 Intangible asset—lease expenses 111 111 Intangible asset—non-compete 64 — 63,709 75,095 Accumulated amortization (12,791) (7,888) 50,918 67,207 $393,747 $510,133 The Company’s goodwill and intangible assets in Europe, denominated in British pounds and Euros, and goodwill in Asia-Pacific, denominated inSingapore dollars, are subject to foreign currency fluctuations. The Company’s foreign currency translation gains and losses, including goodwill and otherintangibles, are a component of other comprehensive income and loss.For the years ended December 31, 2008, 2007 and 2006, the Company recorded amortization expense of $6,868,000, $2,452,000 and $781,000,respectively, associated with its other intangible assets. Estimated future amortization expense related to these intangibles is as follows (in thousands): Year ending: 2009 $5,2102010 5,1772011 5,0892012 5,0742013 5,0732014 and thereafter 25,295Total $50,918 F-25Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other AssetsOther assets consisted of the following as of December 31 (in thousands): 2008 2007Deposits $21,485 $16,618Debt issuance costs, net 17,336 21,333Restricted cash 14,934 1,982Prepaid expenses 3,874 4,091Other assets 1,285 1,860 $58,914 $45,884Accounts Payable and Accrued ExpensesAccounts payable and accrued expenses consisted of the following as of December 31 (in thousands): 2008 2007Accounts payable $18,325 $14,816Accrued compensation and benefits 22,135 18,875Accrued utilities and security 10,327 8,709Accrued taxes 8,640 6,925Accrued interest 5,962 6,461Accrued professional fees 2,741 2,094Accrued other 6,187 7,216 $74,317 $65,096Other Current LiabilitiesOther current liabilities consisted of the following as of December 31 (in thousands): 2008 2007Deferred installation revenue $22,769 $16,295Deferred tax liabilities 7,342 — Accrued restructuring charges 6,023 3,973Customer deposits 5,913 4,643Deferred recurring revenue 4,434 3,811Foreign currency forward contract payable 2,072 — Deferred rent 495 400Interest rate swap payable 271 — Other current liabilities 1,136 351 $50,455 $29,473 F-26Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other LiabilitiesOther liabilities consisted of the following as of December 31 (in thousands): 2008 2007Deferred rent, non-current $28,146 $26,512Deferred installation revenue, non-current 16,531 10,241Asset retirement obligations 12,264 8,759Deferred tax liabilities 12,083 25,955Interest rate swap payable, non-current 10,631 — Accrued restructuring charges, non-current 7,288 8,167Deferred recurring revenue, non-current 6,180 5,745Customer deposits, non-current 6,108 4,201Other liabilities 864 639 $100,095 $90,219The Company currently leases the majority of its IBX centers and certain equipment under non-cancelable operating lease agreements expiring through2027 (see “Other Purchase Commitments” in Note 14). The IBX center lease agreements typically provide for base rental rates that increase at defined intervalsduring the term of the lease. In addition, the Company has negotiated rent expense abatement periods to better match the phased build-out of its centers. TheCompany accounts for such abatements and increasing base rentals using the straight-line method over the life of the lease. The difference between the straight-line expense and the cash payment is recorded as deferred rent.6. Derivative and Hedging InstrumentsThe Company employs interest rate swaps to partially offset its exposure to variability in interest payments due to fluctuations in interest rates forcertain of its variable-rate debt. The Company employs foreign currency forward contracts to partially offset its business exposure to foreign exchange risk forcertain existing foreign currency-denominated assets and liabilities.Cash Flow Hedges—Interest Rate SwapsThe Company has variable-rate debt financing. These obligations expose the Company to variability in interest payments and therefore fluctuations ininterest expense and cash flows due to changes in interest rates. Interest rate swap contracts are used in the Company’s risk management activities in order tominimize significant fluctuations in earnings that are caused by interest rate volatility. Interest rate swaps involve the exchange of variable-rate interestpayments for fixed-rate interest payments based on the contractual underlying notional amount. Gains and losses on the interest rate swaps that are linked tothe debt being hedged are expected to substantially offset this variability in earnings.In May 2008, the Company entered into several interest rate swaps in order to minimize variability related to its variable-rate Chicago IBX Financing andEuropean Financing (see Note 9). The Company also designated two existing interest rate swaps acquired in the IXEurope Acquisition as effective cash flowhedge relationships with the European Financing. Each of these hedge relationships were highly effective at achieving offsetting changes in cash flows as ofDecember 31, 2008 with an insignificant amount of ineffectiveness recorded in interest expense on the accompanying consolidated statements of operations.The Company had never previously entered into any interest rate swap transactions. F-27Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company had the following interest rate swaps in place as of December 31, 2008 (in thousands): NotionalAmount FairValue (1) Loss (2) Liabilities: European Financing interest rate swaps $101,018 $(5,930) $(6,038)Chicago IBX Financing interest rate swap 105,000 (4,972) (4,972) $206,018 $(10,902) $(11,010) (1)Included in the consolidated balance sheets within other current liabilities and other liabilities. (2)Included in the consolidated balance sheets within accumulated other comprehensive income (loss).Other Derivatives—Foreign Currency Forward ContractsThe Company uses foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assetsand liabilities. As a result of foreign currency fluctuations, the U.S. dollar equivalent values of the foreign currency-denominated assets and liabilities change.Foreign currency forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price onan agreed-upon settlement date.The Company has not designated the foreign currency forward contracts as hedging instruments under SFAS 133. Gains and losses on these contractsare included in other income (expense), net, along with those foreign currency gains and losses of the related foreign currency-denominated assets and liabilitiesassociated with these foreign currency forward contracts. The Company entered into various foreign currency forward contracts during the year endedDecember 31, 2008. As of December 31, 2008, the Company recorded a net liability of $1,695,000 representing the fair values of these foreign currencyforward contracts, which is recorded within other current assets and other current liabilities in the accompanying consolidated balance sheet. During the yearended December 31, 2007, the Company entered into foreign currency forward contracts to purchase 265,156,000 British pounds at an average forward rateof 2.020007, or the equivalent of $535,617,000, for purposes of hedging a portion of the purchase price of the IXEurope Acquisition. Upon cash payment,the Company recorded a foreign exchange gain of $1,494,000 during the year ended December 31, 2007, which is reflected within other income (expense) onthe Company’s accompanying consolidated statements of operations. As of December 31, 2007, the Company did not have any outstanding foreign currencyforward contracts.7. Fair Value MeasurementsTo increase consistency and comparability in fair value measurements, SFAS 157 establishes a fair value hierarchy to prioritize the inputs used invaluation techniques. There are three broad levels to the fair value hierarchy of inputs to fair value (Level 1 being the highest priority and Level 3 being thelowest priority) as follows: • Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities inactive markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from orcorroborated by observable market data by correlation or other means. F-28Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) • Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. Theseassumptions are required to be consistent with market participant assumptions that are reasonably available.The Company measures and reports certain financial assets and liabilities at fair value on a recurring basis, including its investments in money marketfunds and available-for-sale debt investments in other public companies, governmental units and other agencies and derivatives.The Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2008 were as follows (in thousands): Fair value atDecember 31,2008 Fair value measurement using Level 1 Level 2 Level 3Assets: U.S. government and agency obligations $131,002 $— $131,002 $— Money market 112,208 112,208 — — Reserve fund 9,250 — — 9,250Corporate bonds 34,535 — 34,535 — Asset-backed securities 17,724 — 17,724 — Certificates of deposits 2,005 — 2,005 — Other securities 1,221 — 1,221 — Derivative assets (1) 377 — 377 — $308,322 $112,208 $186,864 $9,250Liabilities: Derivative liabilities (2) (12,974) — (12,974) — $(12,974) $— $(12,974) $— (1)Included in the consolidated balance sheets within other current assets.(2)Included in the consolidated balance sheets within other current liabilities and other liabilities.The fair value of the Company’s investments in available-for-sale money market funds approximates their face value. Such instruments are included incash equivalents. These securities include available-for-sale debt investments related to the Company’s investments in the securities of other public companies,governmental units and other agencies. The fair value of these investments is based on the quoted market price of the underlying shares. However, theCompany recorded an other-than-temporary impairment charge of $1,527,000 in September 2008 on funds held by the Reserve money market fund, whosecarrying value of $50,940,000 was in excess of fair value of $49,422,000, of which $9,250,000 remained outstanding at December 31, 2008. In February2009, the Company received an additional distribution of $3,379,000 from the Reserve. The money market funds held in the Reserve, originally classifiedwithin Level 1 of the fair value hierarchy, were reclassified to Level 3 of the fair value hierarchy in September 2008. The impairment charge of $1,527,000related to the Reserve is reflected in interest income, net on the accompanying consolidated statements of operations. F-29Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table provides a summary of the activities of the Company’s Level 3 financial assets measured at fair value for the year endedDecember 31, 2008 (in thousands): Balance at December 31, 2007 $— Transfers from Level 1 50,940 Net realized losses (1) (1,527)Settlements (40,163)Balance at December 31, 2008 $9,250 (1)Included in the consolidated statements of operations within interest income.Valuation MethodsFair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniquesinvolve uncertainties and are affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments,discount rates, estimates of future cash flows, future expected loss experience and other factors.The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identicalinstruments in active markets. However, the Reserve experienced a decline in its fair value as a result of its exposure to investments held in Lehman Brotherswhich filed for Chapter 11 bankruptcy protection. The Company recorded a loss on its investments in the Reserve and each of the individual securities whichcomprise the holdings in the Reserve was further evaluated. The Company has re-designated its investment in the Reserve from cash and cash equivalents toshort-term investments. This re-designation is included in purchases of investments in investing activities in the Company’s accompanying consolidatedstatements of cash flows. The Company conducted its fair value assessment of the Reserve using Level 2 and Level 3 inputs. Management has reviewed theReserve’s underlying securities portfolio which is substantially comprised of discount notes, certificates of deposit and commercial paper issued by highly-rated institutions. Normally, the Company would classify such an investment within Level 2 of the fair value hierarchy. However, management also evaluatedthe fair value of its unit interest in the Reserve itself, considering risk of collection, timing and other factors. These assumptions are inherently subjective andinvolve significant management judgment. As a result, the Company has classified its holdings in the Reserve within Level 3 of the fair value hierarchy.The Company considers each category of investments held to be an asset group. The asset groups held at December 31, 2008 were U.S. government andagency securities, money market funds, corporate bonds, asset-backed securities, certificates of deposits and other securities. The Company’s fair valueassessment includes an evaluation by each of these securities held for sale, all of which continue to be classified within Level 2 of the fair value hierarchy.The types of instruments valued based on other observable inputs include available-for-sale debt investments in other public companies, governmentalunits and other agencies. Such instruments are generally classified within Level 2 of the fair value hierarchy.Short-Term and Long-Term Investments. The Company uses the specific identification method in computing realized gains or losses. Except for theReserve, which is carried at its adjusted cost, short-term and long-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 other comprehensive income or F-30Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) loss, net of any related tax effect. The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarilyimpaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades over an extended period of time. TheCompany determined that these quoted market prices qualify as Level 1 and Level 2.Derivative Assets and Liabilities. In determining the fair value of the Company’s interest rate swap derivatives, the Company uses the present value ofexpected cash flows based on observable market interest rate curves and volatilities commensurate with the term of each instrument and the credit valuationadjustments to appropriately reflect both the Company’s own nonperformance risk and the counterparty’s nonperformance risk. For foreign currencyderivatives, the Company’s approach is to use forward contract and option valuation models employing market observable inputs, such as spot currencyrates, time value and option volatilities and adjust for the credit default swap market. Although the Company has determined that the majority of the inputsused to value its derivatives fall within Level 2 of the fair value hierarchy, the credit risk valuation adjustments associated with its derivatives utilize Level 3inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2008, theCompany had assessed the significance of the impact of the credit risk valuation adjustments on the overall valuation of its derivative positions and haddetermined that the credit risk valuation adjustments were not significant to the overall valuation of its derivatives. Therefore, they are categorized as Level 2.8. Convertible DebtThe Company’s convertible debt consisted of the following as of December 31 (in thousands): 2008 2007Convertible Subordinated Debentures $19,150 $32,2502.50% Convertible Subordinated Notes 250,000 250,0003.00% Convertible Subordinated Notes 395,986 395,986 665,136 678,236Less current portion (19,150) — $645,986 $678,236Convertible Subordinated DebenturesIn February 2004, the Company issued $86,250,000 principal amount of 2.5% Convertible Subordinated Debentures due February 15, 2024 (the“Convertible Subordinated Debentures”). Interest is payable semi-annually, in arrears, on February 15th and August 15th of each year.The Convertible Subordinated Debentures are governed by the Indenture dated February 11, 2004, between the Company, as issuer, and U.S. BankNational Association, as trustee (the “Convertible Subordinated Debentures Indenture”). The Convertible Subordinated Debentures Indenture does not containany financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase ofsecurities by the Company. The Convertible Subordinated Debentures are unsecured and rank junior in right of payment to the Company’s existing or futuresenior debt.The Convertible Subordinated Debentures are convertible into shares of the Company’s common stock. Each $1,000 principal amount of ConvertibleSubordinated Debentures is convertible into 25.3165 shares of the Company’s common stock. This represents an initial conversion price of approximately$39.50 per share of F-31Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) common stock. Holders of the Convertible Subordinated Debentures may convert their individual debentures into shares of the Company’s common stockonly under any of the following circumstances: • during any calendar quarter after the quarter ending June 30, 2004 (and only during such calendar quarter) if the sale price of the Company’scommon stock, for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previouscalendar quarter, is greater than or equal to 120% of the conversion price per share of the Company’s common stock, or approximately $47.40 pershare (the “Stock Price Condition Conversion Clause); • subject to certain exceptions, during the five business-day period after any five consecutive trading-day period in which the trading price perConvertible Subordinated Debenture for each day of that period was less than 98% of the product of the sale price of the Company’s commonstock and the conversion rate on each such day (the “Convertible Subordinated Debentures Parity Provision Clause”); • if the Convertible Subordinated Debentures have been called for redemption; or • upon the occurrence of certain specified corporate transactions described in the Convertible Subordinated Debentures Indenture, such as aconsolidation, merger or binding share exchange in which the Company’s common stock would be converted into cash or property other thansecurities (the “Corporate Action Provision Clause”).The conversion rates may be adjusted upon the occurrence of certain events including for any cash dividend, but they will not be adjusted for accruedand unpaid interest. Holders of the Convertible Subordinated Debentures will not receive any cash payment representing accrued and unpaid interest uponconversion of a debenture. Instead, interest will be deemed cancelled, extinguished and forfeited upon conversion. Convertible Subordinated Debentures calledfor redemption may be surrendered for conversion prior to the close of business on the business day immediately preceding the redemption date.The Company may redeem all or a portion of the Convertible Subordinated Debentures at any time after February 15, 2009 at a redemption price equalto 100% of the principal amount of the Convertible Subordinated Debentures, plus accrued and unpaid interest, if any, to but excluding the date of redemption.Holders of the Convertible Subordinated Debentures have the right to require the Company to purchase all or a portion of the Convertible SubordinatedDebentures on February 15, 2009, February 15, 2014 and February 15, 2019, each of which is referred to as a purchase date. In addition, upon afundamental change of the Company, as defined in the Convertible Subordinated Debentures Indenture, each holder of the Convertible SubordinatedDebentures may require the Company to repurchase some or all of the Convertible Subordinated Debentures at a purchase price equal to 100% of the principalamount plus accrued and unpaid interest.The Company has considered the guidance in FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities”, EITF Abstract No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” and EITF Abstract No. 00-27,“Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable ConversionRatios,’ to Certain Convertible Instruments” and other related accounting pronouncements and has determined that the Convertible Subordinated Debenturesdo 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 initial conversionprice outlined in the agreement.In March 2007, the Company entered into agreements with the holders (“Holders”) of $54,000,000 of its Convertible Subordinated Debentures, pursuantto which the Company agreed to exchange an aggregate of 1,367,090 newly issued shares of its common stock for such Holders’ Convertible SubordinatedDebentures (the F-32Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) “Convertible Subordinated Debentures’ Partial Conversion”). The number of shares of common stock issued equals the amount issuable upon conversion ofthe Convertible Subordinated Debentures in accordance with their terms. In addition, each Holder received cash consideration equal to accrued and unpaidinterest through the redemption date totaling $111,000, as well as the present value of future interest due through February 15, 2009 and an incremental fee,totaling $3,395,000 (the “Inducement Fee”). The Company recognized a loss on debt conversion totaling $3,395,000 as a result of the ConvertibleSubordinated Debentures’ Partial Conversion in accordance with FASB No. 84, “Induced Conversions of Convertible Debt”, due to the Inducement Fee. As aresult of the Convertible Subordinated Debentures’ Partial Conversion, a net of $53,229,000 was credited to stockholders’ equity during the first quarter of2007.In November 2008, certain holders of the Convertible Subordinated Debentures converted $13,100,000 principal amount of their ConvertibleSubordinated Debentures into 331,644 newly issued shares of our common stock. As of December 31, 2008, a total of $19,150,000 of ConvertibleSubordinated Debentures remained outstanding and were convertible into 484,813 shares of the Company’s common stock. As noted above, holders of theConvertible Subordinated Debentures had the right to require the Company to purchase all or a portion of these remaining Convertible SubordinatedDebentures totaling $19,150,000 on February 15, 2009; however, none of them did so. In addition, in December 2008, due to a combination of factors,including the fact that the small number of Convertible Subordinated Debentures remaining has resulted in small and infrequent trades of the ConvertibleSubordinated Debentures creating an illiquid market and the depressed price of the Company’s common stock during this period, the ConvertibeSubordinated Debentures Parity Provision Clause was triggered. As a result, as of December 31, 2008, holders of the Convertible Subordinated Debentureshave the right to convert their individual debentures into shares of the Company’s common stock at any time. Therefore, the Company has reclassified theremaining Convertible Subordinated Debentures as a current liability as of December 31, 2008.2.50% Convertible Subordinated NotesIn March 2007, the Company issued $250,000,000 aggregate principal amount of 2.50% Convertible Subordinated Notes due April 15, 2012 (the“2.50% Convertible Subordinated Notes”). Interest is payable semi-annually on April 15 and October 15 of each year, and commenced October 15, 2007.The 2.50% Convertible Subordinated Notes are governed by an Indenture dated as of March 30, 2007, between the Company, as issuer, and U.S. BankNational Association, as trustee (the “2.50% Convertible Subordinated Notes Indenture”). The 2.50% Convertible Subordinated Notes Indenture does notcontain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance orrepurchase of securities by the Company. The 2.50% Convertible Subordinated Notes are unsecured and rank junior in right of payment to the Company’sexisting or future senior debt and equal in right of payment to the Company’s existing and future subordinated debt.Upon conversion, holders will receive, at the Company’s election, cash, shares of the Company’s common stock or a combination of cash and sharesof the Company’s common stock. However, the Company may at any time irrevocably elect for the remaining term of the 2.50% Convertible SubordinatedNotes to satisfy its obligation in cash up to 100% of the principal amount of the 2.50% Convertible Subordinated Notes converted, with any remainingamount to be satisfied, at the Company’s election, in shares of its common stock or a combination of cash and shares of its common stock.The initial conversion rate is 8.9259 shares of common stock per $1,000 principal amount of 2.50% Convertible Subordinated Notes, subject toadjustment. This represents an initial conversion price of F-33Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) approximately $112.03 per share of common stock. Holders of the 2.50% Convertible Subordinated Notes may convert their notes at any time prior to theclose of business on the business day immediately preceding the maturity date under the following circumstances: • during any fiscal quarter (and only during that fiscal quarter) ending after June 30, 2007, if the sale price of the Company’s common stock, for atleast 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than130% of the conversion price per share of common stock on such last trading day, which was $145.64 per share as of December 31, 2008 (the“Stock Price Condition Conversion Clause”); • subject to certain exceptions, during the five business day period following any ten consecutive trading day period in which the trading price of the2.50% Convertible Subordinated Notes for each day of such period was less than 98% of the product of the sale price of the Company’s commonstock and the conversion rate (the “2.50% Convertible Subordinated Notes Parity Provision Clause”); • if such Convertible Subordinated Notes have been called for redemption; • upon the occurrence of specified corporate transactions described in the 2.50% Convertible Subordinated Notes Indenture, such as aconsolidation, merger or binding share exchange in which the Company’s common stock would be converted into cash or property other thansecurities (the “Corporate Action Provision Clause”); or • at any time on or after March 15, 2012.Upon conversion, due to the conversion formulas associated with the 2.50% Convertible Subordinated Notes, if the Company’s stock is trading atlevels exceeding 130% of the conversion price per share of common stock, and if the Company elects to pay any portion of the consideration in cash,additional consideration beyond the $250,000,000 of gross proceeds received would be required. However, in no event would the total number of sharesissuable upon conversion of the 2.50% Convertible Subordinated Notes exceed 11.6036 per $1,000 principal amount of Convertible Subordinated Notes,subject to anti-dilution adjustments, or the equivalent of $86.18 per share of common stock or a total of 2,900,900 shares of the Company’s common stock.As of December 31, 2008, the 2.50% Convertible Subordinated Notes were convertible into 2,231,475 shares of the Company’s common stock.The conversion rates may be adjusted upon the occurrence of certain events, including for any cash dividend, but they will not be adjusted for accruedand unpaid interest. Holders of the 2.50% Convertible Subordinated Notes will not receive any cash payment representing accrued and unpaid interest uponconversion of a note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. The 2.50%Convertible Subordinated Notes called for redemption may be surrendered for conversion prior to the close of business on the business day immediatelypreceding the redemption date.The Company may redeem all or a portion of the 2.50% Convertible Subordinated Notes at any time after April 16, 2010 for cash but only if theclosing sale price of the Company’s common stock for at least 20 of the 30 consecutive trading days immediately prior to the day the Company gives notice ofredemption is greater than 130% of the applicable conversion price per share of common stock on the date of the notice, which was $145.64 per share as ofDecember 31, 2008. The redemption price will equal 100% of the principal amount of the 2.50% Convertible Subordinated Notes, plus accrued and unpaidinterest, if any, to, but excluding, the date of redemption.Holders of the 2.50% Convertible Subordinated Notes have the right to require the Company to purchase with cash all or a portion of the 2.50%Convertible Subordinated Notes upon the occurrence of a fundamental change such as change of control at a purchase price equal to 100% of the principalamount of the 2.50% Convertible Subordinated Notes plus accrued and unpaid interest, if any, to, but excluding, the date of F-34Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) repurchase. Following certain corporate transactions that constitute a change of control, the Company will increase the conversion rate for a holder who elects toconvert the 2.50% Convertible Subordinated Notes in connection with such change of control in certain circumstances.The Company has considered the guidance in FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities”, EITF Abstract No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” and EITF Abstract No. 00-27,“Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable ConversionRatios,’ to Certain Convertible Instruments” and other related accounting pronouncements and has determined that the 2.50% Convertible Subordinated Notesdo 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 initial conversionprice outlined in the agreement.The 2.50% Convertible Subordinated Notes fall within the scope of FSP APB 14-1, applicable to the Company commencing in 2009. For furtherinformation, refer to “Recent Accounting Pronouncements” in Note 1.3.00% Convertible Subordinated NotesIn September 2007, the Company issued $395,986,000 aggregate principal amount of 3.00% Convertible Subordinated Notes due October 15, 2014(the “3.00% Convertible Subordinated Notes”). Interest is payable semi-annually on April 15 and October 15 of each year, and commenced April 15, 2008.The 3.00% Convertible Subordinated Notes are governed by an Indenture dated as of September 26, 2007, between the Company, as issuer, and U.S.Bank National Association, as trustee (the “3.00% Convertible Subordinated Notes Indenture”). The 3.00% Convertible Subordinated Notes Indenture does notcontain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance orrepurchase of securities by the Company. The 3.00% Convertible Subordinated Notes are unsecured and rank junior in right of payment to the Company’sexisting or future senior debt and equal in right of payment to the Company’s existing and future subordinated debt.Holders of the 3.00% Convertible Subordinated Notes may convert their notes at their option on any day up to and including the business dayimmediately preceding the maturity date into shares of the Company’s common stock. The base conversion rate is 7.436 shares of common stock per $1,000principal amount of 3.00% Convertible Subordinated Notes, subject to adjustment. This represents a base conversion price of approximately $134.48 pershare of common stock. If, at the time of conversion, the applicable stock price of the Company’s common stock exceeds the base conversion price, theconversion rate will be determined pursuant to a formula resulting in the receipt of up to 4.4616 additional shares of common stock per $1,000 principalamount of the 3.00% Convertible Subordinated Notes, subject to adjustment. However, in no event would the total number of shares issuable upon conversionof the 3.00% Convertible Subordinated Notes exceed 11.8976 per $1,000 principal amount of 3.00% Convertible Subordinated Notes, subject to anti-dilutionadjustments, or the equivalent of $84.05 per share of the Company’s common stock or a total of 4,711,283 shares of the Company’s common stock. As ofDecember 31, 2008, the 3.00% Convertible Subordinated Notes were convertible into 2,944,551 shares of the Company’s common stock.The conversion rates may be adjusted upon the occurrence of certain events, including for any cash dividend, but they will not be adjusted for accruedand unpaid interest. Holders of the 3.00% Convertible Subordinated Notes will not receive any cash payment representing accrued and unpaid interest uponconversion of a note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. TheCompany may not redeem the 3.00% Convertible Subordinated Notes at its option. F-35Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Holders of the 3.00% Convertible Subordinated Notes have the right to require the Company to purchase with cash all or a portion of the ConvertibleSubordinated Notes upon the occurrence of a fundamental change such as change of control at a purchase price equal to 100% of the principal amount of the3.00% Convertible Subordinated Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. Following certain corporatetransactions that constitute a change of control, the Company will increase the conversion rate for a holder who elects to convert the 3.00% ConvertibleSubordinated Notes in connection with such change of control in certain circumstances.The Company has considered the guidance in FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities”, EITF Abstract No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” and EITF Abstract No. 00-27,“Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable ConversionRatios,’ to Certain Convertible Instruments” and other related accounting pronouncements and has determined that the 3.00% Convertible Subordinated Notesdo 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 initial conversionprice outlined in the agreement.9. Non-Convertible DebtThe Company’s non-convertible debt consisted of the following as of December 31 (in thousands): 2008 2007 European Financing $130,981 $83,544 Chicago IBX Financing 109,991 105,612 Mortgage Payable 94,362 96,746 Asia-Pacific Financing 87,009 25,933 Netherlands Financing 6,485 — Other Note Payable 9,672 18,661 438,500 330,496 Less current portion (52,054) (16,581) $386,446 $313,915 European FinancingIn September 2007, as a result of the IXEurope Acquisition (see Note 2), a wholly-owned subsidiary of the Company acquired a senior facilitiesagreement totaling approximately 82,000,000 British pounds, or approximately $135,533,000 (using the exchange rate as of December 31, 2008) (the“European Financing”). The European Financing is comprised of three facilities: (i) Facility A, which was available to draw upon through March 2008,provided for a term loan of up to approximately 40,000,000 British pounds and bears a floating interest rate per annum of between 0.875% and 2.25% aboveLIBOR or EURIBOR; (ii) Facility B, which was available to draw upon through June 2010, provided for a term loan of up to approximately 40,000,000British pounds and bears a floating interest rate per annum of between 0.875% and 2.25% above LIBOR or EURIBOR and (iii) Facility C, which is availableto draw upon through May 2014, provides for a revolving credit facility of up to approximately 2,000,000 British pounds and bears a floating interest rate perannum of between 0.875% and 2.125% above LIBOR or EURIBOR (collectively, the “Loans Payable”). The European Financing has a final maturity date ofJune 30, 2014 and interest is payable in periods of one, two, three or six months at the election of the Company’s European subsidiary. Facility A will berepaid in 13 semi-annual installments, which commenced June 30, 2008. Facility B will be repaid in nine semi-annual installments commencing June 30, F-36Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 2010. Facility C will be repaid at the final maturity date. The European Financing is available to fund the Company’s subsidiary’s current or future operationsin Europe, including capital expenditures, for certain pre-approved subsidiaries in Europe and amounts can be drawn in British pounds, Euros or Swissfrancs. Loans payable under the European Financing are available to fund certain of the Company’s expansion projects in France, Germany, Switzerland andthe United Kingdom. The European Financing is collateralized by certain of the Company’s assets in Europe and contains several financial covenants specificto the Company’s European operations, with which the Company must comply quarterly. In January 2009, the Company amended certain provisions of theEuropean Financing related to a financial covenant and acknowledgment of the appointment of an executive officer in Europe, which were effectiveDecember 31, 2008 (see Note 18). As a result of this amendment, the Company is in compliance with all financial covenants in connection with the EuropeanFinancing.Upon a written request from the Company at any time after December 31, 2007 and through the final maturity date, and upon approval by the lenders,an additional term loan of up to approximately 15,000,000 British pounds, or approximately $21,890,000, may be made available to the Company.As of December 31, 2008, the Company had fully utilized Facility A and Facility B under the European Financing, leaving 2,000,000 British pounds ofFacility C, or approximately $2,919,000, available to borrow under the European Financing. As of December 31, 2008, the European Financing had anapproximate blended interest rate of 4.39% per annum.The European Financing requires the Company to hedge the floating interest rates inherent in the European Financing (on just a portion of the totalamounts outstanding). In May 2008, the Company entered into three interest rate swap agreements and re-designated two older ineffective interest rate swapagreements with a total of two counterparties to hedge the interest payments on the equivalent principal of $101,018,000 of the European Financing, which willmature in August 2009 and May 2011. Under the terms of the interest rate swap transactions, the Company receives interest payments based on rolling one-month EURIBOR and LIBOR terms and pay fixed interest rates ranging from 5.97% to 8.16% (swap rates ranging from 3.72% to 5.91% plus borrowingmargin) (see Note 6).Chicago IBX FinancingIn February 2007, a wholly-owned subsidiary of the Company obtained a loan of up to $110,000,000 to finance up to 60% of the development andconstruction costs of an expansion project in the Chicago metro area (the “Chicago IBX Financing”). The Company periodically received advances of funds inconjunction with costs incurred for construction of its expansion project in the Chicago metro area (collectively, the “Loan Payable”). As of December 31,2008, the Company had received advances representing the final Loan Payable totaling $109,991,000.The Loan Payable has an initial maturity date of January 31, 2010, with options to extend for up to an additional two years, in one-year increments,upon satisfaction of certain extension conditions. The Loan Payable bears interest at a floating rate (one, three or six month LIBOR plus 2.75%) with interestpayable monthly, which commenced in March 2007. As of December 31, 2008, the Loan Payable had an approximate interest rate of 4.19% per annum. TheChicago IBX Financing has no specific financial covenants and contains a limited parent company guaranty.In May 2008, the Company entered into an interest rate swap agreement with one counterparty to hedge the interest payments on principal of$105,000,000 of the Chicago IBX Financing, which will mature in February 2011. Under the terms of the interest rate swap transaction, we receive interestpayments based on rolling F-37Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) one-month LIBOR terms and pay fixed interest rate of 6.34% (swap rate of 3.59% plus borrowing margin of 2.75%) (see Note 6).Mortgage PayableIn December 2005, the Company financed the Ashburn Campus Property Acquisition with a $60,000,000, 8% mortgage to be amortized over 20 years(the “Mortgage Payable”). Payments for the Mortgage Payable are payable monthly, commenced February 2006, and will be payable through January 2026.The Mortgage Payable is collateralized by the Ashburn Campus property and related assets. Pursuant to the terms of the Mortgage Payable, the Companyagreed to invest at least $40,000,000 in capital improvements to the Ashburn Campus by December 31, 2007. In December 2006, the Company obtainedadditional financing of $40,000,000, which increased the total amount financed by the Mortgage Payable from $60,000,000 to $100,000,000, on the sameterms as the initial Mortgage Payable. The Company used this additional funding to finance expansion projects in the Washington, D.C. metro area. TheMortgage Payable has numerous covenants; however, there are no specific financial ratios or minimum operating performance covenants. As of December 31,2008, the Company was in compliance with all covenants in connection with the Mortgage Payable.Asia-Pacific FinancingIn August 2007, two wholly-owned subsidiaries of the Company, located in Singapore and Tokyo, Japan, entered into an approximately $48,438,000(using the exchange rates as of December 31, 2008) multi-currency credit facility agreement (the “Asia-Pacific Financing”), which is comprised of 23,000,000Singapore dollars and 2,932,500,000 Japanese yen, respectively. During the year ended December 31, 2008, the Asia-Pacific Financing was amended to alsoenable our subsidiaries in Australia and Hong Kong to borrow up to 32,000,000 Australian dollars, or approximately $22,483,000, and 156,000,000 HongKong dollars, or approximately $20,124,000 (using the exchange rate as of December 31, 2008), respectively, under the same general terms, amending theAsia-Pacific Financing into an approximately $91,000,000 multi-currency credit facility agreement. The Asia-Pacific Financing has a four-year term thatallows these four subsidiaries to borrow up to their credit limits during the first 12-month period with repayment to occur over the remaining three years intwelve 12 quarterly installments (collectively, the “Loans Payable”). The Asia-Pacific Financing bears interest at a floating rate (the relevant three-month localcost of funds), as applicable, plus 1.85%-2.50% depending on the ratio of the Company’s senior indebtedness to its earnings before interest, taxes,depreciation and amortization, or EBITDA, with interest payable quarterly. The Asia-Pacific Financing may be used by these four subsidiaries to fund capitalexpenditures on leasehold improvements, equipment, and other installation costs related to expansion plans in Singapore, Tokyo, Sydney and Hong Kong.The Asia-Pacific Financing is guaranteed by the parent, Equinix, Inc., is secured by the assets of these four subsidiaries, including a pledge of their shares,and has several financial covenants specific to the Company’s Asia-Pacific operations, with which the Company must comply quarterly. As of December 31,2008, the Company had fully drawn the Asia-Pacific Financing. As of December 31, 2008, Loans payable under the Asia-Pacific Financing had anapproximate blended interest rate of 3.69% per annum. As of December 31, 2008, loans payable under the Asia-Pacific Financing have a final maturity date ofJune 2012. As of December 31, 2008, the Company was in compliance with all financial covenants in connection with the Asia-Pacific Financing.Netherlands FinancingIn February 2008, as a result of the Virtu Acquisition, a wholly-owned subsidiary of the Company assumed senior credit facilities totalingapproximately 5,500,000 Euros (the “Netherlands Financing”), which are callable by the lender and bear interest at a floating rate (three month EURIBORplus 1.25%). As of December 31, 2008, the Netherlands Financing had an approximate blended interest rate of 4.18% per annum. The Netherlands F-38Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Financing is collateralized by substantially all of the Company’s operations in the Netherlands. The Netherlands Financing contains several financialcovenants specific to the Company’s operations in the Netherlands, which must be complied with on an annual basis. As of December 31, 2008, theCompany’s wholly-owned subsidiary in the Netherlands was not in compliance with certain of the financial covenants; however, the lender agreed to waivesuch non-compliance while the Company renegotiates the entire Netherlands Financing, which should be completed by April 2009. If the Company is unableto renegotiate the Netherlands Financing by April 2009, the financial covenants in their original form will go back into effect. Although the NetherlandsFinancing has a payment schedule with a final payment date in January 2016, as of December 31, 2008, the Company had reflected the total amountoutstanding under the Netherlands Financing as a current liability within the current portion of mortgage and loans payable on the accompanying balance sheetas it is not currently a committed facility (it is callable by the lender).Other Note PayableThe other note payable arises from a 2005 lease restructuring and is a non-interest bearing note with an imputed interest rate of 6.14% per annum.Payments under the other note payable, which originally totaled $20,000,000, are payable quarterly and will be payable through the fourth quarter of 2009.Silicon Valley Bank Credit LineIn December 2004, the Company entered into a $25,000,000 credit line arrangement with Silicon Valley Bank, which was subsequently amended toincrease the line up to $75,000,000 (the “Silicon Valley Bank Credit Line”). Borrowings under the Silicon Valley Bank Credit Line, if drawn, bore interest atvariable interest rates, plus the applicable margins, in effect prior to the amendment, based on either prime rates or LIBOR rates. The Silicon Valley BankCredit Line had an original maturity of September 15, 2008 and was secured by substantially all of the Company’s domestic personal property assets andcertain of the Company’s real property leases. The Silicon Valley Bank Credit Line also featured sublimits, which enabled the Company to issue letters ofcredit. The Company entered into seven irrevocable letters of credit with the Silicon Valley Bank, which were collateralized by the Silicon Valley Bank CreditLine.In February 2008, the Company terminated the Silicon Valley Bank Credit Line. As a result, all letters of credit issued and outstanding under theSilicon Valley Bank Credit Line, totaling $12,144,000, were funded as restricted cash on the Company’s consolidated balance sheets (see “Other Assets” inNote 5). As of the termination date, the Company had no borrowings outstanding under the Silicon Valley Bank Credit Line and no termination penalties wereincurred.Senior Bridge LoanIn June 2007, the Company entered into a Senior Bridge Loan Credit Agreement (the “Senior Bridge Loan”) with Citibank, N.A., as Lender, and asagent for the Lender, for a principal amount of $500,000,000, to secure temporary financing for the IXEurope Acquisition.The Company incurred $2,554,000 of debt issuance costs in securing the Senior Bridge Loan. In September 2007, the Senior Bridge Loan wasterminated unused and, as a result, the Company recorded a loss on debt extinguishment totaling $2,554,000 reflecting the immediate write-off of all suchdebt issuance costs previously capitalized. F-39Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 10. Capital Lease and Other Financing ObligationsCapital lease and other financing obligations consisted of the following as of December 31 (in thousands): 2008 2007 Paris Metro Area IBX Capital Lease $40,047 $— Los Angeles IBX Financing 37,700 37,935 Washington, D.C. Metro Area IBX Capital Lease 31,513 32,700 San Jose IBX Equipment & Fiber Financing 14,164 14,510 Chicago IBX Equipment Financing 6,905 7,547 Other capital lease and financing obligations 7,201 4,720 137,530 97,412 Less current portion (4,499) (3,808) $133,031 $93,604 Paris Metro Area IBX Capital LeaseIn October 2008, the Company recorded the Paris Metro Area IBX Capital Lease. Monthly payments under the Paris Metro Area IBX Capital Leasecommence in April 2009 and will be made through September 2020 at an effective interest rate of 7.43% per annum.Los Angeles IBX FinancingIn December 2005, the Company recorded the Los Angeles IBX Financing. Monthly payments under the Los Angeles IBX Financing commenced inJanuary 2006 and will be made through December 2025 at an effective interest rate of 7.75% per annum.Washington, D.C. Metro Area IBX Capital LeaseIn November 2004, the Company recorded the Washington, D.C. Metro Area IBX Capital Lease. Monthly payments under the Washington, D.C. MetroArea IBX Capital Lease commenced in November 2004 and will be made through October 2019 at an effective interest rate of 8.50% per annum.San Jose IBX Equipment & Fiber FinancingIn February 2005, the Company recorded the San Jose IBX Equipment & Fiber Financing. Monthly payments under the San Jose IBX Equipment &Fiber Financing commenced in February 2005 and will be made through May 2020 at an effective interest rate of 8.50% per annum.Chicago IBX Equipment FinancingIn November 2005, the Company recorded the Chicago IBX Equipment Financing. Monthly payments under the Chicago IBX Equipment Financingcommenced in November 2005 and will be made through August 2015 at an effective interest rate of 7.50% per annum. F-40Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 11. Debt MaturitiesCombined aggregate maturities for the Company’s various debt facilities and other financing obligations as of December 31, 2008 were as follows (inthousands) (unaudited): Convertibledebt (1) Mortgage andloans payable (1) Capital lease andother financingobligations (2) Total 2009 $19,150 $52,054 $15,242 $86,446 2010 — 158,061 (3) 16,562 174,623 2011 — 45,905 16,810 62,715 2012 250,000 28,421 16,695 295,116 2013 — 27,577 16,785 44,362 2014 and thereafter 395,986 126,482 138,595 661,063 665,136 438,500 220,689 1,324,325 Less amount representing interest — — (93,087) (93,087)Plus amount representing residual property value — — 9,928 9,928 665,136 438,500 137,530 1,241,166 Less current portion of principal (19,150) (52,054) (4,499) (75,703) $645,986 $386,446 $133,031 $1,165,463 (1)Represents principal only.(2)Represents principal and interest in accordance with minimum lease payments.(3)The Loan Payable under the Chicago IBX Financing has an initial maturity date of January 31, 2010, with options to extend up to an additional twoyears, in one-year increments, upon satisfaction of certain extension conditions.12. Stockholders’ EquityThe Company’s authorized share capital is 300,000,000 shares of common stock and 100,000,000 shares of preferred stock, of which 25,000,000 isdesignated Series A, 25,000,000 is designated as Series A-1 and 50,000,000 is undesignated. As of December 31, 2008 and 2007, the Company had nopreferred stock issued and outstanding.Common StockAs of December 31, 2008, the Company has reserved the following shares of authorized but unissued shares of common stock for future issuance: Conversion of Convertible Subordinated Debentures 484,813Conversion of 2.50% Convertible Subordinated Notes 2,900,900Conversion of 3.00% Convertible Subordinated Notes 4,711,283Common stock options, restricted shares and restricted stock units 7,599,158Common stock employee purchase plans 1,920,443Common stock warrants 1,034 17,617,631 F-41Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Equity Compensation PlansIn May 2000, the Company’s stockholders approved the adoption of the 2000 Equity Incentive Plan as the successor plan to the 1998 Stock Plan. InAugust 2000 the Company no longer issued additional grants under the 1998 Stock Plan, and unexercised options under the predecessor 1998 Stock Planthat cancel due to an optionee’s termination may be reissued under the successor 2000 Equity Incentive Plan. Under the 2000 Equity Incentive Plan,nonstatutory stock options, restricted shares, restricted stock units, and stock appreciation rights may be granted to employees, outside directors andconsultants at not less than 85% of the fair market value on the date of grant, and incentive stock options may be granted to employees at not less than 100%of the fair market value on the date of grant. Options granted prior to October 1, 2005 generally expire 10 years from the grant date, and equity awards grantedto employees and consultants on or after October 1, 2005 will generally expire seven years from the grant date, subject to continuous service of the optionee.Equity awards granted under the 2000 Equity Incentive Plan generally vest over four years. As of December 31, 2008, the Company has reserved a total of12,184,290 shares for issuance under the 2000 Equity Incentive Plan of which 3,647,700 were still available for grant, and the plan reserve is increased onJanuary 1 each year through January 1, 2010 by the lesser of 6% of the common stock then outstanding or 6,000,000 shares. The 2000 Equity Incentive Planis administered by the Compensation Committee of the Board of Directors, and the Board may terminate or amend the plan, with approval of the stockholdersas may be required by applicable law, at any time.In May 2000, the Company’s stockholders approved the adoption of the 2000 Director Option Plan, which was amended and restated effectiveJanuary 1, 2003. Under the 2000 Director Option Plan, each non-employee board member who was not previously an employee of the Company will receive anautomatic initial nonstatutory stock option grant, which vests in four annual installments. In addition, each non-employee board member will receive anannual non-statutory stock option grant on the date of the Company’s regular Annual Meeting of Stockholders, provided the board member will continue toserve as a director thereafter. Such annual option grants shall vest in full on the earlier of a) the first anniversary of the grant, or b) the date of the regularAnnual Meeting of Stockholders held in the year following the grant date. A new director who receives an initial option will not receive an annual option in thesame calendar year. Options granted under the 2000 Director Option Plan will have an option price not less than 100% of the fair market value on the date ofgrant and will have a 10-year contractual term, subject to continuous service of the board member. On December 18, 2008, the Company’s Board of Directorspassed resolutions eliminating all automatic stock option grant mechanisms under the 2000 Director Plan, and replaced them with an automatic restrictedstock unit grant mechanism under the 2000 Equity Incentive Plan. As of December 31, 2008, the Company has reserved 493,440 shares subject to options forissuance under the 2000 Director Option Plan of which 405,938 were still available for grant and an additional 50,000 shares is added to the reserve onJanuary 1 each year through January 1, 2010. The 2000 Director Option Plan is administered by the Compensation Committee of the Board of Directors, andthe Board may terminate or amend the plan, with approval of the stockholders as may be required by applicable law, at any time.In September 2001, the Company adopted the 2001 Supplemental Stock Plan, under which non-statutory stock options and restricted shares/restrictedstock units may be granted to consultants and employees who are not executive officers or board members, at not less than 85% of the fair market value on thedate of grant. Options granted prior to October 1, 2005 generally expire 10 years from the grant date, and options granted on or after October 1, 2005 willgenerally expire seven years from the grant date, subject to continuous service of the optionee. Current stock options granted under the 2001 SupplementalStock Plan generally vest over four years. As of December 31, 2008, the Company has reserved a total of 1,493,961 shares for issuance under the 2001Supplemental Stock Plan, of which 257,112 were still available for grant. The 2001 Supplemental Stock Plan is administered by the CompensationCommittee of the Board of Directors, and the plan will continue in effect indefinitely unless the Board decides to terminate it earlier.The 1998 Stock Plan, 2000 Equity Incentive Plan, 2000 Director Option Plan and 2001 Supplemental Stock Plan are collectively referred to as the“Equity Compensation Plans.” F-42Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Stock Option ActivityStock option activity under the Equity Compensation Plans is summarized as follows: Numberof sharesoutstanding Weighted-averageexercisepriceper shareStock options outstanding at December 31, 2005 4,162,539 33.67Stock options granted 1,209,870 55.61Stock options exercised (1,593,697) 21.91Stock options canceled (466,397) 49.54Stock options outstanding at December 31, 2006 3,312,315 45.11Stock options granted 944,500 83.03Stock options exercised (941,315) 33.55Stock options canceled (184,582) 61.38Stock options outstanding at December 31, 2007 3,130,918 59.06Stock options granted 88,600 81.60Stock options exercised (519,987) 38.30Stock options canceled (142,078) 74.89Stock options outstanding at December 31, 2008 2,557,453 63.18The total intrinsic value of stock options exercised during the years ended December 31, 2008, 2007 and 2006 was $24,335,000, $54,190,000 and$55,238,000, respectively. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of thestock. The total fair value of options vested during the years ended December 31, 2008, 2007 and 2006 was $27,076,000, $26,321,000 and $21,181,000,respectively. In July 2008, the Company began granting restricted stock units exclusively in lieu of stock options.The following table summarizes information about outstanding equity awards as of December 31, 2008: Outstanding ExercisableRange of exercise prices Number ofshares Weighted-averageremainingcontractuallife Weighted-averageexerciseprice Number ofshares Weighted-averageexerciseprice$2.96 to $26.81 184,974 4.43 $15.57 184,974 $15.57$27.39 to $33.79 202,713 4.93 30.38 199,273 30.32$33.93 to $42.15 251,477 5.34 39.31 199,221 39.45$42.53 to $44.89 244,600 6.04 44.76 232,431 44.77$45.08 to $52.85 471,005 4.17 52.03 291,406 52.17$53.09 to $74.91 219,032 5.01 63.23 88,019 59.72$75.38 to $75.38 376,559 4.99 75.38 157,773 75.38$78.12 to $87.95 210,136 5.80 84.37 94,238 84.34$88.39 to $104.36 206,481 6.38 96.55 59,451 97.24$112.41 to $312.00 190,476 2.12 143.38 171,363 146.83 2,557,453 4.90 63.18 1,678,149 58.66As of December 31, 2008, 2007 and 2006, the weighted average remaining contractual life of options outstanding was 4.90 years, 5.77 years and 6.68years, respectively. The weighted-average exercise price of options outstanding at December 31, 2008, 2007 and 2006 was $63.18, $59.06 and $45.11,respectively. The weighted-average exercise price of options exercisable at December 31, 2008, 2007 and 2006 was $58.66, $51.16 and $43.05, respectively. F-43Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company provides the following additional disclosures for stock options as of December 31 (dollars in thousands): 2008 2007 2006Total aggregated intrinsic value of stock options outstanding $17,683 $139,879 $114,228Total aggregated intrinsic value of stock options exercisable $16,506 $81,505 $51,178Weighted average remaining contractual life of stock options exercisable (in years) 4.69 5.41 6.28Fair Value Calculations—Stock OptionsThe Company uses the Black-Scholes option-pricing model to determine the fair value of stock options with the following weighted average assumptionsfor the years ended December 31: 2008 2007 2006 Dividend yield 0% 0% 0%Expected volatility 52% 63% 69%Risk-free interest rate 3.12% 4.54% 4.70%Expected life (in years) 4.9 4.6 4.6 The weighted-average fair value of stock options per share on the date of grant was $39.22, $45.10 and $32.58, respectively, for the years endedDecember 31, 2008, 2007 and 2006.Restricted Share and Restricted Stock Unit ActivityAs noted above, the Company grants restricted shares and restricted stock units out of the 2000 Equity Incentive Plan. Restricted share activity issummarized as follows: Number ofsharesoutstanding Weighted-averagegrant datefair valueper shareRestricted shares outstanding, December 31, 2005 280,438 $43.76Restricted shares granted 274,000 44.43Restricted shares issued, unvested (1) (274,000) 44.43Restricted shares issued, vested (69,313) 43.76Restricted shares canceled (51,125) 43.76Restricted shares outstanding, December 31, 2006 160,000 43.76Restricted shares granted 283,000 77.06Restricted shares issued, unvested (2) (283,000) 77.06Restricted shares issued, vested (64,000) 43.76Restricted shares canceled — — Restricted shares outstanding, December 31, 2007 96,000 43.76Restricted shares granted — — Restricted shares issued, unvested (2) — — Restricted shares issued, vested (64,000) 43.76Restricted shares canceled — — Restricted shares outstanding, December 31, 2008 (3) 32,000 43.76 F-44Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (1)On January 10, 2006 and May 22, 2006, the Company granted 250,000 and 24,000 restricted shares, respectively, to its executive officers and at thesame time, unlike the previous year’s restricted stock grants (see footnote 3 below), the Company issued these shares into an escrow account under thenames of each of the executive officers. These shares have voting rights and are considered issued and outstanding. They are released from the escrowaccount as they vest. However, they are subject to forfeiture (and, therefore, canceled) if the individual officers do not meet the vesting requirements. See“Earnings Per Share” in Note 1.(2)On January 2, 2007 and April 2, 2007, the Company granted 199,000 restricted shares and 84,000 restricted shares, respectively, to its executiveofficers and the Company’s new Chief Executive Officer, and, at the same time, issued these shares into an escrow account under the names of each ofthe executive officers. These shares have voting rights and are considered issued and outstanding. They are released from the escrow account as theyvest. However, they are subject to forfeiture (and, therefore, canceled) if the individual officers do not meet the vesting requirements. See “Earnings PerShare” in Note 1.(3)As of December 31, 2008, there were a total of 32,000 restricted shares outstanding and unissued. These restricted shares were granted on February 8,2005 to the Company’s executive officers. These shares were not placed into an escrow account in the names of each of the executive officers. Theseshares do not have voting rights and are not considered issued and outstanding. These restricted shares will only be issued when they become vested.Unvested restricted shares as of December 31, 2008 totaled 314,910, comprised of 282,910 issued shares and 32,000 unissued shares. During the yearended December 31, 2008, the Company cancelled 21,166 issued and outstanding shares related to unvested restricted shares that were forfeited. Unvestedrestricted shares as of December 31, 2007 totaled 553,245, comprised of 457,245 issued shares and 96,000 unissued shares. Unvested restricted shares asof December 31, 2006 totaled 407,750, comprised of 247,750 issued shares and 160,000 unissued shares.During the year ended December 31, 2007, the Company granted restricted stock units to certain of its non-executive employees. During the year endedDecember 31, 2008, the Company began granting restricted stock units exclusively to its employees, including executives, in lieu of stock options. Each unitis not considered issued and outstanding and does not have voting rights until it is converted into one share of the Company’s common stock upon vesting.Restricted stock unit activity is summarized as follows: Number ofsharesoutstanding Weighted-averagegrant datefair valueper shareRestricted stock units outstanding, December 31, 2006 — $— Restricted stock units granted 364,136 77.57Restricted stock units vested (47,734) 76.65Restricted stock units canceled — — Restricted stock units outstanding, December 31, 2007 316,402 77.79Restricted stock units granted 606,737 76.37Restricted stock units vested (170,309) 80.38Restricted stock units canceled (53,875) 84.14Restricted stock units outstanding, December 31, 2008 698,955 75.46Total fair value of restricted shares and restricted stock units vested during the years ended December 31, 2008, 2007 and 2006 was $26,153,000,$10,039,000 and $4,168,000, respectively. F-45Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Fair Value Calculations—Restricted Shares and Restricted Stock UnitsThe Company used a Monte Carlo simulation option-pricing model to determine the fair value of restricted shares and restricted stock units that haveboth a service and market price condition with the following weighted average assumptions for the years ended December 31: 2008 2007 2006 Dividend yield 0% 0% 0%Expected volatility 61% 65% 71%Risk-free interest rate 3.74% 4.56% 4.43%Commencing February 2008, the Company ceased granting restricted shares and restricted stock units with a market price condition. The Companyuses fair market value of its common stock traded in the market on the date of the grant to determine the fair value of restricted shares and restricted stockunits that have a service condition only or have both a service and performance condition.Employee Stock Purchase PlansIn June 2004, the Company’s stockholders approved the adoption of the 2004 Employee Stock Purchase Plan and International Employee StockPurchase Plan (the “2004 Purchase Plans”) as successor plans to a previous plan that ceased having activity in 2005. A total of 500,000 shares have beenreserved for issuance under the 2004 Purchase Plans, and the number of shares available for issuance under the 2004 Purchase Plans automatically increaseson January 1 each year, beginning in 2005, by the lesser of 2% of the shares of common stock then outstanding or 500,000 shares. As of December 31, 2008,a total of 1,920,443 shares remain available for purchase under the 2004 Purchase Plans. The 2004 Purchase Plans permit eligible employees to purchasecommon stock on favorable terms via payroll deductions of up to 15% of the employee’s cash compensation, subject to certain share and statutory dollarlimits. Two overlapping offering periods commence during each calendar year, on each February 15 and August 15 or such other periods or dates asdetermined by the Compensation Committee from time to time, and the offering periods last up to 24 months with a purchase date every six months. The priceof each share purchased is 85% of the lower of a) the fair market value per share of common stock on the last trading day before the commencement of theapplicable offering period or b) the fair market value per share of common stock on the purchase date. The 2004 Purchase Plans are administered by theCompensation Committee of the Board of Directors, and such plans will terminate automatically in June 2014 unless a) the 2004 Purchase Plans are extendedby the Board of Directors and b) the extension is approved within 12 months by the Company’s stockholders.For the years ended December 31, 2008, 2007 and 2006, 119,354, 120,787 and 135,325 shares, respectively, were issued under the 2004 PurchasePlans at a weighted average purchase price of $52.92, $39.50 and $28.91 per share, respectively.Fair Value Calculations—Employee Stock Purchase PlansThe Company uses the Black-Scholes option-pricing model to determine the fair value of shares purchased under the 2004 Purchase Plans with thefollowing weighted average assumptions for the years ended December 31: 2008 2007 2006 Dividend yield 0% 0% 0%Expected volatility 59% 41% 69%Risk-free interest rate 3.57% 4.60% 4.95%Expected life (in years) 1.25 1.25 1.25 F-46Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The weighted-average fair value per share of shares purchased on the date of purchase was $26.34, $21.02 and $18.19, respectively, for the yearsended December 31, 2008, 2007 and 2006.Stock-Based Compensation Recognized in the Statement of OperationsThe following table presents, by operating expense, the Company’s stock-based compensation expense recognized in the Company’s consolidatedstatement of operations under SFAS 123(R) for the years ended December 31, 2008, 2007 and 2006 (in thousands): 2008 2007 2006Cost of revenues $4,641 $4,128 $3,238Sales and marketing 10,637 8,925 7,449General and administrative 39,807 29,678 20,080 $55,085 $42,731 $30,767During the year ended December 31, 2008, the Company entered into agreements with its two senior officers in Europe in connection with theirresignations and modified their outstanding stock awards. As a result, the Company recorded an incremental stock-based compensation charge of$3,098,000, which is included in general and administrative expenses in the Company’s accompanying consolidated statements of operations for the yearended December 31, 2008.During the years ended December 31, 2008, 2007 and 2006, the Company capitalized $574,000, $126,000 and $45,000, respectively, of stock-basedcompensation expense as construction in progress in property, plant and equipment.The Company’s stock-based compensation recognized in the consolidated statement of operations was comprised of the following types of equity awardsfor the years ended December 31 (in thousands): 2008 2007 2006Stock options $19,873 $22,306 $21,181Restricted shares and restricted stock units 31,899 17,720 7,848Employee stock purchase plans 3,313 2,705 1,738 $55,085 $42,731 $30,767As of December 31, 2008, the total stock-based compensation cost related to unvested equity awards not yet recognized, net of estimated forfeitures,totaled $76,795,000, which is expected to be recognized over a weighted-average period of 1.99 years.13. Income TaxesIncome or loss before income taxes is attributable to the following geographic locations for the years ended December 31 (in thousands): 2008 2007 2006 United States $30,085 $(2,380) $(7,990)Foreign (3,004) (2,335) 1,656 Income (loss) before income taxes and cumulative effect of a change inaccounting principle $27,081 $(4,715) $(6,334) F-47Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The provision for income tax consisted of the following components for the years ended December 31 (in thousands). 2008 2007 2006 Current: Federal $— $— $(497)State (517) (61) (217)Foreign (1,302) (107) (62)Subtotal (1,819) (168) (776)Deferred: Federal 88,219 — — State 13,697 — — Foreign 4,360 (305) 337 Subtotal 106,276 (305) 337 Benefit (provision) for income taxes $104,457 $(473) $(439)State taxes not based on income are included in general and administrative expenses and the amount was insignificant for the years ended December 31,2008, 2007 and 2006.The fiscal 2008, 2007 and 2006 income tax benefit (expense) differed from the amounts computed by applying the U.S. federal income tax rate of 35%to pre-tax income (loss) as a result of the following for the years ended December 31 (in thousands): 2008 2007 2006 Federal tax at statutory rate $(9,478) $1,650 $2,217 State taxes (702) (61) (217)Deferred tax assets generated in current year not benefited (5,036) (1,762) (1,843)Meals and entertainment (74) (54) (48)Stock option deduction (672) (456) (326)Change in valuation allowance 120,772 1,475 337 Disallowed executives’ compensation (1,032) (861) — Effect of tax settlement and rate change (526) (924) — FIN 48 reserve (286) — — Foreign rate differential 1,518 — — Other, net (27) 520 (559)Total tax benefit (expense) $104,457 $(473) $(439)The Company has not provided for U.S. federal income and foreign withholding taxes on the undistributed earnings from non-U.S. operations as ofDecember 31, 2008 because the Company intends to reinvest the earnings outside the U.S. for an indefinite period of time. If the Company were to distributethese earnings to the U.S. in the form of dividends or otherwise, the Company could be subject to both U.S. income taxes and foreign withholding taxes.Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. F-48Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The types of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are set out below as ofDecember 31 (in thousands): 2008 2007 Deferred tax assets: Depreciation and amortization $60,983 $81,893 Reserves 22,765 18,507 Charitable contributions 73 47 Stock-based compensation 15,426 11,607 Unrealized (gain) loss 6,070 — State tax 245 19 Net operating losses and credits 63,559 72,387 Gross deferred tax assets 169,121 184,460 Valuation allowance (40,274) (163,083)Total deferred tax assets 128,847 21,377 Deferred tax liabilities: Fixed assets fair value step-up (13,656) (19,163)Intangibles (16,614) (21,765)Total deferred tax liabilities (30,270) (40,928)Net deferred tax assets (liabilities) $98,577 $(19,551)The $128,847,000 of deferred tax assets as of December 31, 2008 are attributable to the Company’s operations in the United States, Australia,Singapore and Europe. The $21,377,000 deferred tax assets as of December 31, 2007 are attributable to the Company’s operations in Singapore and Europe.As a result of the IXEurope Acquisition and Virtu Acquisition, the Company recognized deferred tax liabilities in a number of European jurisdictionsattributable to the identifiable intangibles and fixed assets fair value step-up that were recorded for the purchases. The Company’s deferred tax liabilities areincluded in other current liabilities and other liabilities on the accompanying consolidated balance sheets as of December 31, 2008 and 2007.The Company’s accounting for deferred taxes under SFAS No.109 involves weighing positive and negative evidence concerning the realizability of theCompany’s deferred tax assets in each tax jurisdiction. After considering primarily such evidence as the nature, frequency and severity of current andcumulative financial reporting losses, the sources of future taxable income and tax planning strategies, management concluded that a 100% valuation allowancewas required in certain foreign jurisdictions. The valuation allowance is provided for the deferred tax assets, net of deferred tax liabilities, associated with theCompany’s operations in certain jurisdictions located in the Company’s Asia-Pacific and European regions. The operations in these jurisdictions still havesignificant recent losses as of the end of 2008. As such, management does not believe these operations have established a sustained history of profitability andtherefore the valuation allowance is necessary.However, the Company released the valuation allowance against the deferred tax assets in the U.S. at the end of the fiscal year 2008. The Company’sU.S. operations became profitable in 2008, particularly in the fourth quarter. As of the end of the year, the U.S. operations have generated cumulative incomefor the three-year period including 2008. The financial results of the U.S. operations for the recent years have shown an improvement year after year andquarter after quarter, while the financial forecast of the U.S. operations for next year also indicates profitability. As a result, the Company determined that therewas sufficient positive evidence to support the release of the F-49Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) valuation allowance against its U.S. deferred tax assets in the fourth quarter of 2008. In addition, the Company also released the valuation allowance againstthe deferred tax assets in Australia, as the operations in this jurisdiction have established profitability for the last three years including 2008. The Australiaoperations have been profitable every quarter in the three-year period. Upon evaluating the positive and negative evidence, management concluded it is morelikely than not that the deferred tax assets will be fully realizable in both the U.S. and Australia operations.The Company did not provide valuation allowance for its operations in Singapore and Switzerland, as management does not believe that a valuationallowance is needed for these two jurisdictions given that both jurisdictions have a history of profitability for years. The Company released the valuationallowance against the deferred tax assets in Singapore in the fourth quarter of 2006.Federal and state tax laws, including California tax laws, impose substantial restrictions on the utilization of net operating loss and credit carryforwardsin the event of an “ownership change” for tax purposes, as defined in Section 382 of the Internal Revenue Code. In 2003, the Company conducted an analysisto determine whether an ownership change had occurred due to the significant stock transactions in each of the reporting years disclosed at that time. Theanalysis indicated that an ownership change occurred during the fiscal year 2002, which resulted in an annual limitation of approximately $819,000, for thenet operating loss carryforwards generated prior to 2003 and therefore, the Company has substantially reduced its federal and state net operating losscarryforwards for the periods prior to 2003 to approximately $16,400,000. In addition, an ownership change under Section 382 of the Internal Revenue Codewas triggered in September 2007 by the issuance of 4,211,939 shares of the Company’s common stock. However, the annual limitation associated with thisownership change is not meaningful due to the substantial market capitalization of the Company at the time of the ownership change. While a finaldetermination has not been made, the Company does not expect that a Section 382 ownership change occurred in 2008.The Company expects to pay a limited amount of tax for fiscal year 2009. The tax costs will be primarily limited to alternative minimum tax andCalifornia state income tax.The Company had net operating loss carryforwards of approximately $148,000,000 and $168,000,000, respectively, for federal and state income taxpurposes as of December 31, 2008. The net operating loss carryforwards expire, if not utilized, at various intervals from the years 2009 through 2028.Approximately $94,000,000 of the total net operating loss carryforwards is attributable to excess employee stock option deductions, the benefit from which willbe credited to additional paid-in capital when subsequently utilized in future years. In addition, the Company’s foreign operations had approximately$148,000,000 of net operating loss carryforwards for local income tax purposes, of which approximately $29,700,000 expires, if not utilized, at variousintervals from the years 2009 through 2017 while the rest of the foreign operating losses can be carried forward indefinitely.The beginning and ending balances of the Company’s unrecognized tax benefits are reconciled below (in thousands): Unrecognized tax benefits as of December 31, 2006 $1,745 Gross increase related to prior year tax positions 627 Settlement (206)Unrecognized tax benefits as of December 31, 2007 2,166 Gross increase related to prior year tax positions 394 Settlement (1,373)Unrecognized tax benefits as of December 31, 2008 $1,187 F-50Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The unrecognized tax benefits of $1,187,000 as of December 31, 2008, if subsequently recognized, will affect the Company’s effective tax ratefavorably at the time when such a benefit is recognized. During fiscal year 2008, the Company reached a final agreement with a state in which it once operatedto close an appeal filed by the Company in that state’s tax court. The Company filed the appeal in 2006 to contest the decision made by the state auditordisallowing the refundable research and capital goods credits. As a result of the settlement, the total unrecognized tax benefit decreased by $1,373,000 for theyear.The Company’s income tax returns for all tax years remain open to examination by federal and state taxing authorities due to the Company’s netoperating loss carryforwards. In addition, the Company’s tax years of 2003 through 2007 also remain open and subject to examination by local tax authoritiesin certain foreign jurisdictions in which the Company has major operations. There were no income tax audits during the year ended December 31, 2008.14. Commitments and ContingenciesOperating Lease CommitmentsThe Company currently leases the majority of its IBX centers and certain equipment under noncancelable operating lease agreements. The majority of theCompany’s operating leases for its IBX centers expire at various dates from 2009 through 2027 with renewal options available to the Company. The 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 IBX centers. The Company accounts for such abatements and increasing base rentalsusing the straight-line method over the life of the lease. The difference between the straight-line expense and the cash payment is recorded as deferred rent.Minimum future operating lease payments, excluding operating leases covered under restructuring charges (see Note 17), as of December 31, 2008 aresummarized as follows (in thousands): Year ending: 2009 $52,0772010 49,5782011 45,5982012 44,5832013 44,3912014 and thereafter 197,434Total $433,661Total rent expense was approximately $50,366,000, $36,224,000 and $28,385,000 for the years ended December 31, 2008, 2007 and 2006,respectively. Deferred rent, primarily included in other liabilities on the accompanying consolidated balance sheets, was $28,641,000 and $26,912,000 as ofDecember 31, 2008 and 2007, respectively.Other Purchase CommitmentsPrimarily as a result of the Company’s various IBX expansion projects, as of December 31, 2008, the Company was contractually committed for$174,897,000 of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided, in connection with the worknecessary to open these IBX F-51Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) centers and make them available to customers for installation. In addition, the Company had numerous other, non-capital purchase commitments in place asof December 31, 2008, such as commitments to purchase power in select locations, primarily in the U.S., Singapore and the United Kingdom, through 2009and thereafter, and other open purchase orders for goods or services to be delivered or provided during 2009. Such other miscellaneous purchase commitmentstotaled $79,964,000 as of December 31, 2008.Legal MattersOn July 30, 2001 and August 8, 2001, putative shareholder class action lawsuits were filed against the Company, certain of its officers and directors(the “Individual Defendants”), and several investment banks that were underwriters of the Company’s initial public offering (the “Underwriter Defendants”).The cases were filed in the United States District Court for the Southern District of New York. Similar lawsuits were filed against approximately 300 otherissuers and related parties. These lawsuits have been coordinated before a single judge. The purported class action alleges violations of Sections 11 and 15 ofthe Securities Act of 1933 and Sections 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 against the Company and the IndividualDefendants. The plaintiffs have since dismissed the Individual Defendants without prejudice. The suits allege that the Underwriter Defendants agreed toallocate 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. The 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 action seeks damages in anunspecified amount. On February 19, 2003, the Court dismissed the Section 10(b) claim against the Company, but denied the motion to dismiss theSection 11 claim. On December 5, 2006, the Second Circuit vacated a decision by the district court granting class certification in six “focus” cases, which areintended to serve as test cases. Plaintiffs selected these six cases, which do not include Equinix. On April 6, 2007, the Second Circuit denied a petition forrehearing filed by plaintiffs, but noted that plaintiffs could ask the district court to certify more narrow classes than those that were rejected. On August 14,2007, plaintiffs filed amended complaints in the six focus cases. On September 27, 2007, plaintiffs moved to certify a class in the six focus cases. OnNovember 14, 2007, the issuers and the underwriters named as defendants in the six focus cases moved to dismiss the amended complaints against them. OnMarch 26, 2008, the district court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for aprice in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all other claims, the motions todismiss were denied. On October 10, 2008, at the request of the plaintiffs, plaintiffs’ motion for class certification was withdrawn, without prejudice.The parties in the approximately 300 coordinated class actions, including the Company, the underwriter defendants in the Equinix class action, and theplaintiffs in the Equinix class action, have reached an agreement in principle under which the insurers for the issuer defendants in the coordinated cases willmake the settlement payment on behalf of the issuers, including the Company. The settlement is subject to approval by the parties and is also subject to Courtapproval.On August 22, 2008, a complaint was filed against Equinix, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors inPihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant towhich Equinix merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of Equinix.Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuatedimproperly, by Pihana’s majority shareholders, officers and directors, with the alleged assistance of Equinix and others. Among other things, plaintiffscontend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they F-52Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) improperly received no consideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees andcosts, and compensatory damages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725,000,000 valueof Equinix held by Defendants” (a group that includes more than 30 individuals and entities). An amended complaint, which adds new plaintiffs (other allegedholders of Pihana common stock) but is otherwise substantially similar to the original pleading, was filed on September 29, 2008 (the “AmendedComplaint”). On October 13, 2008, a complaint was filed in a separate action by another purported holder of Pihana common stock, naming the samedefendants and asserting substantially similar allegations as the August 22, 2008 and September 29, 2008 pleadings. On December 12, 2008, the courtentered a stipulated order, which consolidated the two actions under one case number and set January 22, 2009 as the last day for Defendants to move todismiss or otherwise respond to the Amended Complaint, the operative complaint in this case. On January 22, 2009, motions to dismiss the AmendedComplaint were filed by Equinix and other Defendants. The court has not yet ruled on any of the motions to dismiss. The Company believes that plaintiffs’claims and alleged damages are without merit and it intends to defend the litigation vigorously.Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter. The Company is unable at thistime to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows.The Company believes that while an unfavorable outcome to these litigations is reasonably possible, a range of potential loss cannot be determined atthis time. As a result, the Company has not accrued for any amounts in connection with these legal matters as of December 31, 2008. The Company and itsofficers and directors intend to continue to defend the actions vigorously.Estimated and Contingent LiabilitiesThe Company estimates exposure on certain liabilities, such as income and property taxes, based on the best information available at the time ofdetermination. With respect to real and personal property taxes, the Company records what it can reasonably estimate based on prior payment history, currentlandlord estimates or estimates based on current or changing fixed asset values in each specific municipality, as applicable. However, there are circumstancesbeyond the Company’s control whereby the underlying value of the property or basis for which the tax is calculated on the property may change, such as alandlord selling the underlying property of one of the Company’s IBX center leases or a municipality changing the assessment value in a jurisdiction and, as aresult, the Company’s property tax obligations may vary from period to period. Based upon the most current facts and circumstances, the Company makesthe necessary property tax accruals for each of its reporting periods. However, revisions in the Company’s estimates of the potential or actual liability couldmaterially impact the financial position, results of operations or cash flows of the Company.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 for which the outcome is expected to result in a material adverse effect in the financial position, results of operationsor cash flows of the Company.Employment AgreementsThe Company has entered into a severance agreement with each of its executive officers that provides for a severance payment equal to the executiveofficer’s annual base salary and maximum bonus in the event his or her employment is terminated for any reason other than cause or he or she voluntarilyresigns under certain F-53Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) circumstances as described in the agreement. In addition, under the agreement, the executive officer is entitled to the payment of his or her monthly health carepremiums under the Consolidated Omnibus Budget Reconciliation Act for up to 12 months. For certain executive officers, these benefits are only triggered aftera change-in-control of the Company.Guarantor ArrangementsAs 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. The Company has no liabilities recorded for these agreements as of December 31, 2008.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 agreements. As a result, the Company believes theestimated fair value of these agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 2008.The Company enters into arrangements with its business partners, whereby the business partner agrees to provide services as a subcontractor for theCompany’s implementations. Accordingly, the Company enters into standard indemnification agreements with its customers, whereby the Companyindemnifies them for other acts, such as personal property damage, of its subcontractors. The maximum potential amount of future payments the Companycould be required to make under these indemnification agreements is unlimited; however, the Company has general and umbrella insurance policies that enablethe Company to recover a portion of any amounts paid. The Company has never incurred costs to defend lawsuits or settle claims related to theseindemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. The Company has no liabilitiesrecorded for these agreements as of December 31, 2008.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 centers, whether or not within the Company’s control, could result in service level commitments to these customers. The Company’sliability insurance may not be adequate to cover those expenses. In addition, any loss of services, equipment damage or inability to meet the Company’sservice level commitment obligations, particularly in the early stage of the Company’s development, could reduce the confidence of the Company’s customersand could consequently impair the Company’s ability to obtain and retain customers, which would adversely affect both the Company’s ability to generaterevenues and the Company’s operating results. The Company generally has the ability to determine such service level credits prior to the associated revenuebeing recognized. The Company has no significant liabilities in connection with service level credits as of December 31, 2008. F-54Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Under the terms of the Combination Agreement entered into as a result of the Company’s acquisitions of Pihana Pacific, Inc. and i-STT Pte Ltd onDecember 31, 2002 (the “Combination”), the Company is contractually obligated to use commercially reasonable efforts to ensure that at all times from andafter the closing of the Combination, until such time as neither STT Communications nor its affiliates hold the Company’s capital stock or debt securities (orthe capital stock received upon conversion of the debt securities) received by STT Communications in connection with the Combination, none of theCompany’s capital stock issued to STT Communications constitutes “United States real property interests” within the meaning of Section 897(c) of theInternal Revenue Code of 1986. Under Section 897(c) of the Code, the Company’s capital stock issued to STT Communications would generally constitute“United States real property interests” at such point in time that the fair market value of the “United States real property interests” owned by the Companyequals or exceeds 50% of the sum of the aggregate fair market values of (a) the Company’s “United States real property interests,” (b) the Company’s interestsin real property located outside the U.S., and (c) any other assets held by the Company which are used or held for use in the Company’s trade or business.The Company refers to this provision in the Combination Agreement as the FIRPTA covenant. Pursuant to the FIRPTA covenant, the Company may be forcedto take commercially reasonable proactive steps to ensure the Company’s compliance with the FIRPTA covenant, including, but not limited to, (a) a sale-leaseback transaction with respect to all real property interests, or (b) the formation of a holding company organized under the laws of the Republic ofSingapore which would issue shares of its capital stock in exchange for all of the Company’s outstanding stock (this reorganization would require thesubmission of that transaction to the Company’s stockholders for their approval and the consummation of that exchange). The Company has entered into anagreement with STT Communications and its affiliate pursuant to which, the Company will no longer be bound by the FIRPTA covenant as of September 30,2009. Currently, the Company is in compliance with the FIRPTA covenant. The Company has no liabilities recorded related to non-compliance with theFIRPTA covenant as of December 31, 2008.15. Related Party TransactionsThe Company has several significant stockholders, and other related parties, that are also customers and/or vendors. For the years ended December 31,2008, 2007 and 2006, revenues recognized with related parties were $20,361,000, $8,396,000 and $5,912,000, respectively. As of December 31, 2008, 2007and 2006, accounts receivable with these related parties were $4,921,000, $2,128,000 and $1,413,000, respectively. For the year ended December 31, 2008,2007 and 2006, costs and services procured with related parties were $1,944,000, $1,219,000 and $3,710,000, respectively. As of December 31, 2008, 2007and 2006, accounts payable with these related parties were $85,000, $122,000 and $313,000, respectively.16. Segment InformationWhile the Company has a single line of business, which is the design, build-out and operation of network-neutral IBX centers, it has determined that ithas three reportable segments comprised of its U.S., Europe and Asia-Pacific geographic regions. The Company’s chief operating decision-maker evaluatesperformance, makes operating decisions and allocates resources based on the Company’s revenue and adjusted EBITDA performance both on a consolidatedbasis and based on these three geographic regions. F-55Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company provides the following segment disclosures as follows for the years ended December 31 (in thousands): 2008 2007 2006Total revenues: United States $442,803 $324,878 $246,066Europe 177,502 37,490 — Asia-Pacific 84,375 57,074 40,849 $704,680 $419,442 $286,915Total depreciation and amortization: United States $99,752 $80,758 $68,786Europe 41,048 9,813 — Asia-Pacific 18,107 9,509 3,732 $158,907 $100,080 $72,518Income (loss) from operations: United States $66,342 $11,533 $76Europe 1,442 (4,034) — Asia-Pacific 5,618 2,616 1,838 $73,402 $10,115 $1,914Capital expenditures: United States $234,914 $459,762 $156,114Europe 164,864 (1) 577,039 (2) — Asia-Pacific 94,591 42,332 15,943 $494,369 $1,079,133 $172,057 (1)Includes the purchase price for the Virtu Acquisition (see Note 2), net of cash acquired, totaling $23,241,000.(2)Includes the purchase price for the IXEurope Acquisition (see Note 2), net of cash acquired, totaling $541,792,000.The Company’s long-lived assets are located in the following geographic areas as of December 31 (in thousands): 2008 2007United States $1,191,449 $959,637Europe 700,560 703,992Asia-Pacific 176,746 91,478 $2,068,755 $1,755,107 F-56Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Revenue information on a services basis is as follows (in thousands): 2008 2007 2006Colocation $545,867 $305,215 $201,772Interconnection 95,452 73,685 53,811Managed infrastructure 27,740 19,519 16,197Rental 1,028 1,237 1,380Recurring revenues 670,087 399,656 273,160Non-recurring revenues 34,593 19,786 13,755 $704,680 $419,442 $286,91517. Restructuring ChargesIn December 2004, in light of the availability of fully built-out data centers in select markets at costs significantly below those costs the Company wouldincur in building out new space, the Company made the decision to exit leases for excess space adjacent to one of the Company’s New York metro area IBXs,as well as space on the floor above its original Los Angeles IBX. As a result of the Company’s decision to exit these spaces, the Company recordedrestructuring charges totaling $17,685,000, which represents the present value of the Company’s estimated future cash payments, net of estimated subleaseincome and expense, through the remainder of these lease terms, as well as the write-off of all remaining property, plant and equipment attributed to the partialbuild-out of the excess space on the floor above its Los Angeles IBX.The Company estimated the future cash payments required to exit these two leased spaces, net of any estimated sublease rental income and expense,through the remainder of these lease terms and then calculated the present value of such future cash flows in order to determine the appropriate restructuringcharge to record. Subsequent to recording the initial restructuring charge, the Company records accretion expense to accrete its accrued restructuring liabilityup to an amount equal to the total estimated future cash payments necessary to complete the exit of these leases. Should the actual lease exit costs differ fromthe Company’s estimates, the Company may need to adjust its restructuring charges associated with the excess lease spaces, which would impact net incomein the period such determination was made.A summary of the movement in the 2004 accrued restructuring charges during the year ended December 31, 2008 is outlined as follows (in thousands): Accruedrestructuringcharge as ofDecember 31,2007 Accretionexpense Restructuringchargeadjustments Cashpayments Accruedrestructuringcharge as ofDecember 31,2008 Estimated lease exit costs $12,140 $792 $3,142 $(2,763) $13,311 12,140 $792 $3,142 $(2,763) 13,311 Less current portion (3,973) (6,023) $8,167 $7,288 F-57Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) A summary of the movement in the 2004 accrued restructuring charges during the year ended December 31, 2007 is outlined as follows (in thousands): Accruedrestructuringcharge as ofDecember 31,2006 Accretionexpense Restructuringchargeadjustments Cashpayments Accruedrestructuringcharge as ofDecember 31,2007 Estimated lease exit costs $13,857 $808 $407 $(2,932) $12,140 13,857 $808 $407 $(2,932) 12,140 Less current portion (3,096) (3,973) $10,761 $8,167 During the years ended December 31, 2008, 2007 and 2006, the Company recorded additional restructuring charges totaling $3,142,000, $407,000 and$1,527,000, respectively, as a result of revised sublease assumptions. As the Company currently has no plans to enter into lump sum lease terminations witheither of the landlords associated with these two excess space leases, the Company has reflected its accrued restructuring liability as both current and non-current liability. The Company reports accrued restructuring charges within other current liabilities and other liabilities on the accompanying consolidatedbalance sheets as of December 31, 2008 and 2007. The Company is contractually committed to these two excess space leases through 2015. In February 2009,the Company decided to utilize the excess space in Los Angeles to expand its original Los Angeles IBX center (see Note 18).The Company’s minimum future payments associated with these two excess space leases is as follows (in thousands): 2009 $4,779 2010 4,871 2011 5,024 2012 5,296 2013 5,397 2014 and thereafter 8,346 33,713 Less amount representing estimated sublease income and expense (18,381) 15,332 Less amount representing accretion (2,021) 13,311 Less current portion (6,023) $7,288 18. Subsequent EventsOn January 1, 2009, pursuant to the provisions of the Company’s equity compensation plans (see Note 12), the number of common shares in reserveautomatically increased by 2,264,721 shares for the 2000 Equity Incentive Plan, 500,000 shares for the 2004 Purchase Plans and 50,000 shares for the 2000Director Option Plan. F-58Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In January 2009, the Company amended certain provisions of the European Financing effective December 31, 2008 (see Note 9) related to certainfinancial covenants and acknowledgment of the appointment of an executive officer in Europe.In January 2009, the Company amended its original lease for its Dallas IBX center, whose initial lease term was to end in May 2010, by extending thelease term an additional twelve years to May 2022. Minimum payments under this lease amendment, incremental to the original lease, total $25,321,000 incumulative lease payments with monthly payments that commence in June 2010. The original lease was accounted for as an operating lease. The Company iscurrently assessing the accounting implications of this lease amendment, which is the first notable IBX center lease to be renewed by the Company. Over thenext several years, the initial lease terms for several more IBX center leases will be expiring.In February 2009, the Company decided to utilize the space it previously abandoned in order to expand its original Los Angeles IBX center. Accordingly,the Company will reverse the restructuring reserve during the three months ended March 31, 2009 associated with the Los Angeles lease (see Note 17). TheCompany estimates that this restructuring reserve reversal is approximately $5,700,000, which will be reflected in its financial statements for the three monthsended March 31, 2009. The Company’s excess space lease in the New York metro area will remain abandoned and continue to carry a restructuring charge.In February 2009, the Company and one of its wholly-owned subsidiaries, as co-borrower, entered into a $25,000,000 one-year revolving credit facilitywith Bank of America (the “BofA Credit Line”). The BofA Credit Line will be used primarily to fund the Company’s working capital and to enable theCompany to issue letters of credit. The effect of issuing letters of credit under the BofA Credit Line will be to reduce the Company’s borrowing availabilityunder the BofA Credit Line. The Company may borrow, repay and reborrow under the BofA Credit Line at either the prime rate or at a borrowing margin of2.75% over one, three or six month LIBOR, subject to a minimum borrowing cost of 3.00%. The BofA Credit Line contains three financial covenants and iscollateralized by the Company’s domestic accounts receivable balances. The BofA Credit Line is available for renewal subject to mutual agreement by bothparties.19. Quarterly 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 fluctuationsin the Company’s cash flows and the cash and cash equivalents and accounts receivable accounts on the Company’s consolidated balance sheet. Causes ofsuch fluctuations may include the volume and timing of new orders and renewals, the timing of the opening of new IBX centers, the sales cycle for theCompany’s services, the introduction of new services, changes in service prices and pricing models, trends in the Internet infrastructure industry, generaleconomic conditions, 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. F-59Table of ContentsEQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents selected quarterly information for fiscal 2008 and 2007: Firstquarter Secondquarter Thirdquarter Fourthquarter (in thousands, except per share data) 2008: Revenues $158,218 $172,044 $183,735 $190,683 Gross profit 63,732 70,036 73,872 82,381 Net income 5,421 2,229 7,389 116,499 (a)Basic earnings per share 0.15 0.06 0.20 3.13 Diluted earnings per share 0.15 0.06 0.19 2.74 2007: Revenues $85,109 $91,837 $103,782 $138,714 Gross profit 32,344 36,228 40,891 46,234 Net income (loss) (4,456) 1,217 4,124 (6,073) (b)Basic earnings per share (0.15) 0.04 0.13 (0.17)Diluted earnings per share (0.15) 0.04 0.12 (0.17) (a)Includes an income tax benefit of $104,857,000.(b)Represents first full quarter of combined results since the IXEurope Acquisition (see Note 2). F-60Exhibit 10.29DATED 21st October 2008 SLOUGH TRADING ESTATE LIMITEDandEQUINIX (LONDON) LIMITEDwithEQUINIX, INC. AGREEMENT FOR LEASErelating to Building 8, Buckingham Avenue Trading Estate, Slough,Berkshire Lacon House84 Theobald’s RoadLondon WC1X 8RWTel: +44 (0)20 7524 6000CONTENTS Clause Subject matter Page1. ACCESS DEFINITIONS AND INTERPRETATION 12. CONDITIONALITY AND DEPOSIT 83. WORKS, ACCESS AND TENANT’S MEZZANINE WORKS 94. GRANT OF THE LEASE AND DELIVERY OF THE OPINION LETTER 115. RESTRICTIONS 126. REPRESENTATIONS 127. NON-ASSIGNMENT 128. NOTICES 139. EXECUTORY AGREEMENT 1310. NON-MERGER ETC. 1411. DEFECTS, ENVIRONMENTAL AND THIRD PARTY RIGHTS 14 Defects 14 Environmental 14 Sub-Contractor Warranties 14 Third party rights 1512. AREA AND RENT 1513. ENTIRE UNDERSTANDING 1514. STANDARD CONDITIONS 1615. EXPERT DETERMINATION 1616. CRITICAL DATE AND LONG STOP DATE 1717. EXCLUSION OF THIRD PARTY RIGHTS 1718. CONSTRUCTION DOCUMENTS 1719. THE REPRESENTATIVE 1720. TERMINATION 1721. CONFIDENTIALITY 1922. SURETY 2023. REPLACEMENT SURETY 2124. JURISDICTION 21 SCHEDULE 1 Provisions relating to the Works 221. CARRYING OUT OF WORKS 222. REVIEW OF WORKS 233. VARIATIONS TO WORKS 234. TIME FOR COMPLETION OF WORKS 255. PRACTICAL COMPLETION 256. CDM REGULATIONS 267. NON PAYMENT 26 SCHEDULE 2 Tenant’s Warehouse Works 27 ANNEXURE 1 Early Access Site Plan 29 ANNEXURE 2 Appointments 30 ANNEXURE 3 Building Contract 31 ANNEXURE 4 Building Documents 32 ANNEXURE 5 Deposit Deed 33 ANNEXURE 6 Environmental Deed of Warranty 34 ANNEXURE 7 Lease 35 ANNEXURE 8 Licence to Alter 36 ANNEXURE 9 Sub-Contractor Warranty 37 ANNEXURE 10 Tenant’s Variation Form 38AGREEMENT FOR LEASE DATE 21ST OCTOBER 2008PARTIES (1)SLOUGH TRADING ESTATE LIMITED (incorporated and registered in England and Wales under company registration number 1184323), theregistered office of which is at 234 Bath Road, Slough, Berkshire SL1 4EE (the “Landlord”) (2)EQUINIX (LONDON) LIMITED (incorporated and registered in England and Wales under company registration number 06703310), the registeredoffice of which is at Quadrant House, Floor 6, 17 Thomas Moore Street, Thomas Moore Square, London E1W 1YW (the “Tenant”) and (3)EQUINIX, INC. (incorporated in the State of Delaware, United States of America, and registered under number 29 11 438) of 3500 South DupontHighway, Dover, DE 19901, Delaware, USA and whose address for service in the United Kingdom is Quadrant House, Floor 6, 17 Thomas MooreStreet, Thomas Moore Square, London E1W 1YW (the “Surety”)IT IS AGREED AS FOLLOWS: 1.ACCESS DEFINITIONS AND INTERPRETATION 1.1In this Agreement the following expressions shall have the meanings indicated: “Access Certificate” means a certificate issued by the Project Manager in accordance with clause 3 (the Project Manager acting in a professional andindependent manner and having regard to the interests of the parties pursuant to this Agreement) stating that the Premises havereached such a state of readiness as to enable the Tenant to enter the relevant part of the Premises for the purpose of carrying outthe Tenant’s Warehouse Works provided always that the Landlord shall procure that an Access Certificate shall not be issuedbefore sufficient of the Works shall have been completed so as to ensure that: (a) the Tenant shall have reasonable pedestrian and vehicular access to and egress (including contractor’s access) from thePremises; (b) the Works to the warehouse part of the Premises shall have been completed in all material respects; (c) site temporary services relating to electricity and water are available to the warehouse part of the Premises subject only to serviceconnections which require an occupier’s application to a service or statutory undertaker; (d) the Tenant’s Warehouse Works can be carried out without any material interruption or delay by reason of any of theWorks; (e) the warehouse part of the Premises shall be wind and water tight; (f) the Tenant shall have reasonable pedestrian and vehicular access to and egress from the Premises to enable the plant, machinery andequipment of the Tenant its contractors and sub-contractors to be delivered and to remain on the relevant parts of the Premises shown onthe early access site plan attached as Annexure 1 for the purposes of and in the course of carrying out the Tenant’s Warehouse Works; (g) the concrete floor slabs to the relevant ground floor or mezzanine floor of the building on the Premises shall have becompleted for a period of 28 days; and (h) the Premises shall comply with health and safety legislation allowing the Tenant’s Warehouse Works to be undertakenlegally, provided that the Tenant shall be entitled to waive any one or more of the foregoing conditions as a condition precedent to theissue of the Access Certificate (but without prejudice to the obligation of the Landlord to procure fulfilment of any conditions sowaived) by notice in writing to the Landlord provided always the Access Certificate shall not be issued as a result of conditionsbeing waived in the event that access would impede to a material degree the carrying out of the Works and/or result in a breach ofhealth and safety regulations provided further the Landlord shall not be precluded from having access to the warehouse part ofthe Premises to complete any outstanding works thereto;“Access Date” means the date of an Access Certificate;“Approvals” means all approvals, consents, permissions and licences of any local or other competent authority or person which may fromtime to time be necessary to enable the Contractor lawfully to commence and to carry out and complete the Works;“Appointments” means the deeds appointing the Professional Team to be substantially in the form of Annexure 2 with any amendments theretoapproved by the Tenant such approval not to be unreasonably withheld or delayed;“Architect” means Langley Hall Associates Limited or the person appointed from time to time by the Landlord or the Contractor to act in thecapacity of the Architect and approved by the Tenant such approved not to be unreasonably withheld or delayed;“Building Contract” means a contract in the form of the JCT Standard Form of Building Contract with Contractors Design 2005 Editionsubstantially in the form annexed to this Agreement as Annexure 3 with such other amendments (if any) as the Landlord shallrequire (in addition to those contained in the form annexed) and which are approved by the Tenant (such approval not to beunreasonably withheld or delayed);“Building Documents” means the specification and drawings relating to the Works and the Tenant’s Mezzanine Works in the form of Annexure 4;“Certificate” has the meaning specified in Schedule 1;“Certificate Date” has the meaning specified in paragraph 5.3 of Schedule 1;“Critical Date” means the date twenty-two (22) weeks from and including the Unconditional Date;“Code of Measuring Practice” means The Royal Institution of Chartered Surveyors Code of Measuring Practice (Sixth Edition) or such later edition as isrelevant at the time of measurement of the Premises pursuant to clause 12;“Completion Date” means the fifth working day following the later of: (a) the Certificate Date; (b) the date the Environmental Deed of Warranty is available for completion; (c) the date the Landlord approves any application for Tenant’s alterations as referred to and subject to the provisions of paragraph 3 ofSchedule 2 made at least five working days prior to the Certificate Date; and (d) the date the Landlord’s Representative and the Tenant’s Representative agree the gross external area of the building part of thePremises under clause 12 or the date of the Experts determination of any dispute over such area if appropriate;“Condition” means the delivery to the Tenant of an offer from a Power Company to enter into a Power Supply Agreement;“Construction Documents” means collectively the Appointments, the Building Contract, the Environmental Deed of Warranty and the Sub-ContractorWarranty;“Contractor” means Moss Construction a division of Kier Regional Limited or such other party appointed by the Landlord from time totime to be the contractor pursuant to the Building Contract;“Cut-off Date” means the date six (6) weeks from and including the date of this Agreement;“Deposit Deed” means the deed pursuant to which the Tenant shall deposit with the Landlord a sum equivalent to six months of theRent together with a sum equivalent to Value Added Tax thereon such deed to be in the form of Annexure 5;“Environmental Consultant” means WSP Environmental Limited of Buchanan House, 24–30 Holborn, London EC1N 2HS;“Environmental Deed of Warranty” means a warranty substantially in the form of Annexure 6 to be granted to the Tenant by the EnvironmentalConsultant;“Group Company” means a company within the same group as the Tenant (or the Surety, as the context requires) as defined in clause4.21.11 of the Lease;“Landlord’s Representative” means Carless & Adams Partnership or such other party appointed by the Landlord from time to time to be thelandlord’s representative;“Landlord’s Solicitors” means Nabarro LLP of Lacon House, 84 Theobald’s Road, London WC1X 8RW (Ref: PC/JUS/S2884/01100);“Lease” means the lease of the Premises for a term (the “Term”) of 20 years commencing on the Certificate Date at the Rentpayable from the Rent Commencement Date with five yearly rent reviews at the expiration of every consecutive fifthyear of the said term such lease to be in the form of Annexure 7;“Licence to Alter” means the licence authorising the Tenant’s Works such licence to be in the form of Annexure 8;“Long Stop Date” means the date which is four months from and including the Target Completion Date;“Opinion Letter” means an opinion letter in relation to the Deposit Deed, the Lease and the Licence to Alter, dated with the date of actualcompletion, from counsel qualified to practice in the jurisdiction in which the Surety is incorporated and being in theform (or substantially the form) of the opinion letter given on the date of this Agreement;“Other Rent” means all sums payable as rent pursuant to the Lease other than the Rent;“Mechanical and Electrical Engineer” means Kier Building Services Engineers or the person appointed by the Landlord or the Contractor to act in thecapacity of Mechanical and Electrical Engineer and approved by the Tenant such approval not to be unreasonablywithheld or delayed;“Power Company” means Scottish & Southern Electricity plc or a subsidiary or group company of that company, or such otherelectricity company as is of sufficient financial standing and has sufficient technical resources to enter into a PowerSupply Agreement;“Power Supply Agreement” means an agreement for the supply of not less than 40MVA electrical power to the Premises to be entered into between(1) the Tenant and (2) a Power Company at an initial cost of not more than fourteen million three hundred thousandpounds (£14,300,000) plus value added tax and for a period of not less than the Term;“Premises” means the land comprising approximately 5.77 acres and the building to be known as Building 8 BuckinghamAvenue Trading Estate, Slough, Berkshire as the same are more particularly described in the Lease;“Prescribed Rate” means three per centum above the base rate of National Westminster Bank Plc from time to time (or such otherclearing bank as the Landlord shall nominate) or (if such rate shall cease to be published) such other reasonable orcomparable rate as the Landlord shall from time to time designate;“Professional Team” means the Architect, the Structural Engineer and the Mechanical and Electrical Engineer;“Project Manager” means an employee appointed by the Landlord to act in the capacity of a project manager;“Rent” means the yearly rent determined pursuant to clause 12 of this Agreement and payable under the Lease;“Rent Commencement Date” means the date being 12 months from and including the Certificate Date in respect of the Rent and the CertificateDate in respect of the Other Rent (or, in either case, from such later date as may be agreed pursuant to paragraph 3.8or 4.4 of Schedule 1);“Report” means the environmental report Ref: 12041360/001 dated April 2008 undertaken by the Environmental Consultant;“Restrictions” means all matters affecting the Premises or its use registered or capable of registration as local land charges and all notices,charges, orders, resolutions, demands, proposals, requirements, regulations, restrictions, agreements, directions or othermatters affecting the Premises or its use or affecting the Works served or made by any local or other competent authority orotherwise arising under any statute or any regulation or order made under any statute;“Structural Engineer” means John Tooke & Partners Limited or the person appointed from time to time by the Landlord or the Contractor to actin the capacity of the Structural Engineer and approved by the Tenant such approval not to be unreasonably withheld ordelayed;“Sub-Contractor Warranty” means a warranty substantially in the form of Annexure 9 to be granted to the Tenant by a sub-contractor undertaking adesign obligation pursuant to clause 3.1.3;“Target Access Date (First)” means the date fifty (50) weeks from and including the Unconditional Date for the area coloured blue on the early accesssite plan attached as Annexure 1 (but the Landlord agrees to ensure that the equivalent period in the Building Contract isforty-seven (47) weeks);“Target Access Date (Ground)” means the date fifty-six (56) weeks from and including the Unconditional Date for the area coloured purple on the earlyaccess site plan attached as Annexure 1;“Target Access Date (Second)” means the date fifty-two (52) weeks from and including the Unconditional Date for the area coloured green on the earlyaccess site plan attached as Annexure 1;“Target Access Dates” means the Target Access Date (First) the Target Access Date (Ground) and the Target Access Date (Second);“Target Area” means 116,000 square feet (10,776.66 square metres) gross external area;“Target Completion Date” means the date sixty-nine (69) weeks from and including the Unconditional Date;“Tenant’s Fit Out Works” means the works to be carried out by the Tenant at its own expense in accordance with the provisions of the Licence to Alter;“Tenant’s Mezzanine Works” means the works to be carried out by the Landlord on behalf of the Tenant and at the cost of the Tenant to construct amezzanine floor which are more particularly described in the Building Documents;“Tenant’s Representative” means Frank Hassett of Equinix Group Limited or such other person or persons appointed from time to time by the Tenantto be its project manager for the purposes of this Agreement and whose identity shall have been notified in writing to theLandlord;“Tenant’s Solicitors” means Druces LLP of Salisbury House, London Wall, London EC2M 5PS (Reference: Suzanne Middleton-Lindsley);“Tenant’s Variation Form” means the form recording a Variation (as defined in paragraph 3 to Schedule 1) to the Works in the form of Annexure 9;“Tenant’s Warehouse Works” means the works to be carried out to the warehouse part of the Premises by the Tenant at its own expense in accordance withthe provisions of Schedule 2;“Tenant’s Works” means: (a) the Tenant’s Fit Out Works; (b) the Tenant’s Mezzanine Works; and (c) the Tenant’s Warehouse Works;“Unconditional Date” means the date the Landlord receives notice from the Tenant that the Condition is satisfied or that the Tenant has waived theCondition;“Value Added Tax” means value added tax as referred to in the Value Added Tax Act 1994 (or any tax of a similar nature which may besubstituted for or levied in addition to it;“Works” means the works which are to be carried out at the Premises by the Contractor and which are briefly described in the BuildingDocuments and which are to be carried out pursuant to and with regard to the provisions of Schedule 1 to provide a warehousewith ancillary offices of approximately 116,000 square feet gross external area (excluding the gross external area of the secondfloor plant room and the gross external area of the staircase from the first floor to the said plant room). 1.2The clause headings in this Agreement (except for the definitions) are for ease of reference and are not to be used for the purposes of construing thisAgreement. 1.3References in this Agreement to clause numbers or schedules or paragraphs in schedules mean the clauses of or schedules to or paragraphs inschedules to this Agreement. 1.4Obligations undertaken by more than one person are joint and several obligations. 1.5Words importing persons include firms, companies and corporations and vice versa. 1.6Words importing one gender will be construed as importing any other gender. 1.7Words importing the singular will be construed as importing the plural and vice versa. 1.8Unless otherwise specified, a reference to legislation is to that legislation as consolidated, amended or re-enacted from time to time and includes allorders, regulations, consents, licences and bye-laws made or granted under such legislation and references to legislation generally are to all legislation(local, national and supra-national) having effect in relation to the Premises. 1.9Where any act is prohibited no party will permit or omit to do anything which will allow that act to be done. 1.10Where any party agrees to do something it will be deemed to fulfil that obligation if it procures that it is done. 1.11Where any notice, consent, approval, permission or certificate is required to be given by any party to this Agreement such notice, consent, approval,permission or certificate must be in writing and will not constitute a valid notice, consent, approval, permission or certificate for the purpose of thisAgreement unless it is in writing. 1.12References in this Agreement to the “Standard Conditions” are to the Standard Commercial Property Conditions (First Edition). 2.CONDITIONALITY AND DEPOSIT 2.1This Agreement is conditional on the Unconditional Date occurring on or before the Cut-off Date. 2.1.1The Tenant shall use best endeavours to satisfy the Condition as soon as possible after the date of this Agreement and in any event before the Cut-offDate. 2.1.2The Tenant may elect to waive the Condition by serving notice in writing on the Landlord to that effect on or before the Cut-off Date, in which case thedate of receipt of such notice shall be the Unconditional Date.2.1.3The Tenant shall notify the Landlord in writing within 5 working days of the Condition being satisfied or waived. 2.2If the Unconditional Date has not occurred by the Cut-off Date then the Landlord shall be entitled to determine this Agreement by serving written noticeto that effect on the Tenant whereupon this Agreement shall absolutely determine but without prejudice to any rights that either party may have againstthe other for any antecedent breach of the terms and conditions of this Agreement. 2.3The Tenant shall pay to the Landlord on the date hereof the sum of three hundred and seventy-seven thousand pounds (£377,000) which the Landlordshall hold in accordance with and subject to the terms and conditions of the Deposit Deed notwithstanding the Deposit Deed will not be completed untilthe Completion Date but provided that the said sum shall be returned to the Tenant with interest if this Agreement is terminated under clause 12.4 orclause 16. 2.4If this Agreement is terminated pursuant to clause 2.2 the Tenant shall pay for and indemnify the Landlord in respect of all costs fees and expenses: 2.4.1incurred by the Landlord in relation to the Works between the date of this Agreement and the date of termination; and 2.4.2consequential upon the Works no longer proceeding, including but not limited to any costs and penalties for breaking contracts and/or orders formaterials. 3.WORKS, ACCESS AND TENANT’S MEZZANINE WORKS 3.1Works 3.1.1Subject to obtaining all Approvals the Landlord shall procure the execution of the Construction Documents in substantially the forms annexed heretoand to procure the carrying out of the Works in accordance with the provisions relating thereto as specified in Schedule 1. In the event of any materialalteration to the Construction Documents being requested, the Landlord shall submit written particulars thereof to the Tenant for its approval, suchapproval not to be unreasonably withheld. Such approval or notice that approval is withheld shall be given to the Landlord within 10 working daysafter written particulars are submitted. Any dispute as to whether or not such approval is unreasonably withheld shall be referred for determination inaccordance with clause 15. 3.1.2The Landlord will procure that the Works until the Certificate Date are insured against the Insured Risks (as defined in the Lease) and in such manneras provided for in the Lease and in the event that the Works or any part or parts thereof are destroyed or damaged the Landlord shall comply with itsobligations under the Lease as if the Lease had been granted. 3.1.3The Tenant shall have the right to make representations in respect of the appointment of any sub-contractors appointed by the Contractor. No sub-contractor undertaking a design obligation relating to floor slab, frame, mechanical and electrical engineering services shall be appointed except onterms that the sub-contractor shall enter into a deed of warranty in respect of such design in substantially the terms of the Sub-Contractor Warranty.The Sub-Contractor Warranty shall provide for appropriate professional indemnity insurance cover in the case of the floor slab and frame elementsand appropriate product liability insurance cover in respect of the other design elements. The Landlord will use all reasonable endeavours to obtainproduct guarantees for cladding/roofs and lifts.3.1.4The Landlord shall prior to the Certificate Date provide to the Tenant for approval full details of the professional indemnity cover in respect of theContractor, Professional Team and Environmental Consultant. 3.1.5The Building Contract shall not be subject to assignment by the Landlord save in the event of any insolvency of the Landlord. 3.1.6If during the carrying out of the Works any pollution or contamination of the Premises is found which is additional to that referred to in the Report theLandlord at its own expense shall procure the removal/neutralisation of the same in accordance with Environmental Agency Recommendations and asapproved by the Tenant’s Representative such approval not to be unreasonably withheld or delayed and to the reasonable satisfaction of theEnvironmental Consultant and the Environmental Deed of Warranty shall be varied to cover the further pollution/contamination. 3.1.7Within the period of 30 days after the Certificate Date the Landlord shall provide the Tenant with a complete and detailed “as built” specification andrelated drawings in respect of the Works on computer disc and all instruction and operation manuals for all plant and machinery in the Premises. 3.2Access 3.2.1The Landlord shall procure the issue by the Project Manager of the Access Certificates as soon as reasonably possible but no later than the relevantTarget Access Dates and shall permit early access to the Premises in accordance with and where the provisions of Schedule 2 shall apply. 3.2.2The Landlord will provide a copy of the Access Certificate to the Tenant on the day it is issued in email format the Tenant having supplied to theLandlord the relevant email address with a hard copy thereof to be forwarded by first class post within 48 hours of issue of the Access Certificate. 3.3Payment for Tenant’s Mezzanine Works 3.3.1In consideration of the Landlord carrying out the Tenant’s Mezzanine Works on behalf of the Tenant the Tenant shall pay the Landlord the totalconstruction costs of the Tenant’s Mezzanine Works together with all design, professional and ancillary costs arising directly or indirectly out of theimplementation of the Tenant’s Mezzanine Works calculated in accordance with this clause as certified by the Project Manager as being reasonably andproperly incurred, the Project Manager acting independently and in a professional capacity. 3.3.2Each Project Manager’s interim certificate (the “Interim Certificate”) will be supported by a breakdown of costs. 3.3.3The Tenant shall pay sums due pursuant to this clause 3.3 by stages within ten (10) working days of the Landlord presenting the Tenant with a copyof the Interim Certificate. 3.3.4If payment of a sum pursuant to clause 3.10 is not made within 10 working days of the Landlord presenting the Tenant with a copy of the InterimCertificate then the Landlord may (without prejudice to the Landlord’s other remedies) elect by notice in writing to the Tenant to suspend work underthe terms of this Agreement until such payment is made (and the period for performing the Landlord’s obligations under this Agreement shall beextended by the period of the suspension).3.3.5Payments shall be made by the Tenant by means of a telegraphic transfer through the CHAPS system to the bank account specified by the Landlord. 3.3.6If any sum due under this clause 3.3 is not paid within 10 working days of the Landlord presenting the Tenant with a copy of the Interim Certificate,the Tenant shall pay interest to the Landlord at the Prescribed Rate for the period from and including the Landlord presenting the Tenant with a copy ofthe Interim Certificate until payment (both before and after any judgment) or until payment is accepted by the Landlord (as the case may be). 3.4Lease Plan 3.4.1Not less than two months before the anticipated Certificate Date the Landlord shall prepare a draft Land Registry-compliant version of the “LeasePlan”, the current version of which is annexed to the draft Lease annexed to this Agreement at Annexure 7. 3.4.2Once any revisions to the Lease Plan have been agreed or determined they shall be annexed to the Lease as the “Lease Plan” in substitution of theexisting Lease Plan. 3.4.3To the extent that the Land Registry raises any requisitions as the extent that the Lease Plan accord with the Land Registration Rules 2003, the Landlordshall use all reasonable endeavours to assist the Tenant in dealing with such requisitions (each party bearing its own costs). 4.GRANT OF THE LEASE AND DELIVERY OF THE OPINION LETTER 4.1Upon the Completion Date the Landlord shall: 4.1.1grant the Lease and the Licence to Alter and the Tenant and the Surety shall accept the said Lease and the Licence to Alter; 4.1.2the parties shall enter into the Deposit Deed; and 4.1.3on completion the definition in the Lease of “Term”, “Commencement Date”, “Rent”, “Rent Commencement Date” and “Review Dates” shallbe completed so as to correspond to the provisions contained in clause 1. 4.2The Lease the Deposit Deed and the Licence to Alter and counterparts thereof shall be prepared by the Landlord’s Solicitors and shall be executedrespectively by the Landlord and by the Tenant and the Surety. 4.3Completion shall take place at the offices of the Landlord’s Solicitors or at such other place in London or Slough as they shall reasonably require. 4.4If the Tenant has not provided full details of its works for the purpose of the Licence to Alter 14 days prior to the Completion Date completion of suchlicence shall take place within 14 days of the Landlord’s Solicitors submitting the engrossment of a counterpart Licence to Alter.4.5On the Completion Date the Tenant shall pay to the Landlord such sum which when added together with the sum paid pursuant to clause 2 representsthe “Deposit” (as defined in the Deposit Deed). 4.6On the Completion Date the Tenant shall procure delivery of the Opinion Letter to the Landlord. 5.RESTRICTIONS 5.1The Premises shall be demised subject to all (if any) Restrictions affecting the Premises (whether in existence at the date of this Agreement or arising atany later date). 5.2No representation is made or warranty given by the Landlord as to whether any restrictions exist or as to the permitted use of the Premises for planningpurposes. 6.REPRESENTATIONS 6.1Save as provided in paragraph 6.2 no agent adviser or other person acting for the Landlord has at any time prior to the making of this Agreement beenauthorised by the Landlord to make to the Tenant or to any agent adviser or other person acting for the Tenant any representation whatever (whetherwritten oral or implied) in relation to the Premises or to any matter contained or referred to in this Agreement. 6.2Any statement made in writing by the Landlord’s Solicitors to the Tenant’s Solicitors prior to the making of this Agreement in reply to an inquiry madein writing by the Tenant’s Solicitors was made with the authority of the Landlord. 7.NON-ASSIGNMENTThe Tenant may not assign, charge or otherwise deal in any way with the benefit of this Agreement in whole or in part prior to the grant of the Leaseexcept to a Group Company and the Landlord shall not be obliged to grant the Lease to any person other than the Tenant or a Group Company (with theTenant acting as a guarantor to the assignee in the same manner as provided for in the Third Schedule to the Lease) which in either case in thereasonable opinion of the Landlord is able to comply with covenants of the Tenant in this Agreement and the Lease subject to obtaining the prior writtenapproval of the Landlord such approval not to be unreasonably withheld or delayed.provided always that: 7.1if the Lease shall not have been granted by reason of any act neglect or default of the Landlord within three months after the Certificate Date then theTenant shall be entitled subject to obtaining the prior approval of the Landlord (such approval not to be unreasonably withheld or delayed) to assign itsinterest under this Agreement and its right to the grant of the Lease to an assignee which if the Lease had been granted would have qualified to be anassignee of the Lease; and7.2the Tenant shall be entitled to charge its interest under this Agreement and its right to the grant of the Lease by way of a charge for the purposes ofraising finance to enable the Tenant to meet its obligations under this Agreement. 8.NOTICES 8.1In this clause 8: “Landlord’s Address” means the address of the Landlord shown on the first page of this Agreement or such other address as the Landlord may fromtime to time notify to the Tenant as being its address for service for the purposes of this Agreement;“Surety’s Address” means the address of the Surety shown on the first page of this Agreement or such other address as the Surety may from time totime notify to the Landlord as being its address for service for the purpose of this Agreement;“Tenant’s Address” means the address of the Tenant shown on the first page of this Agreement or such other address as the Tenant may from time totime notify to the Landlord as being its address for service for the purpose of this Agreement. 8.2Any notice or other communication given or made in accordance with this Agreement shall be in writing and given in accordance with section 196 ofthe Law of Property Act 1925 (as amended) or by first class post (in respect of which receipt will be deemed to be the day following the posting of thesame) and shall be forwarded as applicable to the Landlord’s Address or the Tenant’s Address or the Surety’s Address. 9.EXECUTORY AGREEMENT 9.1This Agreement is an executory agreement only and shall not operate or be deemed to operate as a demise of the Premises. 9.2Save as provided for in Schedule 2 the Tenant shall not be entitled to occupation or possession of the Premises prior to the Certificate Date but shallhave possession of the Premises from the Certificate Date and from such date shall observe and perform all the covenants and conditions contained inthe Lease as if the same had already been granted. 9.3Upon the earlier of the possession by the Tenant of the Premises or the Certificate Date in the event of the Lease not having been completed the Tenantwill pay to the Landlord on demand a licence fee equal to the rents and other payments which would have been payable by the Landlord to the Tenanthad the Lease been granted (subject always to the Rent Commencement Date) provided that for the purposes of this clause 9.3 access to the warehousepart of the Premises shall not constitute possession of the Premises.9.4The Landlord shall be entitled to all remedies by distress action or otherwise for recovering any moneys due or for breach of obligation by the Tenantas if the Lease had been completed. 10.NON-MERGER ETC.All the provisions of this Agreement shall (to the extent that they remain to be observed and performed) continue in full force and effect notwithstandingcompletion of the Lease. 11.DEFECTS, ENVIRONMENTAL AND THIRD PARTY RIGHTS 11.1Defects 11.1.1The Landlord agrees with the Tenant to procure the making good of at its own expense any defects, shrinkages or other faults that arise in the Premiseswithin 12 months of the Certificate Date (and are notified in writing by the Tenant to the Landlord during such period) which are due to faulty design,supervision of the Works, materials or workmanship not in accordance with the Building Contract or this Agreement or to frost occurring before thefirst anniversary of the Certificate Date or other failure of the Building Contractor to comply with its obligations under the Building Contract. Anysuch works shall be undertaken at the expiry of the said 12 month period, unless the defect is such that it impacts upon the use of the Premises by theTenant whereupon the Landlord will procure that any such works are carried out as soon as reasonably possible. The Landlord shall make good orprocure the remedying by the Building Contractor of all defects and/or incomplete items referred to in any supplementary or snagging list referred to inthe Certificate and/or required to be carried out by the Landlord whether as part of its certification arrangements in relation to the Premises or otherwise. 11.1.2If the Landlord shall fail to comply with its obligations under this clause 11 then the Tenant may remedy the breach and all proper costs and expensesin connection therewith shall be paid by the Landlord to the Tenant within 10 days of demand. 11.1.3The provisions of this clause 11 shall be without prejudice to any other provisions of this Agreement and to any other claims, rights of action orremedies which the Tenant might have at common law or otherwise. 11.2Environmental 11.2.1The Landlord shall provide to the Tenant the Environmental Deed of Warranty as soon as possible following the carrying out by the EnvironmentalConsultant of its post construction audit report. 11.2.2The Environmental Consultant shall prior to the Certificate Date provide a warranty or letter upon which the Tenant is entitled to rely confirming allpollution and contamination identified by the Report has been dealt with in accordance with Environment Agency recommendations. 11.3Sub-Contractor WarrantiesThe Landlord shall provide to the Tenant prior to the Completion Date any Sub-Contractor Warranties Provided Always that if the Tenant elects tocomplete without such warranties being available the Landlord shall procure completion of thoseoutstanding as soon as possible.11.4Third party rightsThe Landlord shall procure the grant to the Tenant of the benefit of the rights set out in the Third Party Rights Memorandum attached to the BuildingContract and in the Third Party Rights Memoranda attached to the Appointments and shall within 14 days of the Completion Date serve notices uponthe Contractor and upon the Professional Team notifying them of the Tenant’s interest in the Premises and shall provide the Tenant with a copy of suchnotices. 12.AREA AND RENT 12.1Not less than 10 days prior to the Certificate Date (as estimated at the relevant time by the Project Manager) the building part of the Premises shall bemeasured on site by the Landlord’s Representative and the Tenant’s Representative in accordance with the Code of Measuring Practice. 12.2The Landlord’s Representative and the Tenant’s Representative shall measure the gross external area of the building part of the Premises by way ofsquare feet and square metres and shall agree the resultant figures which: 12.2.1shall be inserted in the relevant part of the First Schedule to the Lease; 12.2.2in the case of the square foot measurement (which shall have deducted therefrom the gross external area of the second floor plant room and the grossexternal area of the staircase from the first floor to the said plant room) multiplied by the sum of thirteen pounds (£13.00) shall represent the initialyearly rent (until varied) but where such sum shall not exceed one million five hundred and eight thousand pounds (£1,508,000). 12.3If the gross external area of the building part of the Premises exceeds the Target Area the Lease shall be amended to provide at rent review that the revisedrent is to be assessed on the gross external area of the building part of the Premises being the Target Area. 12.4If the gross external area (excluding the gross external area of the second floor plant room and the gross external area of the staircase from the first floorto the said plant room) is less than 96 per cent of the Target Area or more than 105 per cent of the Target Area then within 10 working days of the dateof agreement or determination of the gross external area the Tenant shall be entitled but not obliged to determine this Agreement by serving notice on theLandlord and on actual receipt of such notice this Agreement shall determine but without prejudice to any pre-existing breach of the terms of thisAgreement. 12.5The Landlord’s Representative and the Tenant’s Representative at the time of measuring the building part of the Premises pursuant to clause 12.2 shallagree the final form of the First Schedule to the Lease. 13.ENTIRE UNDERSTANDING 13.1This Agreement embodies the entire understanding of the parties and there are no other arrangements between the parties relating to the subject matter ofthis Agreement13.2No amendment or modification shall be valid or binding on any party unless: 13.2.1it is made in writing; 13.2.2it refers expressly to this Agreement; 13.2.3it is signed by the party concerned or its duly authorised representative. 14.STANDARD CONDITIONSThe Standard Conditions shall apply hereto insofar as the same are not inconsistent with the provisions hereof and are applicable to the grant of a leasesave that Standard Conditions 3.4, 4.1.2, 4.2, , 4.5.3 and 5.1 do not apply. 15.EXPERT DETERMINATION 15.1Save as otherwise provided for in this Agreement, and save for any dispute which is referred to adjudication under the Construction Act 1998, anydispute or difference which shall arise between the parties as to the construction of this Agreement or as to the respective rights, duties and obligationsof the parties under or as to any other matter arising out of or connected with the subject matter of this Agreement shall if either the Landlord or theTenant so requires at any time by notice served on the other (the “Notice”) be referred to the decision of an expert (the “Expert”). 15.2The Expert shall be appointed by agreement between the Landlord and the Tenant or if within five working days after service of the Notice theLandlord and the Tenant have been unable to agree then on the application of either the Landlord or the Tenant by such one of the following as theLandlord and the Tenant shall agree to be appropriate having regard to the nature of the dispute or difference in question: 15.2.1the President for the time being of the Law Society; 15.2.2the President for the time being of the Royal Institute of British Architects; 15.2.3the President for the time being of the Royal Institution of Chartered Surveyors or (in each such case) the duly appointed deputy of such President orany other person authorised by him to make appointments on this behalf. 15.3If within 10 working days after service of the Notice the Landlord and the Tenant have been unable to agree which of the persons referred to inparagraph 13.2 is appropriate to appoint the Expert then the Expert shall be appointed on the application of either the Landlord or the Tenant by thePresident for the time being of the Law Society or his duly appointed deputy or any other person authorised by him to make appointments on hisbehalf. 15.4The costs of the Expert shall be determined by the Expert but in the event of any failure to determine the same the costs shall be borne in equal sharesby the parties. 15.5One party may pay the costs required to be borne by another party if they remain unpaid for 21 days after they become due and then recover these andany incidental expenses incurred from the other party on demand.16.CRITICAL DATE AND LONG STOP DATEIf the Works have not commenced on site by the Critical Date or if the Certificate Date has not been achieved by the Long Stop Date then provided thatthe Tenant has not entered the Premises and taken occupation or possession of them the Tenant shall be entitled to determine this Agreement by servingwritten notice to that effect on the Landlord whereupon this Agreement shall absolutely determine but without prejudice to any rights that either partymay have against the other for any antecedent breach of the terms and conditions of this Agreement. 17.EXCLUSION OF THIRD PARTY RIGHTSEach party confirms that no term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not aparty to this Agreement. 18.CONSTRUCTION DOCUMENTSSave where the same are part of the health and safety file (which is to be provided to the Tenant pursuant to paragraph 6 of Schedule 1) the Landlordshall on the Completion Date or before where practicable supply certified copies to the Tenant of the Construction Documents and all other relevantdocumentation relating to the Works. 19.THE REPRESENTATIVE 19.1The Landlord shall make available a portakabin or similar accommodation (the “Portakabin”) on the site of the development for use by the Tenant’sRepresentative and the reasonable cost of which shall be borne by the Tenant and any invoice in this respect shall be paid within 14 days of writtendemand. 19.2The Tenant shall procure that all damage caused to the Portakabin by the Tenant’s Representative is made good at its own expense. 19.3The Tenant’s Representative shall only use the Portakabin in relation to the Works and the Tenant’s Fit Out Works and for no other purpose. 19.4The Landlord shall not be obliged to provide any facilities of whatsoever nature in respect of the Portakabin except a power supply and make availableon the site of the development the use of a portaloo. 19.5The use of the Portakabin shall be subject to such reasonable regulations as the Contractor may reasonably require. 20.TERMINATION 20.1If any of the following events occurs then the Landlord may forthwith by notice in writing to the Tenant at any time terminate this Agreement withoutprejudice to any right or remedy of any party to this Agreement against any other party in respect of any prior breach of this Agreement: 20.1.1there is any breach of the warranties, covenants and other obligations of the Tenant or the Surety under this Agreement which (if capable of remedy) isnot remedied by the Tenant or the Surety within such reasonable period as the Landlord stipulates;20.1.2the Tenant or the Surety (being a company): (a)is unable to pay, or has no reasonable prospect of being able to pay, its debts within the meaning of section 123 or sections 222 to 224(1) of theInsolvency Act 1986 (but disregarding references in those sections to proving it to the court’s satisfaction); (b)resolves or its directors resolve to enter into, or it enters into, or it or its directors commence negotiations or make any application to court inrespect of, or call or convene any meeting for the approval of any composition, compromise, moratorium (including a moratorium statutorilyobtained, whether as a precursor to a voluntary arrangement under the Insolvency Act 1986 or otherwise, or a moratorium informallyobtained), scheme or other similar arrangement with its creditors or any of them, whether under the Insolvency Act 1986, the Companies Act1985 or otherwise; (c)resolves, or its directors resolve, to appoint an administrator of it, or to petition or apply to court for an administration order in respect of it, ora petition or an application for an administration order is made in respect of it, or an administration order is made in respect of it, or any stepunder the Insolvency Act 1986 is taken to appoint an administrator of it out of court, or it enters administration; (d)requests or suffers the appointment of a Law of Property Act 1925, court appointed or other receiver or receiver and manager, or similar officerover or in relation to the whole or any part of its undertaking, property, revenue or assets, or any person holding security over all or any part ofits undertaking, property, revenue or assets takes possession of all or any part of them or requests that such a person does so; (e)resolves or its directors resolve to wind it up, whether as a voluntary liquidation or a compulsory liquidation, or its directors take any stepunder the Insolvency Act 1986 to wind it up voluntarily or to petition the court for a winding-up order, or a winding-up petition is presentedagainst it, or a provisional liquidator is appointed to it, or it goes into liquidation within the meaning of section 247 of the Insolvency Act1986; (f)is dissolved, or is removed from the Register of Companies, or ceases to exist (whether or not being capable of reinstatement or reconstitution)or threatens to cease to exist, or its directors apply for it to be struck-off the Register of Companies; (g)has any distress, execution, sequestration or other process levied or forced upon or against its undertaking, chattels, property or any of itsassets; or (h)is, or becomes, subject to, or takes or has taken against it or in relation to it or the whole or any part of its undertaking, property, revenue orassets, any finding, step, process or proceeding in any jurisdiction other than England and Wales which is equivalent, analogous,corresponding or similar to any of the findings, steps, processes or proceedings mentioned in clauses 20.1.3(a)-36.1.3(g) above, and whether ornot any such finding, step, process or proceeding has been taken in England and Wales;20.1.3the Tenant or the Surety ceases or threatens to cease to carry on any business, or makes or permits or threatens to make or permit any material changein the nature of its business, or suspends or threatens to suspend payment of its debts. 20.2In this clause 20 “company” includes: 20.2.1a company as defined in section 735 of the Companies Act 1985; 20.2.2a body corporate or corporation within the meaning of section 740 of the Companies Act 1985; 20.2.3an unregistered company or association; 20.2.4any “company or legal person” in relation to which insolvency proceedings may be opened pursuant to Article 3 of the EC Regulation on InsolvencyProceedings 2000 (No 1346/2000); 20.2.5a partnership within the meaning of the Partnership Act 1890; 20.2.6a limited partnership registered under the Limited Partnerships Act 1907; and 20.2.7a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000,and the “Registrar of Companies” includes the keeper of any register of any of the legal persons mentioned above. The relevant provisions of clause20 shall, except where the context otherwise requires, apply mutatis mutandis to a partnership within the meaning of the Partnership Act 1890 or alimited partnership registered under the Limited Partnerships Act 1907 incorporating, where relevant, the modifications mentioned in the InsolventPartnerships Order 1994 and the Insolvent Partnerships (Amendment) Order 2005, and to a limited liability partnership incorporated under theLimited Liability Partnerships Act 2000 incorporating, where relevant, the modifications mentioned in the Limited Liability Partnerships Regulations2001. 20.3Where the Tenant or the Surety is more than one individual or company then the Landlord’s right under clause 20.1 will arise if any of the eventscontained or referred to in clause 20.1 occurs in respect of any of those individuals or companies. 20.4On determination of this Agreement, the Tenant shall (so far as required by the Landlord) at its own expense forthwith remove the Tenant’s Works andany other works carried out by the Tenant at the Premises and reinstate the Premises to the state and condition in which it was prior to thecommencement of the Tenant’s Works. Any default in carrying out such works of removal and reinstatement shall entitle the Landlord to carry outsuch work at the expense of the Tenant and all proper costs and expenses incurred shall be repaid by the Tenant to the Landlord on demand andrecoverable as a debt due from the Tenant. This clause shall remain in full force and effect notwithstanding the termination of this Agreement. 21.CONFIDENTIALITYThe Landlord shall not prior to 31 October 2008 and thereafter not without the written consent of the Tenant before make, cause, allow or permit to bemade any: 21.1press, public announcement or release; or21.2any other disclosure by the Landlord or anyone else of any details concerning this Agreement, its terms or effect to any third party other than: (a)to professional advisers on a “need to know” basis; (b)when required by law; or (c)when required by the Stock Exchange. 22.SURETY 22.1The Surety agrees to be surety in accordance with the provisions on its behalf contained in the Lease (and will execute a counterpart thereof when calledupon to do so) and if at any time during the currency of this Agreement (including all matters that remain to be observed and performednotwithstanding completion hereof) the Tenant shall fail to perform and/or comply with any of the terms and conditions on its behalf contained theSurety shall perform observe and comply with such terms and conditions. 22.2The Surety guarantees to the Landlord that the Tenant will promptly comply with the terms and conditions contained in this Agreement and the Lease. 22.3The Surety will pay and make good to the Landlord all losses damages costs and expenses arising as a result of any default by the Tenant incomplying with the terms and conditions contained in this Agreement. 22.4The Surety agrees that no time or indulgence granted to the Tenant by the Landlord nor any variation of the terms of this Agreement that is notprejudicial to the Surety to a material degree nor any other thing by virtue of which but for this provision the Surety would have been released will inany way release the obligations of the Surety to the Landlord under this clause except where the Surety would otherwise be released pursuant to theLandlord and Tenant (Covenants) Act 1995. 22.5The Surety agrees that if this Agreement is disclaimed by or on behalf of the Tenant under any statutory or other power or if this Agreement isterminated by the Landlord pursuant to clause 20, the Surety shall if so required by the Landlord by written notice within one month after notice of adisclaimer has been received by the Landlord or after such termination enter into a new contract with the Landlord in the same form as this Agreement(except for this clause) and the new contract shall take effect from the date of the disclaimer and the Surety shall pay the Landlord’s reasonable andproper costs and disbursements together with Value Added Tax incurred in the preparation and completion of the new contract and execute and deliverit to the Landlord PROVIDED ALWAYS THAT the Surety having received the above mentioned notice may within fourteen days of receipt nominate aGroup Company to be Tenant under the new contract and PROVIDED FURTHER THAT it shall guarantee such Group Company in the same termsas it is Surety under this Agreement and in such case it shall procure that the Group Company shall enter into such contract accordingly and executesthe counterpart and where the Surety shall execute the counterpart as Surety and the Surety shall procure payment or pay all costs and duties inrelation to it.23.REPLACEMENT SURETY 23.1In clause 23.2 a “Surety Replacement Event” is the occurrence of any of the events referred to in clause 20.1.2 in relation to the Surety, or where theSurety comprises more than one person, the occurrence of any of those events in relation to any one of them. 23.2If at any time a Surety Replacement Event occurs, the Tenant shall give immediate written notice of it to the Landlord. The Landlord may after aSurety Replacement Event (and whether or not it has received notice of it from the Tenant) give written notice to the Tenant requiring the Tenant toprocure a replacement or additional surety. Within one month of the Landlord giving such notice to the Tenant, the Tenant shall procure that a surety ofstanding acceptable to the Landlord acting reasonably enters into and executes and delivers to the Landlord a replacement or additional guarantee in thesame form as that entered into by the Surety in respect of which the Surety Replacement Event has occurred. 24.JURISDICTIONThis Agreement shall be governed by and construed in accordance with the laws of England and Wales and the parties to this Agreement submit to thejurisdiction of the English courts.In witness of which this Agreement has been executed as a deed the day and year first before written.SCHEDULE 1Provisions relating to the Works 1.CARRYING OUT OF WORKS 1.1Subject to obtaining all necessary Approvals the Landlord will procure the carrying out of the Works at its expense and procure that the same arecarried out in a good and workmanlike manner and with good quality materials of their type and kind in accordance with the Approvals and theBuilding Documents. 1.2The Landlord shall indemnify the Tenant against all fees, charges and other payments whatever which may at any time be payable to any local orother competent authority in respect of the carrying out of the Works. 1.3The Landlord shall procure that the Tenant and the Tenant’s Representative shall: 1.3.1be kept fully informed of the progress of the Works; 1.3.2be supplied with copies of all architect’s written instructions in respect of any material variation or addition to or omission from the Works; 1.3.3be given reasonable prior notice of all progress and fortnightly liaison meetings; 1.3.4have the right to attend such meeting; 1.3.5be supplied with copies of site meeting minutes; and 1.3.6be informed forthwith of any delay which is likely to delay the Access Date or the Certificate Date. 1.4The Landlord shall procure that any landscaping works required as part of the Works shall be completed and carried out within one planting seasonfollowing the Certificate Date in the course of carrying out of the Works and that any contract in relation to landscaping shall provide for amaintenance period of 12 months from the date of completion. 1.5The Landlord shall procure that: 1.5.1the Building Contractor will maintain insurance of the Works up to the Certificate Date in accordance with the provisions of the Building Contract; 1.5.2that in the event the Works or any part of them at any time are destroyed or damaged the Works and the Premises are rebuilt and reinstated and as soonas practicable. 1.6The Landlord warrants to and undertakes with the Tenant that: 1.6.1reasonable skill and care will be and has been exercised in the design and supervision of the selection of materials and goods for and the standards ofworkmanship in connection with the Works; and 1.6.2reasonable skill and care will be exercised so as to ensure that the mechanical and electrical works forming part of the Works will perform so as to meettheir design criteria as described in the Building Documents.2.REVIEW OF WORKS 2.1The Representative: 2.1.1may at reasonable times on giving reasonable prior notice to the Project Manager view the state and progress including the monitoring of the Works andmake representations to the Landlord in respect of the Works; 2.1.2shall have the right to call for a site meeting once per calendar month to discuss the progress of the Works and attend all other site meetings as anobserver and be entitled to make any representations in writing thereafter to the Project Manager which he must take reasonable account of; 2.1.3shall not in the exercise of his rights under this paragraph 2 interfere with the carrying out of the Works nor shall the Tenant’s Representative beentitled to view the Works unless accompanied by a representative of the Landlord or the Project Manager or a representative of the Contractor; 2.1.4may at any time (other than as provided for in paragraph 2.1.2) make representations relating to the following: (a)the detailed critical bar chart programme showing the sequence of operation in the design procurements and construction of the building part of thePremises; (b)the procurement schedule showing the last day by which materials accord with the main construction programme are to be ordered, reserved ornotice given to supplier or manufacturers; (c)Landlord’s instructions (in its capacity as employer), variations and orders and with minutes of progress and team meetings; (d)copies of the Contractor’s insurance as required under the Building Contract; (e)copies of soil and site investigations reports, including environmental assessments; (f)copies of all construction drawings and drawings issued to accompany variation orders to include architectural, engineering, mechanical andelectrical specialist sub-contract drawings and the like; (g)documentation (where available) relating to compliance with all statutory matters relating to the Works,and in any case the Project Manager shall have regard to and shall take account of the same but in the event that no comment is received from theTenant or the Tenant’s Representative within five working days of receipt by the Tenant of any of the above the Tenant shall be deemed to haveaccepted the position and therefore approved the same. 3.VARIATIONS TO WORKS 3.1In this paragraph 3: “Variation” means any amendment to or departure from the Building Documents and the details of the Works contained therein whether it beby way of alteration, addition or omission. 3.2The Landlord shall be entitled at any time to make a Variation to the Works where necessary to comply with any lawful requirement of any local orstatutory authority or comply with building regulations or the like and the Landlord shall notify the Tenant of such Variation within 10 working daysand such variation shall be implemented only with the prior consent of the Tenant which shall not be unreasonably withheld or delayed. 3.3The Tenant may make a written request for variations to the Works at any time subject to paragraph 3.5 below prior to the Certificate Date and subjectto paragraph 3.5.1 within 10 working days of receipt of such request from the Tenant the Landlord shall advise the Tenant in writing as to whether ornot the Variation is agreed and if it is agreed shall at the same time supply details of any costs to be incurred or saved including fees, profit andoverheads (“Costed Variation”) for the Variation together with details of any period by which the Landlord considers that the issue of the Certificatewill be delayed as a result of the Variation. 3.4If the Landlord considers that any Variation requested by the Tenant is of a nature that it is unable to supply the Costed Variation within the 10 dayperiod referred to in paragraph 3.3 the Landlord shall supply within seven days of the Tenant’s request for a Variation its estimate of the amount oftime it will take to provide the Tenant with the Costed Variation and shall use all reasonable endeavours to provide the same to the Tenant within thesaid estimated period. 3.5Within five working days of receipt of the Costed Variation the Tenant shall advise the Landlord in writing as to whether or not the Costed Variation isagreed and following confirmation of agreement between the parties that the Costed Variation is agreed the Landlord shall implement the Variation at therelevant time: 3.5.1the Tenant shall pay to the Landlord the agreed sum if it is a cost to the Landlord or the Landlord shall pay to the Tenant the agreed sum if it is asaving to the Landlord in each case pursuant to the Costed Variation within 14 days of receipt of a written demand applicable thereto; 3.5.2if the Costed Variation is not agreed the Landlord shall not carry out the Variation. 3.6Notwithstanding the provisions of this paragraph 3 the Tenant shall not be entitled to request any Variation two months prior to the Target CompletionDate that would create in aggregate with any other Variation of the Tenant a delay in the Certificate being issued by a period greater than 14 days fromthe date it would have been achieved but for any Variations. 3.7In respect of this paragraph 3 where the Landlord agrees to a Variation the parties shall at all times comply with the provisions of the Tenant’s VariationForm which shall be completed prior to the carrying out of any Variation save and except in the event of paragraph 3.2 when the provisions of thisparagraph 3.7 shall not apply. 3.8If a Variation is requested by the Tenant and put into effect by the Landlord and such Variation causes or is likely to cause a delay in completion of theWorks then prior to the issue of the completed and signed Tenant’s Variation Form the parties shall agree upon the Certificate Date upon which apartfrom the Variation the Works would otherwise have been completed and such date shall be deemed to be the Certificate Date for the purposes of thedefinition of Rent Commencement Date unless varied by any further Variation and such date shall be inserted in the Tenant’s Variation Form andfurther the parties shall agree and record a revised Target Completion Date to take account of the delay caused by the Variation.4.TIME FOR COMPLETION OF WORKS 4.1The Landlord shall use all reasonable endeavours to procure that: 4.1.1completion of the Works occurs by the Target Completion Date; 4.1.2the Access Dates occur within fifty-six (56) weeks of the Unconditional Date. 4.2If the Employer awards an extension of time to the Contractor pursuant to the Building Contract then the Target Completion Date and the Target AccessDates shall be extended by the same period as the extension of time awarded under the Building Contract provided further that an extension of timeshall be granted where there has been a default on the part of the Tenant or the Tenant’s Representative has delayed in responding within a reasonabletime in dealing with any matter where his approval is required pursuant to any provision contained in this Agreement. 4.3In respect of any delay arising at any time pursuant to this paragraph 4 or otherwise the Landlord shall notify the Tenant of the same and if anydispute arises in this respect the matter shall be referred to an Expert pursuant to clause 15 of this Agreement. 4.4If at the Target Completion Date the Certificate Date has not been achieved (subject to any extension of the Target Completion Date having regard to theprovisions of paragraphs 3.7, 4.1 and 4.3 of this Schedule 1) the rent free period to be granted to the Tenant in respect of the Rent shall be extended byone month for each whole week of delay in the issue of the Certificate. 5.PRACTICAL COMPLETION “Certificate” means a certificate to be issued by the Architect certifying that the Works have been Practically Completed in accordance withthe provisions of the Building Contract and the provisions of paragraph 5.3 shall apply;“Certificate Date” means the date on which the Certificate is issued in respect of the Premises. 5.1When the Works shall have been substantially and practically completed (“completed” being construed without reference to any minor works of anunfinished nature which would normally be the subject of a building contractor’s snagging list (“Snagging Items”)) in accordance with thisAgreement (“Practically Completed”) the Landlord shall procure that the Architect shall issue the Certificate and a copy together with a list ofSnagging Items shall immediately be sent to the Tenant. 5.2The Landlord shall procure that at least 10 working days before the Architect proposes to issue the Certificate he shall notify the Tenant’sRepresentative of his proposal to issue the same and permit the Tenant’s Representative to accompany the Architect on inspection of the Works andtogether they shall prepare a snagging list and the Tenant’s Representative shall be entitled to make representations and the Architect shall have regard tosuch representations.5.3The Landlord shall procure that the Architect provides to the Tenant a copy of the Certificate as soon as it has been issued. 5.4Any dispute relating to the issue or otherwise of the Certificate shall be referred to an Expert pursuant to clause 15 of this Agreement. 6.CDM REGULATIONS 6.1The Landlord has agreed with the Tenant that it will act as the client for the purposes of the Construction (Design and Management) Regulations 2007(the “CDM Regulations”) in respect of the whole of the design and construction of the Works and that the Landlord will accordingly issue adeclaration to that effect under Regulation 4 of the CDM Regulations as soon as reasonably practicable after the date of commencement of the Works. 6.2On or within 30 days of the Completion Date the Landlord will without charge provide the Tenant with an electronic copy of the health and safety filein respect of the Works which the Landlord shall procure has been prepared in accordance with the requirements of the CDM Regulations. 6.3Following the Certificate Date or if sooner the date the Tenant enters the warehouse part of the Premises for the purposes of undertaking the Tenant’sWarehouse Works the Tenant shall appoint its own contractor and planning supervisor pursuant to the CDM Regulations in respect of the Tenant’sWorks. 7.NON PAYMENT 7.1If the Tenant fails to pay any demand for payment properly made under this Agreement on its due date then the Landlord may give the Tenant fiveworking days’ notice in writing that it intends to suspend the Works and if payment has still not been made at the expiry of such five working days’notice then the Landlord shall be entitled to suspend the Works immediately and any such suspension shall last until payment is made in full (withinterest if applicable) (and the period for performing the Landlord’s obligations under this Agreement shall be extended by the period of thesuspension). 7.2Any dispute relating to the payment shall be referred to an Expert pursuant to clause 15 of this Agreement.SCHEDULE 2Tenant’s Warehouse Works 1.As from each Access Date the Tenant shall be entitled to enter the relevant part of the Premises and to carry out and complete as soon as convenientlypracticable the Tenant’s Warehouse Works. 2.The Tenant’s occupation of the Premises shall be as licensee subject to and with the benefit of the same exceptions, reservations, rights (including thesame right to relief as a lessee has to relief from forfeiture as granted by section 146 of the Law of Property Act 1925), agreements and covenants aswould have applied if the Lease had been granted except insofar as the same are inconsistent with the terms of this Agreement. 3.Prior to the first Access Date the Tenant shall provide to the Landlord full and sufficient details of the Tenant’s Warehouse Works for approval by theLandlord such approval not to be unreasonably withheld or delayed. 4.The Tenant may at its own expense carry out and complete the Tenant’s Warehouse Works: 4.1in a good and workmanlike manner and with sound materials of their respective kinds; 4.2in accordance with the said plans and specification; 4.3using reasonable endeavours not to obstruct or interfere with the carrying out of the Works; 4.4to the reasonable satisfaction of the Project Manager in all respects. 5.If at any time any breach by the Tenant of its obligations in this Agreement relating to the manner of the carrying out of the Tenant’s Warehouse Workscauses or in the reasonable opinion of the Landlord will cause delay in completion of the Works then in such event the Landlord shall give notice to theTenant of his opinion with reasons and shall request that the Tenant agrees a new Target Completion Date (and/or a new Target Access Date in respectof those areas for which an Access Certificate has not yet been issued) which would otherwise have been such date but for such delay and in the eventof the parties within seven days of receipt of such notice by the Tenant failing to agree upon such Target Completion Date (and/or Target Access Date)the matter shall be referred to the President for the time being of the Royal Institute of British Architects for the appointment of the Expert having regardto the provisions of clause 15 and the decision of the Expert shall be final and binding on the parties. The Landlord shall have the right to serve anynumber of notices pursuant to this paragraph 5. 6.For the purposes of the rent review provisions of the Lease the Tenant’s Warehouse Works and any agreed Costed Variations carried out at the Tenant’sexpense under Schedule 1 hereof shall be disregarded for the purposes of any review of the rent.Signed as a deed by SLOUGH TRADINGESTATE LIMITED acting by two directors: /s/ Siva Shankar Director /s/ Kevin O`Connor Director Signed as a deed by EQUINIX (LONDON)LIMITED acting by two directors: /s/ Russell Poole Director /s/ James Marchbank Director Signed as a deed on behalf of EQUINIX, INC. a company incorporatedin the State of Delaware, United States of America, by Stephen M.Smith and Keith D. Taylor being persons who, in accordance with thelaws of that territory, are acting under the authority of the company /s/ Stephen M. Smith Authorised signatory /s/ Keith D. Taylor Authorised signatoryExhibit 10.30[ON THE LETTERHEAD OF CIT CAPITAL FINANCE (UK) LIMITED]LETTER OF APPROVAL & CONSENT To: Equinix Group Limited (formerly IXEurope Plc) 51-53 Great Marlborough Street London W1F 7JTFAO: James Marchbank14 January 2009Dear sirs£82,000,000 facilities agreement dated 29 June 2007 between, amongst others (1) Equinix Group Limited (formerly known as IXEurope Plc) (the“Company”) (as an original borrower), (2) CIT Bank Limited and (3) CIT Capital Finance (UK) Limited (the “Administrative Agent”) (asadministrative agent and security trustee) (as amended by amendment letters dated 31 August 2007 and 26 October 2007 and from time to time)(the “Facilities Agreement”)We refer to the Facilities Agreement. Terms defined in the Facilities Agreement shall have the same meaning where used in this letter, unless otherwise defined inthis letter. In this letter, “Effective Date” shall mean 31 December 2008. 1.The Company has requested that: (a)the Administrative Agent agrees to the appointment of Eric Schwartz as the “President, Europe” of the Group as of 1 June 2008 in replacement ofGuy Willner (CEO) and Christophe de Buchet (COO) and to amend the definition of “Management Change” accordingly; (b)the Administrative Agent agrees to allow an Original Borrower to reimburse Equinix Operating Co. Inc for the expenses, including salary, taxes,costs and other associated expenses reasonably incurred by Equinix Operating Co. Inc. in relation to Mr. Schwartz acting in his capacity asPresident, Europe during the period from 1 June 2008 to 31 December 2010 (inclusive) (the “Reimbursement Period”); (c)the Administrative Agent agrees to the proposed amendments to the Capital Expenditure financial covenant set out in Clause 21.1.4 (CapitalExpenditure) of the Facilities Agreement to reflect additional expansion projects; and (d)acknowledgement by the Administrative Agent that certain Subsidiaries of Equinix, Inc. are not members of the Borrowing Group and as suchtheir activities are not restricted by the Facilities Agreement. 2.On and from the Effective Date, the Administrative Agent, acting on the instructions of the Majority Lenders, agrees: (a)to the appointment of Eric Schwartz as the “President, Europe” of the Group as of 1 June 2008 in replacement of Guy Willner (CEO) andChristophe de Buchet (COO); (b)that the following new definition be inserted alphabetically in Clause 1.1:““President, Europe” means, in respect of the Group, the person with the title of “Chief Executive Officer” or “Chief Operating Office” or suchother title as may be agreed between the Administrative Agent and the Company.”; (c)that the definition of “Management Change” in Clause 8.5(C) (Exit) be deleted in its entirety and be replaced with:““Management Change” means the loss to or departure from the Group within any six Month period of both of the current President, Europeand the Finance Director, Europe, save as replaced by persons within six Months approved in writing by the Administrative Agent or aspreviously agreed by the Administrative Agent in writing.” (d)to permit an Original Borrower to reimburse Equinix Operating Co. Inc for all reasonable expenses incurred by Equinix Operating Co. Inc duringthe Reimbursement Period in connection with the remuneration of the President, Europe, including salary, taxes, costs and other associatedexpenses reasonably incurred by Equinix Operating Co. Inc. in respect of such President, Europe provided that the aggregate of all suchreimbursements made during the Reimbursement Period shall not exceed US$4m; (e)that the words “and content” be added to Clause 20.4.2(A) (Budget) after the word “form” in the first line of such Clause 20.4.2(A) (Budget); (f)that Clause 20.4.3 (Budget) be deleted in its entirety and replaced with:“The Company shall, if it materially changes the projections in such budget, promptly supply to the Administrative Agent in sufficient copies forthe Lenders revised projections in form and content reasonably acceptable to the Administrative Agent together with a description of the materialchanges.”; (g)that Clause 21.1.4 (Capital Expenditure) be deleted in its entirety and replaced with:“Capital Expenditure: The aggregate allowable Capital Expenditure of the Borrowing Group in respect of each financial year of the Companyshall be agreed between the Company and the Administrative Agent not later than 30 days following approval of each Budget delivered pursuant toClause 20.4.1 (Budget) or each set of revised projections delivered pursuant to Clause 20.4.3 (Budget); (h)that, notwithstanding paragraph 2(g) above, for the financial year ending December 2008, the aggregate allowable Capital Expenditure of theBorrowing Group shall not exceed £65 million (such calculation to be made in accordance with the methodology set out in the “proposedamendments” memo dated 12 December 2008 from James Marchbank to CIT Capital Finance (UK) Limited); (i)that the following Clause 23.18 be added in numerical order to the Facilities Agreement: “23.18Capital ExpenditureAgreement on the aggregate allowable Capital Expenditure of the Borrowing Group in respect of each financial year of the Company is notreached, pursuant to Clause 21.1.4 (Capital Expenditure), between the Company and the Administrative Agent within 30 days followingapproval of each Budget delivered pursuant to Clause 20.4.1 (Budget) or each set of revised projections delivered pursuant to Clause20.4.3 (Budget).”; and (j)that Part II of Schedule 10 be deleted in its entirety, together the “Amendments and Consents”. 3.The Administrative Agent, acting on the instructions of all of the Lenders: (a)hereby acknowledges that it was previously notified by the Company of the execution of the following leases: (i)the lease in respect of the property referred to as “Paris3” by Equinix Paris SAS; and (ii)the lease in respect of the property referred to as “London5” by Equinix (London) Limited; and (b)hereby confirms that the companies referred to in paragraphs (a)(i) and (a)(ii) (the “Equinix Companies”) above are not members of theBorrowing Group and that, subject to paragraph below, the activities of the Equinix Companies are not restricted by the Facilities Agreement. 4.The Company (on behalf of itself and each other Obligor) acknowledges and agrees that each Obligor shall ensure (and shall procure that each othermember of the Group ensures) that, notwithstanding paragraph above, all transactions, business and other dealings undertaken with the EquinixCompanies by any member of the Group shall be undertaken subject to and in accordance with the Facilities Agreement (including, without limitation,the provisions of Clause 22.14 (Arm’s length basis)). 5.The Amendments and Consents are made in accordance with Clause 38 (Amendments and waivers). 6.By countersigning this letter you confirm, as the Company and as Obligors’ Agent, that each Obligor confirms on the date of this letter, save asexpressly provided for in this letter that: (a)the Facilities Agreement; and (b)its obligations under Clause 18 (Guarantee and Indemnity) of the Facilities Agreement and under any Transaction Security Document, shallremain and continue in full force and effect. 7.The terms of this letter shall take effect on and from the Effective Date. 8.This letter may be signed in any number of counterparts, and this has the same effect as if the signatures on each counterpart were on a single copy ofthis letter. 9.This letter is hereby designated as a Finance Document. 10.A person who is not a party to this letter has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of the termscontained in this letter. 11.This letter shall be governed by and construed in accordance with English Law.Kindly acknowledge your acknowledgement of and agreement to the terms of this letter by countersigning this letter below. Yours faithfully/s/ David Jones, Managing DirectorFor and on behalf ofCIT Capital Finance (UK) Limited(as Administrative Agent for itself and the Finance Parties)We hereby acknowledge, agree to and confirm the terms of this letter /s/ James Marchbank, Finance DirectorSigned for and on behalf ofEquinix Group Limited(as the Company and as Obligors’ Agent on behalf of eachObligor)Dated: 15/01/09Exhibit 10.31SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 18, 2008 (the “Effective Date”) by and between Stephen M. Smith (the “Executive”) andEQUINIX, INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. In addition, any outstanding stock awards shall vest pro-rata withrespect to the current outstanding installment, but as to any stock award that vests based both on time-based vesting and upon satisfaction of performancemilestones, only to the extent any applicable performance milestones have been met. For example, if Executive is subject to a Qualifying Termination sixmonths after the grant of a restricted stock award where the restricted stock award vests as to 25% of its shares solely upon completion of one year of serviceafter its grant, then Executive would vest in 12.5% of such restricted stock award. Finally, Executive shall be paid any unpaid bonus for the prior fiscal yearprovided he has met the goals for payment of such bonus. The Executive will receive his or her severance payment in a cash lump-sum which will be madewithin ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor; in both cases subject to Executive’s personal and any other professional obligations or employment.The Executive further agrees that, during this twelve-month period, he or she shall not in any way or by any means disparage the Company, the members ofthe Company’s Board of Directors or the Company’s officers and employees. The Company agrees that members of the Company’s Board of Directors and itsofficers will not in any way or by any means disparage Executive for the same twelve-month period.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities; (ii) a material reduction in his or her level of compensation (including base salary and target bonus) other than pursuant toa Company-wide reduction of compensation where the reduction affects the other executive officers and Executive’s reduction is substantially equal, on apercentage basis, to the reduction of the other executive officers; (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and onlyif such change, reduction or relocation is effected by the Company without Executive’s consent; or (iv) a material breach of this Agreement or the Executive’soffer letter by the Company or the failure of any successor to the Company to assume this Agreement or the offer letter pursuant to the terms of Section 5(a) ofthis Agreement. For the Executive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (c), all of thefollowing requirements must be satisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within 120 days ofthe initial existence of one or more of the conditions set forth in subclauses (i) through (iv); (2) the Company will have 30 days from the date of such notice toremedy the condition and, if it does so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination ofemployment under this provision must occur within eighteen (18) months of the initial existence of one or more of the conditions set forth in subclauses(i) through (iv).(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from: (i)The Executive’s voluntary resignation of his or her employment for Good Reason; or (ii)The Company’s termination of the Executive’s employment for any reason other than Cause;provided, however, that following a Change in Control the Executive may not voluntarily resign his or her employment for Good Reason for a four (4) monthperiod following such Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and Executive’s offer letter and to agree expressly to perform this Agreement and Executive’s offer letterin the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. For all purposes under thisAgreement, the term “Company” shall include any successor to the Company’s business and/or assets or which becomes bound by this Agreement byoperation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise,notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing,any determination required under this Section shall be made by independent tax counsel designated by the Company and reasonably acceptable to Executive(“Independent Tax Counsel”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes ofmaking the calculations required under this Section, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicabletaxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent TaxCounsel shall assume that Executive pays all taxes at the highest marginal rate. The Company and Executive shall furnish to Independent Tax Counsel suchinformation and documents as Independent Tax Counsel may reasonably request in order to make a determination under this Section. The Company shallbear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event thatSection 6(a)(ii)(B) above applies, then based on the information provided to Executive and the Company by Independent Tax Counsel, Executive may, inExecutive’s sole discretion and within 30 days of the date on which Executive is provided with the information prepared by Independent Tax Counsel,determine which and how much of the Payments (including the accelerated vesting of equity compensation awards) to be otherwise received by Executive shallbe eliminated or reduced (as long as after such determination the value (as calculated by Independent Tax Counsel in accordance with the provisions ofSections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the Reduced Amount). If the Internal Revenue Service (the“IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and the enforcement of Section 6(b) shall be theexclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements under any prior separation, severanceand salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, including severancearrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefits under both this Agreementand any other severance pay or salary continuation program, plan or other arrangement with the Company. This Agreement provides additional terms forvesting acceleration for stock awards and does not supersede the terms of any vesting acceleration pursuant to a stock award.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Stephen M. SmithStephen M. SmithEQUINIX, INC./s/ Peter Van CampBy: Peter Van CampTitle: Executive ChairmanExhibit 10.32SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 10, 2008 (the “Effective Date”) by and between Peter Van Camp (the “Executive”) andEQUINIX, INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. The Executive will receive his or her severance payment in a cash lump-sum which will be made within ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor. The Executive further agrees that, during this twelve-month period, he or she shall not in any way or byany means disparage the Company, the members of the Company’s Board of Directors or the Company’s officers and employees.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entityfollowing a Change in Control, Executive retains substantially similar authority, duties or responsibilities for such division or business unit of the acquiringcorporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes ofthis sub clause (c)(i); (ii) a 10% or greater reduction in his or her level of compensation, which will be determined based on an average of the Executive’sannual Total Direct Compensation for the prior three calendar years or, if less, the number of years the Executive has been employed by the Company (referredto below as the “look-back years”); or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and only if such change,reduction or relocation is effected by the Company without Executive’s consent. For purposes of the foregoing, Total Direct Compensation means total targetcash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of grant, based on thetotal stock compensation (FAS 123R) expense associated with that award; provided, however, that if the Executive commenced employment with the Companyduring the look-back years, only one-third of the grant value of the equity grant attributable to commencement of employment shall be counted. For theExecutive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (c), all of the following requirements must besatisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within 120 days of the initial existence of one or moreof the conditions set forth in subclauses (i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if itdoes so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination of employment under this provision mustoccur within eighteen (18) months of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii).(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from: (i)The Executive’s voluntary resignation of his or her employment for Good Reason; or (ii)The Company’s termination of the Executive’s employment for any reason other than Cause;provided, however, that following a Change in Control the Executive may not voluntarily resign his or her employment for Good Reason for a four (4) monthperiod following such Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject tothe Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent taxcounsel designated bythe Company and reasonably acceptable to Executive (“Independent Tax Counsel’), whose determination shall be conclusive and binding upon Executive andthe Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counsel may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. The Companyand Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order tomake a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection with anycalculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and theCompany by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within 30 days of the date on which Executive is provided with theinformation prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensationawards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent TaxCounsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the ReducedAmount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and theenforcement of Section 6(b) shall be the exclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements under any prior separation, severanceand salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, including severancearrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefits under both this Agreementand any other severance pay or salary continuation program, plan or other arrangement with the Company.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Peter Van CampPeter Van CampEQUINIX, INC./s/ Stephen M. SmithBy: Stephen M. SmithTitle: CEO & PresidentExhibit 10.33SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 19, 2008 (the “Effective Date”) by and between Keith D. Taylor (the “Executive”) andEQUINIX, INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. The Executive will receive his or her severance payment in a cash lump-sum which will be made within ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor. The Executive further agrees that, during this twelve-month period, he or she shall not in any way or byany means disparage the Company, the members of the Company’s Board of Directors or the Company’s officers and employees.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities; (ii) a material reduction in his or her level of compensation (including base salary and target bonus) other than pursuant toa Company-wide reduction of compensation where the reduction affects the other executive officers and Executive’s reduction is substantially equal, on apercentage basis, to the reduction of the other executive officers; or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided andonly if such change, reduction or relocation is effected by the Company without Executive’s consent. For the Executive to receive the benefits under thisAgreement as a result of a voluntary resignation under this subsection (c), all of the following requirements must be satisfied: (1) the Executive must providenotice to the Company of his or her intent to assert Good Reason within 120 days of the initial existence of one or more of the conditions set forth in subclauses(i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it does so, the Executive may withdraw his orher resignation or may resign with no benefits; and (3) any termination of employment under this provision must occur within eighteen (18) months of theinitial existence of one or more of the conditions set forth in subclauses (i) through (iii).(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from: (i)The Executive’s voluntary resignation of his or her employment for Good Reason; or (ii)The Company’s termination of the Executive’s employment for any reason other than Cause;provided, however, that following a Change in Control the Executive may not voluntarily resign his or her employment for Good Reason for a four (4) monthperiod following such Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject tothe Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent taxcounsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel’), whose determination shall be conclusive andbinding upon Executive and the Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counselmay make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning theapplication of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginalrate. The Company and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonablyrequest in order to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur inconnection with anycalculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and theCompany by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within 30 days of the date on which Executive is provided with theinformation prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensationawards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent TaxCounsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the ReducedAmount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and theenforcement of Section 6(b) shall be the exclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements under any prior separation, severanceand salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, including severancearrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefits under both this Agreementand any other severance pay or salary continuation program, plan or other arrangement with the Company.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Keith D. TaylorKeith D. TaylorEQUINIX, INC./s/ Stephen M. SmithBy: /s/ Stephen M. SmithTitle: CEO & PresidentExhibit 10.34SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 17, 2008 (the “Effective Date”) by and between Peter Ferris (the “Executive”) and EQUINIX,INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. The Executive will receive his or her severance payment in a cash lump-sum which will be made within ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor. The Executive further agrees that, during this twelve-month period, he or she shall not in any way or byany means disparage the Company, the members of the Company’s Board of Directors or the Company’s officers and employees.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entityfollowing a Change in Control, Executive retains substantially similar authority, duties or responsibilities for such division or business unit of the acquiringcorporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes ofthis sub clause (c)(i); (ii) a 10% or greater reduction in his or her level of compensation, which will be determined based on an average of the Executive’sannual Total Direct Compensation for the prior three calendar years or, if less, the number of years the Executive has been employed by the Company (referredto below as the “look-back years”); or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and only if such change,reduction or relocation is effected by the Company without Executive’s consent. For purposes of the foregoing, Total Direct Compensation means total targetcash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of grant, based on thetotal stock compensation (FAS 123R) expense associated with that award; provided, however, that if the Executive commenced employment with the Companyduring the look-back years, only one-third of the grant value of the equity grant attributable to commencement of employment shall be counted. For theExecutive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (c), all of the following requirements must besatisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within 120 days of the initial existence of one or moreof the conditions set forth in subclauses (i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if itdoes so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination of employment under this provision mustoccur within eighteen (18) months of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii).(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from: (i)The Executive’s voluntary resignation of his or her employment for Good Reason; or (ii)The Company’s termination of the Executive’s employment for any reason other than Cause;provided, however, that following a Change in Control the Executive may not voluntarily resign his or her employment for Good Reason for a four (4) monthperiod following such Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject tothe Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent taxcounsel designated bythe Company and reasonably acceptable to Executive (“Independent Tax Counsel’), whose determination shall be conclusive and binding upon Executive andthe Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counsel may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. The Companyand Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order tomake a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection with anycalculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and theCompany by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within 30 days of the date on which Executive is provided with theinformation prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensationawards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent TaxCounsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the ReducedAmount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and theenforcement of Section 6(b) shall be the exclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements under any prior separation, severanceand salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, including severancearrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefits under both this Agreementand any other severance pay or salary continuation program, plan or other arrangement with the Company.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Peter FerrisPeter FerrisEQUINIX, INC./s/ Stephen M. SmithBy: /s/ Stephen M. SmithTitle: CEO & PresidentExhibit 10.35CHANGE IN CONTROL SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 19, 2008 (the “Effective Date”) by and between Eric Schwartz (the “Executive”) andEQUINIX, INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. The Executive will receive his or her severance payment in a cash lump-sum which will be made within ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor. The Executive further agrees that, during this twelve-month period, he or she shall not in any way or byany means disparage the Company, the members of the Company’s Board of Directors or the Company’s officers and employees.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entityfollowing a Change in Control, Executive retains substantially similar authority, duties or responsibilities for such division or business unit of the acquiringcorporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes ofthis sub clause (c)(i); (ii) a 10% or greater reduction in his or her level of compensation, which will be determined based on an average of the Executive’sannual Total Direct Compensation for the prior three calendar years or, if less, the number of years the Executive has been employed by the Company (referredto below as the “look-back years”); or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and only if such change,reduction or relocation is effected by the Company without Executive’s consent. For purposes of the foregoing, Total Direct Compensation means total targetcash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of grant, based on thetotal stock compensation (FAS 123R) expense associated with that award; provided, however, that if the Executive commenced employment with the Companyduring the look-back years, only one-third of the grant value of the equity grant attributable to commencement of employment shall be counted. For theExecutive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (c), all of the following requirements must besatisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within 120 days of the initial existence of one or moreof the conditions set forth in subclauses (i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if itdoes so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination of employment under this provision mustoccur within 18 months of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii). Should the Company remedy thecondition as set forth above and then one or more of the conditions arises again within twelve (12) months following the occurrence of a Change in Control, theExecutive may assert Good Reason again subject to all of the conditions set forth herein.(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from (i) the Company terminates the Executive’s employment for any reason other than Cause within twelve (12) months after a Change in Control or(ii) the Executive voluntarily resigns his or her employment for Good Reason between the date that is four (4) months following a Change in Control and thedate that is twelve (12) months following a Change in Control, provided however, that the grounds for Good Reason may arise at anytime within the twelve(12) months following the Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject tothe Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent taxcounsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel’), whose determination shall be conclusive andbindingupon Executive and the Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counsel may makereasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application ofSections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. TheCompany and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request inorder to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection withany calculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and theCompany by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within 30 days of the date on which Executive is provided with theinformation prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensationawards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent TaxCounsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the ReducedAmount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and theenforcement of Section 6(b) shall be the exclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements on change in control under any priorseparation, severance and salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, includingchange in control severance arrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefitsunder both this Agreement and any other severance pay or salary continuation program, plan or other arrangement with the Company.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Eric SchwartzEric SchwartzEQUINIX, INC./s/ Stephen M. SmithBy: /s/ Stephen M. SmithTitle: CEO & PresidentExhibit 10.36CHANGE IN CONTROL SEVERANCE AGREEMENTTHIS AGREEMENT is entered into as of December 11, 2008 (the “Effective Date”) by and between Jarrett Appleby (the “Executive”) andEQUINIX, INC., a Delaware corporation (the “Company”).1. Term of Agreement.Except to the extent renewed as set forth in this Section 1, this Agreement shall terminate the earlier of December 31, 2011 (the “Expiration Date”)or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described in Section 4(d); however,if a definitive agreement relating to a Change in Control has been signed by the Company on or before December 31, 2011, then this Agreement shall remain ineffect through the earlier of:(a) The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination as described inSection 4(d) or(b) The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with theCompany for a reason described in Section 4(d).This Agreement shall renew automatically and continue in effect for three year periods measured from the initial Expiration Date, unless the Companyprovides Executive notice of non-renewal at least six months prior to the date on which this Agreement would otherwise expire.2. Severance Payment.(a) Severance Benefit. If the Executive is subject to a Qualifying Termination, then the Company shall pay the Executive 100% of his or herannual base salary and target bonus (at the annual rate in effect immediately prior to the actions that resulted in the Qualifying Termination). Such severancebenefit shall be paid in accordance with the Company’s standard payroll procedures. The Executive will receive his or her severance payment in a cash lump-sum which will be made within ten (10) business days of the latest of the following dates: (i)the date of Executive’s Qualifying Termination; (ii)the date of the Company’s receipt of the Executive’s executed General Release; and (iii)the expiration of any rescission period applicable to the Executive’s executed General Release.(b) Health Care Benefit. If the Executive is subject to a Qualifying Termination, and if the Executive elects to continue his or her healthinsurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his or her employment, then theCompany shall pay the Executive’s monthly premium under COBRA until the earliest of (i) the close of the twelve-month period following cessation of his orher employment or (ii) the expiration of the Executive’s continuation coverage under COBRA.(c) General Release. Any other provision of this Agreement notwithstanding, Subsections (a) and (b) above shall not apply unless the Executive(i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Companyor persons affiliated with the Company and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The releasemust be in the form prescribed by the Company, without alterations. The Company will deliver the form to the Executive within 30 days after the Executive’sSeparation. The Executive must execute and return the release within 21 days from receipt of the form.(d) Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company determines thatExecutive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of a Separation, then (i) the severance benefits under Section 2(a), tothe extent that they are subject to Section 409A of the Code, will commence during the seventh month after the Executive’s Separation and (ii) any amounts thatotherwise would have been paid during the first six months after a Separation will be paid in a lump sum on the earliest practicable date permitted bySection 409A(a)(2) of the Code.3. Covenants.(a) Non-Solicitation. During the Executive’s employment with the Company and during the twelve-month period following his or her cessation ofemployment, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee orconsultant of the Company or any of the Company’s affiliates, whether on the Executive’s own behalf or on behalf of any other person or entity. The Executiveand the Company agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business.(b) Non-Competition. The Executive agrees that, during his or her employment with the Company, he or she shall not engage in any otheremployment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company.(c) Cooperation and Non-Disparagement. The Executive agrees that, during the twelve-month period following his or her cessation ofemployment, he or she shall cooperate with the Company in every reasonable respect and shall use his or her best efforts to assist the Company with thetransition of Executive’s duties to his or her successor. The Executive further agrees that, during this twelve-month period, he or she shall not in any way or byany means disparage the Company, the members of the Company’s Board of Directors or the Company’s officers and employees.4. Definitions.(a) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean the Executive’s unauthorized use or disclosure of tradesecrets which causes material harm to the Company, the Executive’s conviction of, or a plea of “guilty” or “no contest” to, a felony, or the Executive’s grossmisconduct.(b) Definition of “Change in Control.” For all purposes under this Agreement, “Change in Control” shall have the meaning ascribed to suchterm in Section 19.4 of the Company’s 2000 Equity Incentive Plan.(c) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” shall mean (i) a material diminution in the Executive’sauthority, duties or responsibilities, provided, however, if by virtue of the Company being acquired and made a division or business unit of a larger entityfollowing a Change in Control, Executive retains substantially similar authority, duties or responsibilities for such division or business unit of the acquiringcorporation but not for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes ofthis sub clause (c)(i); (ii) a 10% or greater reduction in his or her level of compensation, which will be determined based on an average of the Executive’sannual Total Direct Compensation for the prior three calendar years or, if less, the number of years the Executive has been employed by the Company (referredto below as the “look-back years”); or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and only if such change,reduction or relocation is effected by the Company without Executive’s consent. For purposes of the foregoing, Total Direct Compensation means total targetcash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards, determined at the time of grant, based on thetotal stock compensation (FAS 123R) expense associated with that award; provided, however, that if the Executive commenced employment with the Companyduring the look-back years, only one-third of the grant value of the equity grant attributable to commencement of employment shall be counted. For theExecutive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (c), all of the following requirements must besatisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within 120 days of the initial existence of one or moreof the conditions set forth in subclauses (i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if itdoes so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination of employment under this provision mustoccur within 18 months of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii). Should the Company remedy thecondition as set forth above and then one or more of the conditions arises again within twelve (12) months following the occurrence of a Change in Control, theExecutive may assert Good Reason again subject to all of the conditions set forth herein.(d) Definition of “Qualifying Termination.” For all purposes under this Agreement, “Qualifying Termination” shall mean a Separationresulting from (i) the Company terminates the Executive’s employment for any reason other than Cause within twelve (12) months after a Change in Control or(ii) the Executive voluntarily resigns his or her employment for Good Reason between the date that is four (4) months following a Change in Control and thedate that is twelve (12) months following a Change in Control, provided however, that the grounds for Good Reason may arise at anytime within the twelve(12) months following the Change in Control.(e) Definition of Separation. For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in theregulations under Section 409A of the Code.5. Successors.(a) Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger,consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and formsatisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.(b) Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, theExecutive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.6. Golden Parachute Taxes(a) Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement orotherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), besubject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“ExciseTax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or anyother applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax(“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and othertaxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of thegreatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject tothe Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent taxcounsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel’), whose determination shall be conclusive andbindingupon Executive and the Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counsel may makereasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application ofSections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. TheCompany and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request inorder to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection withany calculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and theCompany by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within 30 days of the date on which Executive is provided with theinformation prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensationawards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent TaxCounsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the ReducedAmount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and theenforcement of Section 6(b) shall be the exclusive remedy to the Company.(b) Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRSdetermines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or payback to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” TheRepayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company sothat Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall bemaximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zerowould not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received byExecutive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.7. Miscellaneous Provisions.(a) Other Severance Arrangements. This Agreement supersedes any and all cash severance arrangements on change in control under any priorseparation, severance and salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, includingchange in control severance arrangements pursuant to an employment agreement or offer letter. In no event shall any individual receive cash severance benefitsunder both this Agreement and any other severance pay or salary continuation program, plan or other arrangement with the Company.(b) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with Federal ExpressCorporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or shemost recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and allnotices shall be directed to the attention of its Secretary.(c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of thesame condition or provision at another time.(d) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to bewithheld by law.(e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceabilityof any other provision hereof, which shall remain in full force and effect.(f) No Retention Rights. Nothing in this Agreement shall confer upon the Executive any right to continue in service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of the Executive, which rights arehereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.(g) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State ofCalifornia (other than their choice-of-law provisions).IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of theday and year first above written. /s/ Jarrett ApplebyJarrett ApplebyEQUINIX, INC./s/ Stephen M. SmithBy: /s/ Stephen M. SmithTitle: CEO & PresidentExhibit 10.37October 31, 2008Jarrett ApplebyDear Jarrett:Equinix Operating Company, Inc. (“Equinix”) is pleased to offer you employment on the following terms, contingent upon completion of a backgroundinvestigation, satisfactory reference checks and approval of the Compensation Committee of the Board of Directors:1. Position. You will serve in a full-time capacity of Chief Marketing Officer and will report to Steve Smith, CEO & President. By signing this letteragreement, you represent and warrant to Equinix that you are under no contractual commitments inconsistent with your obligations to Equinix.2. Salary. You will be paid a salary at the annual rate of $300,000.00, which will be paid on a semi-monthly basis at $12,500.00 in accordance withEquinix’s standard payroll practices for salaried employees. This salary will be subject to adjustment pursuant to Equinix’s employee compensation policiesin effect from time to time.3. Restricted Stock Unit Award. Upon commencement of employment, it will be recommended to the Compensation Committee of Equinix’s Board ofDirectors that you be granted 12,500 Restricted Stock Units of common stock of Equinix under the terms and conditions of the applicable equity award planand your award agreement. Subject to your continued service through each vesting date, the award will vest over 3 years, with 25% of the units granted to veston June 1, 2009, and an additional 25% of the units granted to vest on each December 1st thereafter until fully vested. The Restricted Stock Units shallprovide for acceleration of 50% of the unvested shares in the event you are subject to an involuntary termination within 12 months after a change in control (assuch terms are defined in the award agreement). Each unit is an unfunded right to receive one share of Equinix common stock upon vesting and issuance ofthe share provided you remain in active service through the vesting date. You will also be eligible to participate in a performance-based restricted stock unitgrant in March of 2009 with the executive team.4. 401(k) Savings Plan and Company Match. Each payroll, Equinix will contribute 50 cents on every dollar up to the first 6% of your salary that youdefer into your 401(k) account. This plan includes a four-year vesting schedule of the Equinix contributions to your 401(k) account. You will vest in 25% ofthe company match after your first year as an Equinix employee, and 25% each year thereafter. You are eligible to enroll in and begin contributing to the 401(k)plan on your first day. This information will be included in your orientation packet and you will also receive a welcome packet from our 401(k) provider,Fidelity Investments.5. Proprietary Information and Inventions Agreement. Like all Equinix employees, you will be required, as a condition to your employment withEquinix, to sign Equinix’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.6. Period of Employment. Your employment with Equinix will be “at will,” meaning that either you or Equinix will be entitled to terminate your employmentat any time and for any reason, with or without cause. Any contrary representations which may have been made to you are superseded by this offer. This isthe full and complete agreement between you and Equinix on this term. Although your job duties, title, compensation and benefits, as well as Equinix’spersonnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express writtenagreement signed by you and a duly authorized officer of Equinix.7. Outside Activities. While you render services to Equinix, you will not engage in any other gainful employment, business or activity without the writtenconsent of Equinix. While you render services to Equinix, you also will not assist any person or organization in competing with Equinix, in preparing tocompete with Equinix or in hiring any employees of Equinix.8. Withholding Taxes. All forms of compensation referred to in this letter are subject to reduction to reflect applicable withholding and payroll taxes.9. Entire Agreement. This letter and the Exhibit attached hereto contain all of the terms of your employment with Equinix and supersede any priorunderstandings or agreements, whether oral or written, between you and Equinix.10. Amendment and Governing Law. This letter agreement may not be amended or modified except by an express written agreement signed by you and aduly authorized officer of Equinix. The terms of this letter agreement and the resolution of any disputes will be governed by California law.11. Health Benefits. You and your dependents will be entitled to participate in the Company’s medical and dental benefit plans in accordance with theirterms.12. Paid Time Off. You will be entitled to Paid Time Off (PTO) that accrues on a semi-monthly basis. You will accrue 5 hours per pay period. See the U.S.Equinix Employee handbook for more information.13. Other Terms. As required by law, your employment with the Company is also contingent upon your providing legal proof of your identity andauthorization to work in the United States.14. Company-wide Bonus. You will be eligible to participate in Equinix’s 2009 Annual Cash Incentive Plan. Under the plan, you will be eligible to receive abonus of up to 50% of your base salary, based upon Equinix’s financial performance and your individual performance. The cash incentive bonus will beguaranteed at $150,000 for 2009 only. This will be paid 50% in May 2009, and 50% in March 2010. Detailed information on this plan will be provided toyou after you start.15. Change In Control Severance Agreement. You will be entitled to certain severance benefits upon a change in control of Equinix as detailed in theattached Change In Control Severance Agreement.We look forward to you joining Equinix. You may indicate your agreement with these terms and accept this offer by signing and dating the enclosed duplicateoriginals of this letter, the Change in Control Severance Agreement and the duplicate original of the Proprietary Information and Inventions Agreement (PIIA).Please return one signed original offer letter, both Change in Control Severance Agreements and both PIIA’s. One signed original Change in Control SeveranceAgreement and one PIIA will be returned to you after receiving a company representative’s signature.This offer, if not accepted, will expire at the close of business on Friday, November 7, 2008. Sincerely,By: /s/ Steve SmithSteve SmithCEO & PresidentI have read and accept this employment offer: Jarrett B. ApplebyPrint Full Name/s/ Jarrett B. ApplebySignatureDated: 11/06 , 2008 My Start Date will be 12/08/08AttachmentExhibit A: Proprietary Information and Inventions AgreementExhibit B: Change In Control Severance AgreementExhibit 10.38EQUINIX, INC. 2000 EQUITY INCENTIVE PLANNOTICE OF RESTRICTED STOCK UNIT AWARDFOR EXECUTIVESYou have been granted the number of restricted stock units (“Restricted Stock Units”) indicated below by Equinix, Inc. (the “Company”) on the followingterms: Name: Jarrett ApplebyEmployee Id #: «Id»Restricted Stock Unit Award Details: Date of Grant: December 8, 2008 Award Number: RU0607Restricted Stock Units: 12,500 Each Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company subject to the terms and conditions contained in theRestricted Stock Unit Agreement (the “Agreement”). Capitalized terms not otherwise defined shall have the same definition as in the Agreement or the 2000Equity Incentive Plan (the “Plan”).Vesting Schedule:Vesting is dependent upon continuous active service as an employee, consultant or director of the Company or a subsidiary of the Company (“Service”)throughout the vesting period. The Restricted Stock Units shall vest as follows: (A) the first 25% of the RSUs subject to the award shall vest on June 1, 2009and (B) an additional 25% of the RSUs subject to the award shall vest on each December 1st thereafter.By your signature and the signature of the Company’s representative below, you and the Company agree that the Restricted Stock Units are granted under andgoverned by the terms and conditions of the Plan and the Agreement that is attached to and made a part of this document.You further agree that the Company may deliver by email all documents relating to the Plan or this award (including, without limitation, prospectuses requiredby the U.S. Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, withoutlimitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a web site maintained bythe Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify you by email.By your signature below, you agree to cover all Tax-Related Items as defined in the Agreement. RECIPIENT: EQUINIX, INC.Signature: /s/ Jarrett Appleby By: /s/ Steve SmithPrint Name: Jarrett Appleby Title: Chief Executive OfficerDate: EQUINIX, INC. 2000 EQUITY INCENTIVE PLAN:RESTRICTED STOCK UNIT AGREEMENT Payment for Shares No payment is required for the Restricted Stock Units you receive.Vesting The Restricted Stock Units that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Unit Award. No additional Restricted Stock Units vest after your active service as an employee, consultant or director of the Company or asubsidiary of the Company (“Service”) has terminated for any reason. It is intended that vesting in the Restricted Stock Units iscommensurate with a full-time work schedule. For possible adjustments that may be made by the Company, see the Section belowentitled “Leaves of Absence and Part-Time Work.”Change in Control The Restricted Stock Units will vest in full if not assumed or substituted with a new award as set forth in Section 11.3 of the 2000Equity Incentive Plan (the “Plan”). In addition, you will vest as to 50% of the unvested Restricted Stock Units if the Company is subject to a Change in Control beforeyour Service terminates, and you are subject to a Qualifying Termination (as defined below) within 12 months after the Change inControl. Change in Control is defined in the Plan.QualifyingTermination A Qualifying Termination means the termination of your Service resulting from: (a) involuntary discharge for any reason otherthan Cause (as defined below) within 12 months after a Change in Control; or (b) your voluntary resignation for Good Reason (asdefined below), between the date that is four months following a Change in Control and the date that is 12 months following aChange in Control (provided however, that the grounds for Good Reason may arise at anytime within the 12 months following theChange in Control). Cause means your unauthorized use or disclosure of trade secrets which causes material harm to the Company, your conviction of,or a plea of “guilty” or “no contest” to, a felony, or your gross misconduct. Good Reason means (i) a material diminution in your authority, duties or responsibilities, provided, however, if by virtue of theCompany being acquired and made a division or business unit of a larger entity following a Change in Control, youretain substantially similar authority, duties or responsibilities for such division or business unit of the acquiring corporation butnot for the entire acquiring corporation, such reduction in authority, duties or responsibilities shall not constitute Good Reason for purposes of this subclause (i); (ii) a 10% or greater reductionin your level of compensation, which will be determined based on an average of your annual Total Direct Compensation for the priorthree calendar years or, if less, the number of years you have been employed by the Company (referred to below as the “look-backyears”); or (iii) a relocation of Executive’s place of employment by more than 30 miles, provided and only if such change, reductionor relocation is effected by the Company without Executive’s consent. For purposes of the foregoing, Total Direct Compensationmeans total target cash compensation (annual base salary plus target annual cash incentives) plus the grant value of equity awards,determined at the time of grant, based on the total stock compensation (FAS 123R) expense associated with that award; provided,however, that if you commenced employment with the Company during the look-back years, only one-third of the grant value of theequity grant attributable to commencement of employment shall be counted. For you to receive the benefits under this Agreement as aresult of a voluntary resignation for Good Reason, all of the following requirements must be satisfied: (1) you must provide notice tothe Company of your intent to assert Good Reason within 120 days of the initial existence of one or more of the conditions set forth insubclauses (i) through (iii); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it doesso, you may withdraw your resignation or may resign with no acceleration; and (3) any termination of employment under thisprovision must occur within 18 months of the initial existence of one or more of the conditions set forth in subclauses (i) through(iii). Should the Company remedy the condition as set forth above and then one or more of the conditions arises again within 12months following the occurrence of a Change in Control, you may assert Good Reason again subject to all of the conditions set forthherein.Forfeiture If your Service terminates for any reason, then your Restricted Stock Units will be forfeited to the extent that they have not vestedbefore the termination date and do not vest as a result of the termination (including as a result of a Qualifying Termination as setforth above). This means that the Restricted Stock Units will immediately revert to the Company. You receive no payment forRestricted Stock Units that are forfeited. The Company determines when your Service terminates for this purpose.Leaves of Absenceand Part-TimeWork For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leaveof absence, if the leave was approved by the Company in writing. But your Service terminates when the approved leave ends, unlessyou immediately return to active work. If you go on a leave of absence that lasts or is expected to last seven days or longer, then vesting will be suspended during the leaveto the extent provided for in the Company’s leave policy. Upon your return to active work (as determined by the Company), vestingwill resume; however, unless otherwise provided in the Company’s leave policy, you will not receive credit for any vesting untilyou work an amount of time equal to the period of your leave. If you, and the Company, agree to a reduction in your scheduled work hours, then the Company reserves the right to modify therate at which the Restricted Stock Units vest, so that the rate of vesting is commensurate with your reduced work schedule. Anysuch adjustment shall be consistent with the Company’s policies for part-time or reduced work schedules or shall be pursuant tothe terms of an agreement between you and the Company pertaining to your reduced work schedule. The Company shall not be required to adjust any vesting schedule pursuant to this subsection.Stock Certificates No shares of Common Stock shall be issued to you prior to the date on which the Restricted Stock Units vest. After any RestrictedStock Units vest pursuant to this Agreement, the Company shall promptly cause to be issued in book-entry form, registered inyour name or in the name of your legal representatives or heirs, as the case may be, the number of shares of Common Stockrepresenting your vested Restricted Stock Units. No fractional shares shall be issued.Stockholder Rights The Restricted Stock Units do not entitle you to any of the rights of a stockholder of the Company. Your rights shall remainforfeitable at all times prior to the date on which you vest in the Restricted Stock Units awarded to you. Upon settlement of theRestricted Stock Units into shares of Common Stock, you will obtain full voting and other rights as a stockholder of theCompany.Units Restricted You may not sell, transfer, pledge or otherwise dispose of any Restricted Stock Units or rights under this Agreement other than bywill or by the laws of descent and distribution.Withholding Taxes Regardless of any action the Company and/or your employer (the “Employer”) take with respect to any or all income tax (includingU.S. federal, state and local tax and/or non-U.S. tax), social insurance, payroll tax, payment on account or other tax-relatedwithholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is andremains your responsibility and that the Company and/or the Employer (a) make no representations or undertakings regarding thetreatment of any Tax-Related Items in connection with any representations or undertakings regarding the treatment of any Tax-Related Items in connection withany aspect of the Restricted Stock Units, including the award of the Restricted Stock Units, the vesting of the Restricted StockUnits, the issuance of shares of Common Stock in settlement of the Restricted Stock Units, the subsequent sale of shares acquiredat vesting and the receipt of any dividends; and (b) do not commit to structure the terms of the award or any aspect of the RestrictedStock Units to reduce or eliminate your liability for Tax-Related Items. Prior to the relevant taxable event, you shall pay or makeadequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding obligations for Tax Related Itemsof the Company and/or the Employer. With the Company’s consent, these arrangements may include (a) withholding shares ofCompany stock that otherwise would be issued to you when they vest, (b) surrendering shares that you previously acquired, or (c)deducting the withholding taxes from any cash compensation payable to you. The fair market value of the shares you surrender,determined as of the date taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. The Company may refuse to deliver the shares of Common Stock to you if you fail to comply with your obligations in connectionwith the Tax-Related Items as described in this subsection.Restrictions on Resale You agree not to sell any shares of Common Stock you receive under this Agreement at a time when applicable laws, regulations,Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the Company’sintranet) or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as yourService continues and for such period of time after the termination of your Service as the Company may specify.No Retention Rights Except to the extent provided specifically in an agreement between you and the Company, your award or this Agreement does notgive you the right to be employed or retained by the Company or a subsidiary of the Company in any capacity; the Company andits subsidiaries reserve the right to terminate your Service at any time, with or without cause. In accepting the award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature,and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Planand this Agreement; (b) the award is voluntary and occasional and does not create any contractual or other right to receive futureawards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been grantedrepeatedly in the past; (c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) your participation in the Plan shall not create a right to further employment with your Employer andshall not interfere with the ability of your Employer to terminate your Service at any time with or without cause; (f) the award is anextraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or any subsidiary ofthe Company, and which is outside the scope of your employment or service contract, if any; (g) the award is not part of normal or expectedcompensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy,end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event shouldbe considered as compensation for, or relating in any way to, past services for the Company or any subsidiary of the Company; (h) in theevent that you are not an employee of the Company, the award and your participation in the Plan will not be interpreted to form anemployment or service contract or relationship with the Company; and, furthermore, the award and your participation in the Plan will not beinterpreted to form an employment or service contract or relationship with the Employer or any other subsidiary of the Company; (i) thefuture value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (j) in consideration of theaward, no claim or entitlement to compensation or damages shall arise from termination of the award or from any diminution in value of theaward or shares of Common Stock acquired upon vesting of the award resulting from termination of Service (for any reason whatsoever andwhether or not in breach of local labor laws) and you irrevocably release the Company and any subsidiary of the Company from any suchclaim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, bysigning this Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; (k) the Company is notproviding any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan oryour acquisition or sale of the underlying shares of Common Stock; and (l) you are hereby advised to consult with your own personal tax,legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.Adjustments In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Restricted Stock Units that will vest inany future installments will be adjusted accordingly.Severability The provisions of this Agreement are severable and if any one or more provisions are determined to be invalid or otherwise enforceable, inwhole or in part, the remaining provisions shall continue in effect.Applicable Law This Agreement will be interpreted and enforced with respect to issues of contract law under the laws of the State of California.The Plan and OtherAgreements The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or byrequest to the Stock Services Department. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this award. Any prioragreements, commitments or negotiations concerning this award are superseded. This Agreement may be amended only by anotherwritten agreement between the parties.BY SIGNING THE NOTICE OF RESTRICTED STOCK UNIT AWARD, YOU AGREE TOALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.Exhibit 21.1List of Equinix’s Subsidiaries Name JurisdictionEquinix Operating Co., Inc. DelawareEquinix Asia Pacific Pte Ltd SingaporeEquinix Singapore Holdings Pte Ltd SingaporeEquinix Singapore Pte Ltd SingaporeEquinix Pacific Pte Ltd SingaporePihana Pacific SDN, BHD MalaysiaEquinix Pacific, Inc. DelawareEquinix Japan KK (in Kanji) JapanEquinix Australia Pty Ltd AustraliaEquinix Hong Kong Ltd Hong KongEquinix RP, Inc. DelawareEquinix RP II LLC DelawareCHI 3, LLC DelawareCHI 3 Procurement, LLC IllinoisNY3, LLC DelawareSV1, LLC DelawareLA4, LLC DelawareEquinix Europe Ltd United KingdomEquinix Group Ltd United KingdomEquinix (UK) Ltd United KingdomEquinix (Services) Ltd United KingdomEquinix Corporation Ltd United KingdomEquinix Investments Ltd United KingdomEquinix (London) Ltd United KingdomEquinix (Dusseldorf) GmbH GermanyEquinix (Real Estate) GmbH GermanyEquinix (Germany) GmbH GermanyEquinix (France) SAS FranceEquinix Paris SAS FranceInterconnect Exchange Europe SL SpainEquinix (Switzerland) AG SwitzerlandIntelisite BV The NetherlandsEquinix (Netherlands) BV The NetherlandsEquinix (Netherlands) Holding Coöperatie U.A The NetherlandsEquinix (Holdings) B.V. The NetherlandsVirtu Secure Web Services BV The NetherlandsExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-45280, 333-58074, 333-71870, 333-85202, 333-104078, 333-113765, 333-117892, 333-122142, 333-132466, 333-140946 and 333-149452) and Form S-3 (Nos. 333-104077, 333-108783, 333-109697, 333-114723, 333-116322, 333-120224, 333-122144, 333-123923, 333-128857, 333-141594, 333-146064, 333-146065 and 333-141609) of Equinix, Inc. of ourreport dated February 24, 2009 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form10-K. /s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaFebruary 25, 2009Exhibit 31.1CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Stephen M. Smith, certify that:1. I have reviewed this annual report on Form 10-K of Equinix, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Dated: February 26, 2009/s/ STEPHEN M. SMITHStephen M. SmithChief Executive Officer and PresidentExhibit 31.2CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Keith D. Taylor, certify that:1. I have reviewed this annual report on Form 10-K of Equinix, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Dated: February 26, 2009/s/ KEITH D. TAYLORKeith D. TaylorChief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Equinix, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2008 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Stephen M. Smith, Chief Executive Officer and President of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ STEPHEN M. SMITHStephen M. SmithChief Executive Officer and PresidentFebruary 26, 2009 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Equinix, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2008 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Keith D. Taylor, Chief Financial Officer of the Company, certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ KEITH D. TAYLORKeith D. TaylorChief Financial OfficerFebruary 26, 2009 

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