Definitve Revised Proxy Materials
Table of Contents
 
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
 
Amendment No. 1 to
Definitive Proxy Statement
 
Filed by the Registrant    x
 
Filed by a Party other than the Registrant    ¨
 
Check the appropriate box:
 
¨ 
Preliminary Proxy Statement
 
¨ 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
x 
Definitive Proxy Statement
 
¨ 
Definitive Additional Materials
 
¨ 
Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12
 
EQUINIX, INC.
(Name of Registrant As Specified In Its Charter)
 
                                                                                                                                                                                                                                          
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
¨ 
No Fee required.
 
¨  
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
(1) 
 
Title of  each class of securities to which transaction applies:
 
Ordinary shares, par value S$1.00 per share (the “i-STT Ordinary Shares”) of i-STT Pte Ltd (“i-STT”)
Series A Redeemable Preferred Stock, par value $0.001 per share (the “Pihana Series A Preferred Stock”), of Pihana Pacific, Inc. (“Pihana”)
Series B Convertible Preferred Stock, par value $0.001 per share, of Pihana (the “Pihana Series B Preferred Stock”)
 
 
(2) 
 
Aggregate number of securities to which transaction applies:
 
54,000,000 i-STT Ordinary Shares
5,000,000 shares of Pihana Series A Preferred Stock
80,189,964 shares of Pihana Series B Preferred Stock
4,587,384 warrants to acquire shares of Pihana Series B Preferred Stock (the “Pihana Warrants”)
 
 
(3) 
 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
$0.555 per i-STT Ordinary Share (a)
$0.001 per share of Series A Preferred Stock (b)
$0.001 per share of Series B Preferred Stock (c)
$5.580 per Pihana Warrant (d)
 
 
(a)
 
Calculated per Rule 0-11(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), based on the par value per i-STT Ordinary Share (translated using the October 15, 2002 noon buying rate of the Federal Reserve Bank of New York of $0.5548 Singapore Dollars per United States Dollar) because i-STT has an accumulated deficit.
 
 
(b)
 
Calculated per Rule 0-11(c) under the Exchange Act, based on the par value per share of Series A Preferred Stock because Pihana has an accumulated deficit.
 
 
(c)
 
Calculated per Rule 0-11(c) under the Exchange Act, based on the par value per share of Series B Preferred Stock because Pihana has an accumulated deficit.
 
 
(d)
 
Represents the exercise price of each Pihana Warrant.
 
 
(4) 
 
Proposed maximum aggregate value of transaction:
 
$2,997,000 for the i-STT Ordinary Shares
$5,000 for the Series A Preferred Stock
$80,190 for the Series B Preferred Stock
$25,597,602 for the Pihana Warrants
$28,679,792 for the transaction
 
 
(5) 
 
Total fee paid:
 
$5,277 (e)
 
 
(e)
 
Calculated as $92.00 per $1,000,000 of the proposed maximum aggregate value of the transaction.
 
x 
 
Fee paid previously with preliminary materials:
 
¨ 
 
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
 
 
(1) 
 
Amount Previously Paid:
 
 
(2) 
 
Form, Schedule or Registration Statement No.:
 
 
(3) 
 
Filing Party:
 
 
(4) 
 
Date Filed:


Table of Contents
 
LOGO
 
December 10, 2002
 
TO THE STOCKHOLDERS OF EQUINIX, INC.
 
Dear Stockholder:
 
A special meeting of stockholders of Equinix, Inc. will be held at the offices of Willkie Farr & Gallagher located at 787 Seventh Avenue, New York, New York 10019 on December 30, 2002, beginning at 9:00 a.m. Eastern Time.
 
On October 2, 2002, we entered into agreements to consummate a series of related acquisition and financing transactions. Under the terms of these agreements, we intend to combine our business with two similar businesses through the acquisition of i-STT Pte Ltd and Pihana Pacific, Inc. Second, we intend to sell a minimum of $30.0 million and up to $40.0 million of convertible secured notes to investors, including STT Communications Ltd, to finance continuing operations of the combined companies and to reduce our outstanding debt. These notes will be convertible into shares of our common stock and preferred stock. Upon completion of these transactions, STT Communications, i-STT’s sole stockholder, and the Pihana stockholders could together hold a majority of our stock. In addition, in the event STT Communications converts its notes and warrants to equity, it, together with the Pihana stockholders, will hold nearly 65% of our stock, which would essentially constitute a change of control.
 
Prior to these transactions, we had no relationship with STT Communications. Neither STT Communications nor Pihana were affiliates of Equinix or each other. Following these transactions, because of the large percentage of our stock that will be held by STT Communications, STT Communications will become an affiliate of Equinix and will have significant influence over matters requiring stockholder consent.
 
In connection with these transactions, we intend to amend our credit facility and to reduce our outstanding debt by exchanging a large portion of our outstanding 13% senior notes due 2007 for a combination of cash and shares of our common stock. Each of these transactions is more fully described in this proxy statement. In connection with the special meeting, you are being asked to vote in favor of the issuance of shares of our common stock and preferred stock in connection with these transactions.
 
In addition, we have been notified by the Nasdaq Qualification Panel that in order to qualify for listing on The Nasdaq National Market following the closing of the proposed transactions, our stock price must trade above $5.00 per share. To bring the trading price of our common stock above $5.00, we intend to effect a reverse stock split. Based on our stock price on December 6, 2002 of $0.28 per share, in order to achieve the $5.00 minimum share price, we would need to complete a reverse stock split such that for every 17.86 shares currently outstanding, there would be one share outstanding following such reverse stock split.
 
Our board of directors has approved these transactions, and recommends that you vote FOR each of the proposals described in this proxy statement.
 
It is important that your shares be represented and voted at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND OUR SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the special meeting. If you decide to attend the special meeting and wish to change your proxy vote, you may do so automatically by voting in person at the meeting.
 
On behalf of the board of directors, I would like to express our appreciation for your continued interest in the affairs of Equinix. We look forward to seeing you at the special meeting.
 
Sincerely,
 
LOGO
Peter F. Van Camp
Chairman of the Board
and Chief Executive Officer
 
This proxy statement and the related proxy card was first mailed to our stockholders on or about December 10, 2002.


Table of Contents
LOGO
 
EQUINIX, INC.
2450 Bayshore Parkway
Mountain View, CA 94043
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held December 30, 2002
 
A special meeting of stockholders of Equinix, Inc. will be held at the offices of Willkie Farr & Gallagher located at 787 Seventh Avenue, New York, New York 10019, on December 30, 2002, beginning at 9:00 a.m. Eastern Time for the following purposes:
 
 
1.
 
To approve the issuance of shares of our common stock and preferred stock in connection with the combination of our business with the businesses of i-STT Pte Ltd and Pihana Pacific, Inc., the issuance of convertible secured notes in connection with a new debt financing pursuant to which we will raise a minimum of $30.0 million and a maximum of $40.0 million and the exchange of a significant portion of our senior notes for a combination of cash and shares of our common stock.
 
 
2.
 
To adopt the agreement and plan of merger, dated as of October 17, 2002, by and between Eagle Oasis, Inc., our wholly-owned subsidiary, and us.
 
The foregoing items of business are more fully described in this proxy statement.
 
Only stockholders of record at the close of business on November 22, 2002 are entitled to notice of, and to vote at, the special meeting and at any adjournments or postponements thereof. A list of such stockholders will be available for inspection at our headquarters located at 2450 Bayshore Parkway, Mountain View, California 94043, during ordinary business hours for the ten-day period prior to the special meeting.
 
BY ORDER OF THE BOARD OF DIRECTORS,
 
LOGO
Peter F. Van Camp
Chairman of the Board
and Chief Executive Officer
 
Mountain View, California
December 10, 2002
 

IMPORTANT
 
WHETHER OR NOT YOU PLAN TO ATTEND OUR SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE SPECIAL MEETING. IF YOU DECIDE TO ATTEND OUR SPECIAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.


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QUESTIONS AND ANSWERS ABOUT THE COMBINATION, THE FINANCING,  THE SENIOR NOTE EXCHANGE, THE AMENDMENT TO THE CREDIT FACILITY  AND THE CHARTER MERGER
 
Q:
 
Why am I receiving this proxy statement?
 
A:
 
You are receiving this proxy statement in connection with a special meeting of our stockholders to approve transactions more fully described in this proxy statement.
 
Q:
 
When and where will the special meeting of Equinix stockholders be held?
 
A:
 
December 30, 2002 beginning at 9 a.m., local time, at the offices of Willkie Farr & Gallagher at 787 Seventh Avenue, New York, New York 10019.
 
Q:
 
What proposals am I being asked to vote for?
 
A:
 
On October 2, 2002, we entered into agreements to consummate a series of related acquisition and financing transactions that will result in our issuance of shares of our common stock and preferred stock (and instruments convertible or exercisable into shares of our common stock and preferred stock) that will represent approximately 77.5% of our capital stock as of the closing of those transactions. Under the listing rules of The Nasdaq National Market we are required to seek the approval of our stockholders when we propose to issue new shares of stock, or instruments convertible or exercisable into new shares of stock, in excess of 20% of our outstanding capital stock. The following is a brief description of the transactions:
 
 
 
First, we intend to combine our existing Internet exchange business with two similar businesses through the acquisition of the outstanding stock of i-STT Pte Ltd from STT Communications Ltd and a merger of one of our subsidiaries with Pihana Pacific, Inc. pursuant to the terms of a combination agreement that we entered into on October 2, 2002. We call this transaction the combination.
 
 
 
Second, we intend to sell a minimum of $30.0 million and up to $40.0 million of convertible secured notes to STT Communications and other investors to finance continuing operations and a reduction of our outstanding debt pursuant to the terms of a securities purchase agreement that we entered into on October 2, 2002. These notes will be convertible into shares of our common stock and preferred stock. We call this transaction the financing.
 
 
 
Finally, we intend to significantly reduce our outstanding debt by exchanging a large portion of our 13% senior notes due 2007, or our senior notes, for a combination of cash and shares of our common stock. We call this transaction the senior note exchange.
 
In Proposal 1, you are being asked to vote for the issuance of shares of our common stock and preferred stock in connection with the combination, the financing and the senior note exchange.
 
We do not have a sufficient number of authorized and unissued shares of preferred stock to complete the combination and financing. Therefore, we need to increase the number of authorized shares of our preferred stock. In addition, we need to increase our trading price by effecting a reverse stock split. The goal of the reverse stock split is to increase the trading price of our common stock on The Nasdaq National Market to a price in excess of $5.00 for a sustained period of time. While the reverse stock split will reduce the number of shares of common stock you hold, it will not by itself change your relative percentage ownership of our common stock as compared to our other stockholders.
 
To accomplish the increase in authorized shares of preferred stock and the reverse stock split, Eagle Oasis, Inc., one of our wholly-owned subsidiaries, will merge with and into us. We call this transaction the charter merger.

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As a result of the charter merger, the certificate of incorporation of Eagle Oasis, Inc. will become our certificate of incorporation. The Eagle Oasis, Inc. certificate of incorporation that we assume in the charter merger will contain sufficient authorized shares of preferred stock and common stock to complete the combination, the financing and the senior note exchange and will effect the reverse stock split. The actual number of authorized shares and the reverse stock split ratio will be determined by our officers immediately prior to the closing based on the trading price of our stock and market conditions at the time of closing.
 
In Proposal 2, you are being asked to adopt the agreement and plan of merger, dated October 17, 2002, by and between us and Eagle Oasis, Inc., our wholly-owned subsidiary, that will implement the charter merger.
 
Q:
 
What will happen if all of the proposals are not approved at the special meeting?
 
A:
 
If our stockholders do not approve the issuance of our stock in connection with the combination, the financing and the senior note exchange, we will most likely file for protection under federal bankruptcy law. See “Risk Factors” beginning on page 24.
 
Q:
 
What do I need to do now?
 
A:
 
After carefully reading and considering the information contained in this proxy statement, please complete and sign your proxy and return it in the enclosed return envelope as soon as possible so that your shares may be represented and voted at our special meeting. If you sign and send in your proxy and do not indicate how you want to vote, we will count your proxy as a vote for the proposal to approve the issuance of shares of our common stock and preferred stock in connection with the combination, the financing and the senior note exchange and the adoption of the merger agreement. See the enclosed proxy card for instructions on how to vote by telephone and by Internet.
 
Q:
 
Do I have appraisal rights if I oppose the issuance of common stock and preferred stock in connection with the combination, financing and senior note exchange and the charter merger?
 
A:
 
No. None of our stockholders will have appraisal rights in connection with the transactions described in Proposals 1 and 2.
 
Q:
 
When do you expect these transactions to be completed?
 
A:
 
The transactions are anticipated to close by the end of 2002, but may close in 2003 depending on how quickly we can complete the SEC review and complete the senior note exchange. Prior to the closing, we will work closely together with i-STT and Pihana to plan the smooth integration of the three organizations.
 
Q:
 
If my shares are held in ‘street name’ by my broker, will my broker vote my shares for me?
 
A:
 
Shares held in ‘street name’ are shares held in brokerage accounts or held by other nominees on a stockholder’s behalf. Your broker or nominee will vote your shares only if you provide instructions on how to vote. You should follow the directions provided by your broker or nominee regarding how to instruct your broker to vote your shares. If you do not instruct your broker or nominee, your shares will not be voted.
 
Q:
 
Can I change my vote after I have mailed my signed proxy?
 
A:
 
Yes. You can change your vote at any time before your proxy is voted at our special meeting. If you hold your shares in your own name, you can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy. If you choose either of these two methods, you must submit your notice of revocation or your new proxy before the

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meeting to the address set forth in the answer to the last question below. Third, stockholders can attend the meeting and vote in person. If your shares are held in ‘street name’, you should follow the directions provided by your broker or nominee regarding how to change your vote.
 
Q:
 
What do I do if I have questions?
 
A:
 
If you have any questions about the issuance of common stock in connection with the combination, the financing, the senior note exchange or the charter merger or if you need additional copies of this proxy statement and you are one of our stockholders, you should contact:
 
Georgeson Shareholder Communications, Inc.
(866) 870-4339

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SUMMARY
 
This summary, together with the question and answer section, highlights some of the information discussed in greater detail elsewhere in this proxy and may not contain all of the information that is important to you. For a more complete understanding of the combination, the financing, the senior note exchange, the charter merger and the other related transactions described in this proxy statement, you should carefully read this entire document and the documents referred to in this proxy statement. See “Where You Can Find Additional Information” beginning on page 146.
 
The Companies
 
Equinix, Inc.
 
We design, build and operate neutral Internet Business Exchange hubs, or IBX hubs, where Internet businesses place their equipment and their network facilities in order to interconnect with each other to improve Internet performance. Our carrier neutral IBX hubs and Internet exchange services enable network service providers, enterprises, content providers, managed service providers and other Internet infrastructure companies to directly interconnect with each other for increased performance and cost advantages.
 
We currently have seven IBX hubs, consisting of more than 810,000 square feet, which operate in key U.S. Internet intersection points—Washington, D.C., New York, Dallas, Chicago, Los Angeles and Silicon Valley areas. In addition, we have strategic partnerships established in Europe and Asia to serve customer needs in those areas.
 
Our headquarters are located at 2450 Bayshore Parkway, Mountain View, California 94043. Our phone number is (650) 316-6000.
 
i-STT Pte Ltd
 
i-STT offers the following services, which are organized under three general business divisions, to its customers:
 
 
 
WEBCentre.    i-STT’s “WEBCentre” division maintains carrier neutral data center facilities in Singapore and Bangkok which house customers’ critical computer systems, networks, and telecommunications equipment. This division also provides system and network management services to ensure the optimal performance and continuous availability of customers’ computer systems. These services are very similar to those offered by Equinix and Pihana in their facilities.
 
 
 
Connectivity Services.    i-STT’s connectivity services division provides connectivity services that enable multiple telecommunications carriers and Internet service providers to interconnect with each other at a single location and provide direct Internet connectivity to enterprise customers within the data center.
 
 
 
Enterprise Messaging.    i-STT’s enterprise messaging division enables enterprises to outsource the operations and management of their email systems to i-STT. These email systems are based on the Lotus Notes and Microsoft Exchange platforms.
 
i-STT is a wholly-owned subsidiary of STT Communications. STT Communications is a Singapore telecommunications and information technologies company. Through its subsidiaries, STT Communications provides fixed and mobile telecommunications, data, internet services, telephone equipment distribution, managed hosting, teleport services, broadband cable and video, and e-business software development services.

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STT Communications is a majority-owned subsidiary of Singapore Technologies Pte Ltd, a Singapore based conglomerate. Singapore Technologies, in turn, is a wholly-owned subsidiary of Temasek Holdings (Private) Limited, an investment holding company wholly-owned by the government of Singapore.
 
i-STT has two operating units, one in Singapore and the other in Bangkok, and its headquarters are located at Blk 20 Ayer Rajah Crescent, #05-05/08 Ayer Rajah Industrial Estate, Singapore 139964. i-STT’s phone number is (65) 6723-8888.
 
Pihana Pacific, Inc.
 
Pihana operates a business similar to ours, along the Pacific rim. Pihana designs and builds carrier neutral data centers to house critical Internet systems for Internet service providers, telecommunications carriers, content service providers, and enterprise customers. Pihana has deployed an Internet exchange network to facilitate high performance routing of Internet traffic and provides an integrated suite of services, including enterprise system management, storage, colocation and disaster recovery services.
 
Pihana’s regional footprint includes seven data center facilities in Los Angeles, California, Singapore, Tokyo, Japan, Seoul, Korea, Sydney, Australia, Hong Kong and Honolulu, Hawaii. Pihana has its regional headquarters in Hong Kong.
 
Pihana is privately held and is not controlled by any single person or group. Pihana’s significant investors include, among others, affiliates of Goldman Sachs, UBS Capital, Morgan Stanley Dean Witter Private Equity and Columbia Capital.
 
The combination agreement requires Pihana to dispose of its Seoul, Korea data center subsidiary and enter into arrangements to terminate or amend its office lease in Singapore, its office lease in Honolulu, Hawaii and part of its data center lease in Los Angeles, California.
 
Pihana’s headquarters are located at 1100 Alakea Street, Suite 3000, Honolulu, Hawaii 96813. Pihana’s telephone number is (808) 528-7500.
 
The Special Meeting
 
The special meeting will be held on Monday, December 30, 2002, beginning at 9 a.m., local time, at the offices of Willkie Farr & Gallagher located at 787 Seventh Avenue, New York, New York 10019.
 
Record Date
 
The record date for determining the holders of shares of our outstanding common stock entitled to vote at the special meeting is the close of business on November 22, 2002. On the record date, 98,892,711 shares of our common stock were issued and outstanding.
 
Proposal 1
The Issuance of Shares in Connection with the Combination,  the Financing and the Senior Note Exchange
 
The Combination
 
The combination is our acquisition of the businesses of i-STT and Pihana for cash and shares of our common stock and preferred stock as described below. See “The Combination” beginning on page 55.

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Acquisition of Pihana
 
We will acquire Pihana through a merger of one of our indirect wholly-owned subsidiaries with Pihana. As consideration for the merger, we expect to pay $10,000 and issue to the holders of Pihana’s preferred stock, shares of our common stock representing approximately 23.2% of our capitalization as of the closing of the combination. See “The Combination—The Pihana Merger” beginning on page 55.
 
Acquisition of i-STT
 
One of our indirect wholly-owned subsidiaries will purchase all of i-STT’s issued and outstanding stock from STT Communications. In consideration for the i-STT acquisition, we expect to pay $10,000 and issue to STT Communications shares of our common stock and Series A preferred stock representing approximately 28.3% of our capitalization as of the closing of the combination. See “The Combination—The i-STT Stock Purchase” beginning on page 58.
 
Adjustments to Consideration
 
The number of shares of our common stock and preferred stock to be issued to STT Communications and Pihana’s preferred stockholders is subject to adjustment based on our and i-STT’s working capital balance and the amount of cash Pihana has as of the opening of business, without giving effect to the combination, on the day of the closing of the combination. See “The Combination—The Pihana Merger—Determination of the Pihana Merger Consideration” beginning on page 55 and “The Combination—The i-STT Stock Purchase—Determination of the i-STT Stock Purchase Consideration” beginning on page 58.
 
Closing of the Combination, the Financing and the Senior Note Exchange
 
Unless otherwise noted, references in this proxy statement to the closing shall refer to the closing of the combination, the financing and the senior note exchange. The closing of the financing is conditioned upon the closing of the combination. The closing of the combination and the financing are conditioned upon the closing of the senior note exchange. We intend to close the combination, the financing and the senior note exchange immediately following our special meeting. We are targeting the closing to occur on December 31, 2002. See “The Combination” beginning on page 55, “The Financing” beginning on page 78 and “The Senior Note Exchange” beginning on page 82.
 
The Financing
 
In order to provide cash for our operations and to retire and restructure a portion of our outstanding debt, we will raise additional capital at the closing of the financing. At the closing of the financing, we will sell a minimum of $30.0 million and a maximum of $40.0 million of convertible secured notes. The convertible secured notes will be convertible into shares of our common stock and preferred stock at a price of approximately $0.34 per share, which represents a 10% premium over the 30 trading day average closing price of our common stock ending five days prior to signing the combination agreement. Each convertible secured note issued to STT Communications will be convertible into shares of our Series A preferred stock or shares of our non-voting Series A-1 preferred stock and will accrue interest at the rate of 14% per annum. All convertible secured notes issued to other investors will be convertible into shares of our common stock and accrue interest at the rate of 10% per annum. All interest on the convertible secured notes will be paid in the form of additional notes of the same series. All of the convertible secured notes will mature in November 2007. Due to the size of the investment by STT Communications and the concurrent negotiation of our acquisition of i-STT, the notes and warrants to be issued to STT Communications have preferential terms in comparison with notes and warrants to be issued to other investors.
 

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Until the second anniversary of the closing, unless terminated earlier as described in this proxy statement, STT Communications will be subject to restrictions on the amount of our voting securities that it may acquire upon conversion of notes or warrants. Under the securities purchase agreement, STT Communications may not convert its convertible secured notes or the warrants received in connection with the purchase of such notes into shares of our Series A preferred stock or common stock, but instead must convert or exercise into shares of our non-voting Series A-1 preferred stock, if:
 
 
 
as a result of such conversion, STT Communications and its affiliates would hold more than 40% of our outstanding voting stock; or
 
 
 
STT Communications has not complied with requirements of the Hart-Scott-Rodino Antitrust Improvements Act, or HSR Act, with respect to a conversion that would cause it to hold voting stock valued in excess of $50.0 million.
 
The convertible secured notes issued to STT Communications will be secured by a first priority lien on all of i-STT’s assets and the assets of Pihana’s Singapore subsidiary. All of the convertible secured notes will be secured by a second priority lien on substantially all of the remaining assets.
 
As additional consideration for the convertible secured notes, we will issue to each purchaser warrants for shares of our common and preferred stock. Warrants issued to STT Communications will be exercisable for shares of our Series A preferred stock or shares of our non-voting Series A-1 preferred stock depending on whether STT Communications would exceed the 40% voting stock threshold described above. All other warrants will be exercisable for shares of our common stock. Each warrant will initially be exercisable for $0.01 per share.
 
The material terms of the Series A preferred stock and the Series A-1 preferred stock are as follows:
 
 
 
Liquidation:    In the event of our liquidation, dissolution or winding-up, our assets will be distributed pro rata to Series A preferred stock, Series A-1 preferred stock and common stock on an as-converted to common stock basis.
 
 
 
Redemption:    The Series A preferred stock and the Series A-1 preferred stock are not redeemable at the option of the holder. After seven years, we will have the right, but not the obligation, to repurchase the Series A preferred stock and the Series A-1 preferred stock at the then current fair market value.
 
 
 
Conversion:    The Series A preferred stock and the Series A-1 preferred stock will initially be convertible into one share of common stock (subject to the anti-dilution adjustments described below). The Series A preferred stock will be convertible at any time at the option of the holder. The Series A-1 preferred stock may only be converted to Series A preferred stock or common stock under specified conditions. See “Governance of the Combined Company” beginning on page 89.
 
 
 
Automatic Conversion:    Subject to the conversion restrictions on the Series A-1 preferred stock as described above, all shares of Series A-1 preferred stock and all but 100 shares of Series A preferred stock will automatically convert into common stock upon our achieving four consecutive quarters of profitability.
 
 
 
Antidilution Adjustments:    There will be proportional adjustments for stock splits and stock dividends and similar events.
 
 
 
Voting Rights:    Except as required by Delaware law, the Series A preferred stock will vote with the common stock on an as-converted to common stock basis. Except as otherwise provided by Delaware law, the Series A-1 preferred stock will be non-voting.
 
 
 
Series A Board Seats:    The holders of Series A preferred stock will have the right to elect three directors until the earlier of (i) there are no longer 100 shares of Series A preferred stock outstanding or (ii) the second anniversary of the closing.

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The closing of the financing is conditioned upon the closing of the combination. See “The Financing” beginning on page 78.
 
The Senior Note Exchange
 
As a condition to closing the combination and financing, we are required to substantially reduce the outstanding amount of our senior notes so that no more than $22.3 million is outstanding under the notes. This condition requires us to retire at least $124.9 million of our outstanding senior notes unless two of the three combining companies agree to waive the condition. Prior to signing the combination agreement, we received offers to exchange outstanding senior notes from the holders of $101.2 million of our senior notes, leaving more than $23.7 million additional senior notes that we are required to exchange in the senior note exchange in order to close the combination and the financing. In connection with the combination and financing, we have made an offer to exchange cash and shares of our common stock for all of our outstanding senior notes. Holders of our senior notes will receive an amount of cash and shares of our common stock based on the aggregate principal amounts of senior notes exchanged as described in the following table. The table below describes the amount we will pay for every $1.00 of principal of senior notes exchanged.
 
Consideration Information per $1 Principal Amount of Notes Exchanged
 
Participation
Level:

  
Principal Amount Exchanged*
($ in millions)

  
Cash
Consideration

  
Stock
Consideration

  
Value of Stock Consideration**

  
Aggregate Stock Consideration (% of Fully-Diluted Capitalization)***

  
Total Consideration per $1.00 Note Exchanged

  
Equal to or greater than:

  
but less than:

              
1
  
$    0.0
  
$115.0
  
$0.13
  
.513
  
$0.15
  
11%
  
$0.28
2
  
$115.0
  
$117.0
  
$0.13
  
.509
  
$0.15
  
11%
  
$0.28
3
  
$117.0
  
$119.0
  
$0.13
  
.500
  
$0.15
  
11%
  
$0.28
4
  
$119.0
  
$121.0
  
$0.13
  
.492
  
$0.14
  
11%
  
$0.27
5
  
$121.0
  
$123.0
  
$0.13
  
.484
  
$0.14
  
11%
  
$0.27
6
  
$123.0
  
$125.0
  
$0.13
  
.476
  
$0.14
  
11%
  
$0.27
7
  
$125.0
  
$127.0
  
$0.14
  
.414
  
$0.12
  
10%
  
$0.26
8
  
$127.0
  
$129.0
  
$0.14
  
.408
  
$0.12
  
10%
  
$0.26
9
  
$129.0
  
$131.0
  
$0.14
  
.401
  
$0.12
  
10%
  
$0.26
10
  
$131.0
  
$132.5
  
$0.14
  
.396
  
$0.11
  
10%
  
$0.25
11
  
$132.5
  
$135.0
  
$0.15
  
.342
  
$0.10
  
  9%
  
$0.25
12
  
$135.0
  
$137.0
  
$0.15
  
.336
  
$0.10
  
  9%
  
$0.25
13
  
$137.0
  
$140.0
  
$0.15
  
.330
  
$0.10
  
  9%
  
$0.25
14
  
$140.0
  
$147.2
  
$0.16
  
.275
  
$0.08
  
  8%
  
$0.24
15
  
$147.2
  
NA
  
$0.17
  
.229
  
$0.07
  
  7%
  
$0.24

*
 
The consummation of the senior note exchange is conditioned upon, among other things, the closing of the sale of $30.0 million of convertible notes to STT and the closing of the combination. The closing of these transactions is conditioned upon a minimum of $125.0 million of senior notes being tendered and accepted for exchange. Therefore, although levels below $125.0 million are presented on the table, consent of two of the three principal partners (the Company, STT and Pihana) is required to waive this requirement.
**
 
Share value based on Equinix closing price on December 10, 2002 of $0.29.
***
 
Approximate minimum aggregate percentage of our stock to be issued at the closing to holders who participate in the senior note exchange, calculated on a fully-diluted, treasury stock basis after giving effect to the maximum number of shares that could be issued in connection with the senior note exchange, the combination, the shares issuable upon conversion of $30.0 million of convertible notes, and the paid-in-kind securities issuable through 2007 and warrants issued in connection with such convertible notes. Amounts are based on our share price as of December 10, 2002 of $0.29 and fully-diluted shares outstanding as of September 30, 2002.

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We have commenced an exchange offer for all of our outstanding senior notes, and the holders of the senior notes currently have until December 27, 2002 to tender their senior notes to us in exchange for the consideration described above. The expiration of the exchange offer may be extended at our option and the closing of the senior note exchange is conditioned upon our stockholders approving Proposal 1 to authorize the issuance of the shares in the senior note exchange. See “The Senior Note Exchange” beginning on page 82.
 
Post-Closing Capitalization
 
The closing of the combination, the financing and the senior note exchange will significantly change our ownership structure. The table below indicates the relative ownership percentage of the combined company that will be owned by our existing stockholders, the holders of our senior notes who exchange their senior notes, STT Communications and the former stockholders of Pihana. These percentages are subject to adjustment at the closing of the combination based on closing conditions in the transaction documents and the actual amount of senior notes exchanged. See “The Combination” beginning on page 55.
 
Stockholders

    
Approximate     %
of our Capital Stock

    
Approximate     %
of our Voting Stock Following the Financing**

    
Following the closing of the Combination

    
Following the
Financing**

    
Existing stockholders*
    
30.7%
    
22.5%
    
25.7%
Senior noteholders participating in the exchange
    
17.8%
    
13.1%
    
14.9%
STT Communications
    
28.3%
    
47.4%
    
40.0%
Former Pihana preferred stockholders
    
23.2%
    
17.0%
    
19.4%
 
 
*
 
Our existing stockholders’ capital stock is calculated based on the total number of shares of our common stock outstanding, plus all shares of our common stock issuable upon the exercise of our outstanding stock options and warrants with an exercise price less than $0.306 per share (as adjusted for the assumed cashless exercise of those options and warrants).
 
**
 
The percentages in this column assume we issue $30.0 million of convertible secured notes and related warrants in the financing to STT Communications, and the subsequent conversion of all notes and the exercise of all warrants issued to STT Communications into capital stock, but does not include shares of our stock issuable upon exercise of the change in control warrants and cash trigger warrants described in this proxy statement. For two years following the closing, STT Communications has agreed to convert its convertible secured notes and warrants into shares of our non-voting preferred stock if conversion of the notes and warrants would cause STT Communications to hold more than 40% of our outstanding voting stock. This restriction will expire before the second anniversary of the closing if enumerated events occur. See “Governance of the Combined Company” beginning on page 89.
 
Unless otherwise noted, references in this proxy statement to the combined company’s capitalization are based on the assumptions and methodologies contained in the foregoing table.

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Governance of the Combined Company
 
Nomination of Directors.    Following the closing, our board of directors will consist of nine members who will be nominated for two years following the closing, as follows:
 
 
 
Three members of our pre-combination board of directors will remain on the board following the combination. Any vacancies among these directors will be filled based on the nomination of the two directors who remain following the creation of that vacancy. One of these directors must at all times qualify as an independent director under the rules of The Nasdaq National Market. We call these directors the Equinix directors.
 
 
 
Three members of our board of directors will be individuals nominated by STT Communications. We call these directors the STT Communications directors.
 
 
 
One member of our board of directors will be an individual nominated by the former preferred stockholders of Pihana.
 
 
 
Two members of our board of directors will be individuals nominated by our nominating committee who qualify as independent directors under the rules of The Nasdaq National Market.
 
After the two year period expires, all directors will be elected by a plurality of votes cast at a meeting of our stockholders.
 
To the extent additional independent directors must be nominated to our board under the rules of The Nasdaq National Market, STT Communications and the Pihana stockholders have each agreed to nominate one director who qualifies as an independent director under those rules.
 
Board Committees.    For two years after the closing, all committees will consist of at least one of the Equinix directors and one STT Communications director. In no event will any committee contain more STT Communications directors than our directors. One of the STT Communications directors will serve as the chairman of our board of directors and chairman of our Compensation Committee.
 
Restrictions on Conversion.    As described above, for two years following the closing, STT Communications has agreed to convert its convertible secured notes and warrants into shares of our non-voting preferred stock if conversion of the notes and warrants would cause STT Communications to hold more than 40% of our outstanding voting stock. This restriction will expire before the second anniversary of the closing if enumerated events occur, including a material breach by us of our obligations under our material agreements with STT Communications, if a third party makes a tender offer for our shares, if STT Communications makes a tender offer with specified criteria or if STT makes additional cash investments in our shares. After two years, STT Communications will be free to convert its notes and warrants into shares of our common stock and Series A preferred stock without limitation.
 
Officers.    Following the combination, our current management team will continue to serve in their current positions. Prior to closing, we will mutually agree with STT Communications on an individual to run our newly acquired operations in Asia.
 
Risks Related to the Combination, the Financing and the Senior Note Exchange
 
The combination, the financing and the senior note exchange involve a variety of significant risks. You should carefully consider the factors discussed in the section entitled “Risk Factors” beginning on page 24.

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Votes Required
 
Proposal 1, relating to approval of the issuance of our stock in connection with the combination, the financing, and the senior note exchange, must be approved by a majority of the votes cast at the special meeting by holders of our common stock.
 
Proposal 2, relating to the adoption of the merger agreement, must be approved by the holders of at least a majority of our issued and outstanding shares of common stock.
 
Each share of our common stock is entitled to one vote.
 
Amendment to Our Credit Facility
 
As a condition to the combination, the financing and the senior note exchange, we are required to amend the terms of our credit facility. As part of this amendment we will pay down approximately $7.5 million of the outstanding principal and eliminate a number of the restrictive financial covenants under our credit facility, including those related to our achieving minimum quarterly revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA results. See “The Credit Facility” beginning on page 86.
 
To provide a mechanism to allow STT Communications and other purchasers of the convertible secured notes to ensure our compliance with liquidity and payment covenants under our credit facility, at the closing, we will issue cash trigger warrants to STT Communications and other investors. The holders of the cash trigger warrants will have the right, but not the obligation, to purchase shares of our common stock or, in the case of STT Communications, shares of our preferred stock. The cash trigger warrants will become exercisable only upon a default of our minimum cash covenant under our credit facility or our failure to make principal or interest payments on amounts outstanding under our credit facility when due. The maximum value of shares that may be purchased under the cash trigger warrants is $30.0 million. The maximum value of shares that may be purchased upon any one exercise of the cash trigger warrants is equal to the sum of (a) any shortage of cash under our cash covenant or any missed principal or interest payment plus (b) $5.0 million. See “The Financing—Cash Trigger Warrants” beginning on page 80.
 
Conditions to Closing
 
In addition to completing each of the transactions described above, there are a number of conditions to closing the combination and financing transactions, including:
 
 
 
Obtaining our stockholders’ approval of Proposal 1 and Proposal 2.
 
 
 
Maintaining our listing on The Nasdaq National Market or The Nasdaq Small Cap Market. If at the closing of the combination our common stock is listed on The Nasdaq Small Cap Market, we must not have received any indication from Nasdaq that we would not be allowed to transfer back to The Nasdaq National Market after our stock trades above $1.00 for 30 consecutive trading days.
 
 
 
We must have agreed with STT Communications on a management financial model and management structure for the combined companies.
 
 
 
Pihana must have reduced its operations in Los Angeles, Hawaii and Singapore and divested itself of its operations in Korea.
 
 
 
Each of us, STT Communications and Pihana must meet cash, non-current liabilities and working capital tests.
 
 
 
No events shall have occurred that would constitute a material adverse effect on us, i-STT or Pihana.
 

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We must have renegotiated our ground lease in San Jose.
 
 
 
We must obtain an independent valuation of all of our personal and real property assets for purposes of determining that we are not a real property holding company under U.S. law.
 
 
 
Documents effecting the security interests of the convertible secured notes must be executed and delivered by us to the purchasers of our convertible secured notes.
 
 
 
Guarantees of the convertible secured notes by all of our subsidiaries must be executed and delivered by us to the purchasers of our convertible secured notes.
 
Recommendation of the Board of Directors; Our Reasons for the Combination, the Financing and the Senior Note Exchange
 
Our board of directors, has voted FOR, and recommends that you vote FOR, the approval of Proposal 1. For a description of the reasons which our board considered in approving and recommending the combination, the financing and the senior note exchange, see “Proposal 1—Issuance of Shares in connection with the Combination, the Financing and the Senior Note Exchange—Our Reasons for the Combination, the Financing and the Senior Note Exchange” beginning on page 46.
 
Opinion of Financial Advisor
 
In connection with the combination, our board of directors received a written opinion from Salomon Smith Barney Inc. as to the fairness, from a financial point of view, to Equinix of the aggregate consideration to be paid by Equinix in the combination. The full text of Salomon Smith Barney’s written opinion, dated October 2, 2002, is attached to this proxy statement as Annex B. We encourage you to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken. Salomon Smith Barney’s opinion was provided in connection with the combination, does not address any related transaction and does not constitute a recommendation to you as to how you should vote or act on any matters relating to the combination or any related transactions.
 
Proposal 2
Charter Merger
 
In order to facilitate the combination, the financing and the senior note exchange described above, we need to accomplish the following:
 
 
 
Increase in Authorized Shares.    We need to increase the number of authorized shares of our preferred stock to allow for the issuance of shares of stock in connection with the combination and the financing. The authorized number of shares of preferred stock will be increased from 10,000,000 shares to 100,000,000 shares.
 
 
 
The Reverse Stock Split.    On November 25, 2002, the Nasdaq Qualifications Panel notified us that as a result of the combination, the financing and the senior note exchange, we will be required to submit an application to re-qualify for initial listing on The Nasdaq National Market. One of the conditions to qualifying for initial listing is that our stock price must trade at or above $5.00 per share. For the last several months our common stock has traded substantially below $5.00. To bring the trading price of our common stock above $5.00, our board of directors has authorized a reverse stock split to reduce the number of shares of our common stock outstanding. As a result of the reverse stock split, shares of our common stock will be combined into a smaller number of shares of our common stock. While the reverse stock split will reduce the number of shares held by each of our stockholders, it will not change

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the percentage of our outstanding stock owned by each stockholder. Based on our stock price on December 6, 2002 of $.28 per share, in order to achieve the $5.00 minimum share price we would need to complete a reverse stock split such that for approximately every 17.86 shares currently outstanding there would be one share outstanding following such reverse stock split. We anticipate that the actual reverse stock split ratio will cause our stock price to exceed the $5.00 minimum requirement. Shares issuable in the combination, the financing and the senior note exchange will be adjusted to reflect the reverse stock split.
 
The reverse stock split and the increase in our authorized shares will occur as a result of the charter merger. We could also accomplish the reverse stock split and an increase in the authorized shares through an amendment to our restated certificate of incorporation. Under the terms of our restated certificate of incorporation, an amendment requires the affirmative vote of 66 2/3% of our outstanding common stock. The charter merger, on the other hand, only requires the affirmative vote of a majority of our outstanding common stock. As we have disclosed throughout the proxy statement, if these transactions are not approved, we would file for bankruptcy protection and our existing stockholders’ equity would be almost entirely eliminated. While we believe we could ultimately get the required 66 2/3% vote to approve an amendment, given the importance of getting the transaction closed as soon as possible, we decided the charter merger was in the best interests of the company and its stockholders and creditors.
 
In Proposal 2, you are being asked to vote for the adoption of the agreement and plan of merger, dated October 17, 2002, by and between us and Eagle Oasis, Inc., our wholly-owned subsidiary, that will implement the charter merger.
 
Recommendation of the Board of Directors
 
Our board of directors has voted FOR, and recommends that you vote FOR, the approval of Proposal 2.

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Table of Contents
Structure of Equinix, Inc.
 
The following chart shows the structure of Equinix, Inc. and its subsidiaries prior to the combination, the financing, and the senior note exchange. The parenthetical information indicates the jurisdiction of incorporation for each entity.
 
LOGO

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The following chart shows the structure of Equinix, Inc. and its subsidiaries following the combination, the financing and the senior note exchange. The parenthetical information indicates the jurisdiction of incorporation for each entity.
 
LOGO
 
*
 
i-STT owns 60% of i-STT Nation Ltd, the entity through which i-STT does business in Thailand. The other 40% is owned by Nation Media Group of Thailand. At the closing of the combination, Equinix Thailand Holdings, Inc. will acquire i-STT’s 60% share of i-STT Nation Ltd.

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Table of Contents
EQUINIX, INC.
 
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
 
You should read the following table in conjunction with our historical consolidated financial statements and related notes and our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement.
 
The consolidated statement of operations data for the fiscal years ended December 31, 2001, 2000 and 1999 and the consolidated balance sheet data as of December 31, 2001 and 2000 have been derived from our audited consolidated financial statements included elsewhere in this proxy statement. The consolidated statement of operations data for the period from June 22, 1998 (inception) to December 31, 1998 and the consolidated balance sheet data as of December 31, 1999 and 1998 are derived from our audited financial statements not included or incorporated by reference in this proxy statement.
 
The consolidated balance sheet data as of September 30, 2002 and the consolidated statements of operations data for the nine months ended September 30, 2002 and 2001 are based on our unaudited quarterly consolidated financial statements included in this proxy statement.
 
The information as of and for the nine month periods ended September 30, 2002 and 2001 is unaudited and has been prepared on the same basis as our annual consolidated financial statements. In the opinion of our management, this quarterly information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. The results of operations for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2002, or any future period.
 
   
Nine Months
Ended September 30,

   
Years Ended December 31,

    
Period from
June 22, 1998
(inception) to
December 31,
1998

 
   
2002

   
2001

   
2001

   
2000

   
1999

    
   
(unaudited)
              
Statement of Operations Data:
(in thousands, except per share amounts)
                                                
Revenues
 
$
58,385
 
 
$
45,948
 
 
$
63,414
 
 
$
13,016
 
 
$
37
 
  
$
—  
 
Costs and operating expenses:
                                                
Cost of revenues (includes stock-based compensation of $216, $412, $426, $766, $177 and none for the periods ended September 30, 2002 and 2001 and December 31, 2001, 2000, 1999, and 1998, respectively)
 
 
78,599
 
 
 
74,593
 
 
 
94,889
 
 
 
43,401
 
 
 
3,268
 
  
 
—  
 
Sales and marketing (includes stock-based compensation of $802, $2,344, $2,830, $6,318, $1,631 and $13 for the periods ended September 30, 2002 and 2001 and December 31, 2001, 2000, 1999, and 1998, respectively)
 
 
12,168
 
 
 
13,274
 
 
 
16,935
 
 
 
20,139
 
 
 
3,949
 
  
 
47
 
General and administrative (includes stock-based compensation of $4,622, $13,285, $15,788, $22,809, $4,819 and $151 for the periods ended September 30, 2002 and 2001 and December 31, 2001, 2000, 1999, and 1998, respectively)
 
 
22,735
 
 
 
47,013
 
 
 
58,286
 
 
 
56,585
 
 
 
12,603
 
  
 
902
 
Restructuring charges
 
 
28,960
 
 
 
48,565
 
 
 
48,565
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
   


 


 


 


 


  


Total costs and operating expenses
 
 
142,462
 
 
 
183,445
 
 
 
218,675
 
 
 
120,125
 
 
 
19,820
 
  
 
949
 
Loss from operations
 
 
(84,077
)
 
 
(137,497
)
 
 
(155,261
)
 
 
(107,109
)
 
 
(19,783
)
  
 
(949
)
Interest income
 
 
961
 
 
 
9,477
 
 
 
10,656
 
 
 
16,430
 
 
 
2,138
 
  
 
150
 
Interest expense
 
 
(26,411
)
 
 
(32,948
)
 
 
(43,810
)
 
 
(29,111
)
 
 
(3,146
)
  
 
(220
)
Gain on debt extinguishment
 
 
27,188
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
  
 
—  
 
   


 


 


 


 


  


Net loss
 
$
(82,339
)
 
$
(160,968
)
 
$
(188,415
)
 
$
(119,790
)
 
$
(20,791
)
  
$
(1,019
)
   


 


 


 


 


  


Net loss per share:
                                                
Basic and diluted
 
$
(0.88
)
 
$
(2.07
)
 
$
(2.39
)
 
$
(3.48
)
 
$
(4.98
)
  
$
(1.48
)
   


 


 


 


 


  


Weighted average shares
 
 
93,687
 
 
 
77,843
 
 
 
78,681
 
 
 
34,461
 
 
 
4,173
 
  
 
688
 
   


 


 


 


 


  


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Table of Contents
 
    
As of September 30,

    
As of December 31,

 
    
2002

    
2001

    
2001

    
2000

    
1999

    
1998

 
    
(unaudited)
                             
Balance Sheet Data: (in thousands)
                                                     
Cash and cash equivalents and short-term investments
  
$
11,622
 
  
$
165,842
 
  
$
87,721
 
  
$
207,210
 
  
$
222,974
 
  
$
9,165
 
Restricted cash and short-term investments
  
 
1,517
 
  
 
27,875
 
  
 
28,044
 
  
 
36,855
 
  
 
38,609
 
  
 
—  
 
Working capital (deficit)
  
 
(95,931
)
  
 
74,075
 
  
 
39,889
 
  
 
126,677
 
  
 
229,178
 
  
 
8,920
 
Property and equipment, net
  
 
386,699
 
  
 
327,278
 
  
 
325,226
 
  
 
315,380
 
  
 
28,444
 
  
 
482
 
Construction in progress
  
 
—  
 
  
 
91,066
 
  
 
103,691
 
  
 
94,894
 
  
 
18,312
 
  
 
31
 
Total assets
  
 
428,318
 
  
 
648,739
 
  
 
575,054
 
  
 
683,485
 
  
 
319,946
 
  
 
10,001
 
Senior secured credit facility
  
 
100,000
 
  
 
150,000
 
  
 
105,000
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Senior notes
  
 
139,303
 
  
 
187,387
 
  
 
187,882
 
  
 
185,908
 
  
 
183,955
 
  
 
—  
 
Redeemable convertible preferred stock
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
97,227
 
  
 
10,436
 
Total stockholders’ equity (deficit)
  
 
147,866
 
  
 
227,725
 
  
 
203,521
 
  
 
375,116
 
  
 
8,472
 
  
 
(846
)
Other Financial Data: (in thousands)
                                                     
Net cash used in operating activities
  
 
(29,741
)
  
 
(52,057
)
  
 
(68,854
)
  
 
(68,073
)
  
 
(9,908
)
  
 
(796
)
Net cash used in investing activities
  
 
(6,507
)
  
 
(191,812
)
  
 
(153,014
)
  
 
(302,158
)
  
 
(86,270
)
  
 
(5,265
)
Net cash provided by (used in) financing activities
  
 
(13,700
)
  
 
155,134
 
  
 
107,799
 
  
 
339,847
 
  
 
295,178
 
  
 
10,226
 

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Table of Contents
EQUINIX, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
SELECTED UNAUDITED QUARTERLY FINANCIAL INFORMATION
 
The Company believes that period-to-period comparisons of its financial results should not be relied upon as an indication of future performance. The Company’s revenues and results of operations have been subject to significant fluctuations, particularly on a quarterly basis, and the Company’s revenues and results of operations could fluctuate significantly quarter-to-quarter and year-to-year. Significant quarterly fluctuations in revenues will cause significant fluctuations in our cash flows and the cash and cash equivalents and accounts receivable accounts on the Company’s balance sheet. Causes of such fluctuations may include the volume and timing of new orders and renewals, the sales cycle for our services, the introduction of new services, changes in service prices and pricing models, trends in the Internet infrastructure industry, general economic conditions (such as the recent economic slowdown), extraordinary events such as acquisitions or litigation and the occurrence of unexpected events.
 
The unaudited quarterly financial information presented below has been prepared by the Company and reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to present fairly the financial position and results of operations for the interim periods presented.
 
The following table presents selected unaudited quarterly information for the period ending September 30, 2002 and the fiscal years 2001 and 2000:
 
    
For the quarterly periods ending

 
    
March 31

    
June 30

    
September 30

 
    
(in thousands, except per share data)
 
2002:
                          
Revenues
  
$
20,158
 
  
$
18,040
 
  
$
20,187
 
Net loss
  
 
(13,694
)
  
 
(24,557
)
  
 
(44,088
)
Basic and diluted net loss per share
  
 
(0.16
)
  
 
(0.25
)
  
 
(0.44
)
 
    
For the quarterly periods ending

 
    
March 31

    
June 30

    
September 30

    
December 31

 
    
(in thousands, except per share data)
 
2001:
                                   
Revenues
  
$
12,613
 
  
$
16,157
 
  
$
17,178
 
  
$
17,466
 
Net loss
  
 
(41,537
)
  
 
(37,857
)
  
 
(81,574
)
  
 
(27,447
)
Basic and diluted net loss per share
  
 
(0.54
)
  
 
(0.48
)
  
 
(1.03
)
  
 
(0.34
)
2000:
                                   
Revenues
  
$
136
 
  
$
892
 
  
$
3,933
 
  
$
8,055
 
Net loss
  
 
(18,009
)
  
 
(26,811
)
  
 
(32,085
)
  
 
(42,885
)
Basic and diluted net loss per share
  
 
(2.40
)
  
 
(2.62
)
  
 
(0.70
)
  
 
(0.57
)

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Table of Contents
i-STT PTE LTD
 
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
 
You should read the following table in conjunction with i-STT’s historical consolidated financial statements and related notes and i-STT’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this proxy statement, which have been prepared in accordance with Singapore GAAP. Singapore GAAP differs in certain respects from U.S. GAAP. For a discussion of material differences as applied to i-STT’s financial statements, see Note 27 to i-STT’s consolidated financial statements. All dollar amounts presented are in U.S. dollars.
 
The consolidated statements of operations data for the fiscal year ended December 31, 2001 and the period from January 3, 2000 (inception) to December 31, 2000 and the consolidated balance sheet data as of December 31, 2001 and 2000 have been derived from audited consolidated financial statements of i-STT included in this proxy statement.
 
The consolidated balance sheet data as of September 30, 2002 and the consolidated statements of operations data for the nine months ended September 30, 2002 and 2001 has been derived from unaudited interim consolidated financial statements of i-STT also included in this proxy statement/prospectus.
 
The information as of and for the nine months ended September 30, 2002 and 2001 are unaudited and have been prepared on the same basis as i-STT’s annual consolidated financial statements. In the opinion of i-STT’s management, this unaudited information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. The results of operations for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2002, or any future period.
 
   
Nine Months Ended September 30,

    
Year Ended December 31, 2001

    
Period from January 3, 2000 (inception) to December 31, 2000

 
   
2002

    
2001

       
   
(unaudited)
               
Statement of Operations Data: (in thousands)
                                  
Revenues
 
$
8,141
 
  
$
9,828
 
  
$
12,191
 
  
$
10,742
 
Loss from operations
 
 
(5,659
)
  
 
(24,307
)
  
 
(26,334
)
  
 
(14,708
)
Net loss
 
 
(5,601
)
  
 
(24,839
)
  
 
(26,959
)
  
 
(14,427
)
Net loss in accordance with US GAAP
 
 
(6,038
)
  
 
(25,598
)
  
 
(27,845
)
  
 
(14,647
)
   
September 30,

    
December 31,

 
   
2002

    
2001

    
2001

    
2000

 
   
(unaudited)
               
Balance Sheet Data: (in thousands)
                       
Cash and cash equivalents
 
$
1,575
 
  
$
1,031
 
  
$
2,670
 
  
$
5,053
 
Working capital (deficit)
 
 
(18,622
)
  
 
(14,957
)
  
 
(16,617
)
  
 
(20,244
)
Total assets
 
 
18,354
 
  
 
22,817
 
  
 
23,473
 
  
 
30,669
 
Shareholders’ equity/(deficit)
 
 
(5,432
)
  
 
2,455
 
  
 
174
 
  
 
(2,422
)
Shareholders’ equity/(deficit) in accordance with US GAAP
 
 
(5,487
)
  
 
2,289
 
  
 
43
 
  
 
(1,760
)

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PIHANA PACIFIC, INC.
 
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
 
You should read the following table in conjunction with Pihana’s historical consolidated financial statements and related notes and Pihana’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this proxy statement.
 
The consolidated statement of operations data for the fiscal years ended December 31, 2001 and 2000 and the period from June 11, 1999 (inception) to December 31, 1999 and the consolidated balance sheet data as of December 31, 2001 and 2000 have been derived from audited consolidated financial statements of Pihana included in this proxy statement. The consolidated balance sheet data as of December 31, 1999 is derived from Pihana’s unaudited consolidated financial statements not included in this proxy statement.
 
The consolidated balance sheet data as of September 30, 2002 and the consolidated statements of operations data for the nine months ended September 30, 2002 and 2001 has been derived from unaudited consolidated financial statements of Pihana also included in this proxy statement.
 
The information as of and for the nine months ended September 30, 2002 and 2001 are unaudited and have been prepared on the same basis as Pihana’s annual consolidated financial statements. In the opinion of Pihana’s management, this unaudited information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. The results of operations for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2002, or any future period.
 
    
Nine Months Ended
September 30,

    
Years Ended
December 31,

      
Period from June 11, 1999 (inception) to December 31, 1999

 
    
2002

    
2001

    
2001

    
2000

      
    
(unaudited)
                 
Statement of Operations Data: (in thousands)
                                              
Revenues
  
$
3,123
 
  
$
342
 
  
$
1,018
 
  
$
13
 
    
$
—  
 
Loss from operations
  
 
(113,776
)(1)
  
 
(38,105
)
  
 
(50,888
)
  
 
(18,521
)
    
 
(1,033
)
Net loss
  
 
(113,048
)(1)
  
 
(32,324
)
  
 
(43,851
)
  
 
(15,953
)
    
 
(989
)
 
    
September 30,

    
December 31,

 
    
2002

    
2001

    
2001

    
2000

      
1999

 
Balance Sheet Data: (in thousands)
  
(unaudited)
             
(unaudited)
 
Cash and cash equivalents and short-term investments
  
$
38,465
 
  
$
85,102
 
  
$
67,742
 
  
$
191,626
 
    
$
1,194
 
Working capital
  
 
33,990
 
  
 
77,681
 
  
 
62,734
 
  
 
176,157
 
    
 
1,082
 
Total assets
  
 
72,786
 
  
 
200,508
 
  
 
186,093
 
  
 
233,531
 
    
 
2,137
 
Series A redeemable preferred stock
  
 
14,534
 
  
 
13,574
 
  
 
13,814
 
  
 
12,854
 
    
 
3,064
 
Series B redeemable preferred stock
  
 
216,222
 
  
 
216,222
 
  
 
216,222
 
  
 
213,592
 
    
 
—  
 
Series B redeemable preferred stock warrant
  
 
6,741
 
  
 
6,741
 
  
 
6,741
 
  
 
6,741
 
    
 
—  
 
Stockholders’ deficit
  
 
(174,959
)
  
 
(49,761
)
  
 
(64,578
)
  
 
(17,123
)
    
 
(1,079
)

(1)
 
Includes non-recurring charge of $77.0 million for the impairment of long-lived assets in the nine months ended September 30, 2002.
 

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SUMMARY UNAUDITED CONDENSED COMBINED PRO FORMA DATA
 
We are providing the following summary unaudited pro forma combined financial information to provide you with a better picture of what the results of operations and the financial position of Equinix’s, Pihana’s and i-STT’s business might have looked like had the combination, the financing, the senior note exchange and the amendment to our credit facility occurred on January 1, 2001 for statement of operations purposes and on September 30, 2002 for balance sheet purposes. This information is provided for illustrative purposes only and is not necessarily indicative of what our results of operations or financial position would have been if those transactions actually occurred on the dates assumed. In addition, this information is not necessarily indicative of what our future consolidated operating results or consolidated financial position will be.
 
    
Nine Months
Ended
September 30,
2002

    
Year
Ended
December 31,
2001

 
    
(in thousands, except per share amounts)
 
Unaudited pro forma combined statement of operations data:
                 
Revenues
  
$
69,545
 
  
$
75,581
 
Costs and operating expenses:
                 
Cost of revenues
  
 
99,763
 
  
 
135,062
 
Sales and marketing
  
 
19,679
 
  
 
30,805
 
General and administrative
  
 
31,622
 
  
 
77,473
 
Restructuring and other non-recurring charges
  
 
31,730
 
  
 
48,565
 
    


  


Total costs and operating expenses
  
 
182,794
 
  
 
291,905
 
    


  


Loss from operations
  
 
(113,249
)
  
 
(216,324
)
Interest income
  
 
2,470
 
  
 
16,094
 
Interest expense
  
 
(18,125
)
  
 
(26,757
)
Other
  
 
(1,035
)
  
 
(1,008
)
    


  


Net loss
  
$
(129,939
)
  
$
(227,995
)
    


  


Net loss per share:
                 
Basic and diluted
  
$
(0.49
)
  
$
(0.92
)
    


  


Weighted average shares
  
 
263,684
 
  
 
248,678
 
    


  


Net loss per share, as adjusted for anticipated reverse stock split:
                 
Basic and diluted
  
$
(8.87
)
  
$
(16.50
)
    


  


Weighted average shares
  
 
14,649
 
  
 
13,815
 
    


  


 
    
September 30,
2002

    
(in thousands)
Unaudited pro forma combined balance sheet data:
      
Cash and cash equivalents and short-term investments
  
$
57,384
Restricted cash and short-term investments
  
 
1,564
Working capital
  
 
35,512
Property and equipment, net
  
 
398,335
Total assets
  
 
515,318
Senior secured credit facility
  
 
92,500
Senior notes
  
 
21,096
Stockholders’ equity
  
 
327,778

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Table of Contents
COMPARATIVE PER SHARE DATA
 
The following table presents Equinix’s, Pihana’s and i-STT’s unaudited historical per share and combined pro forma per share data after giving effect to the combination using the purchase method of accounting. The pro forma data does not purport to be indicative of the results of future operations or the results that would have occurred had the combination, the financing, the senior note exchange and the amendment to our credit facility been consummated at the beginning of the periods presented. The information set forth below should be read in conjunction with Equinix’s, Pihana’s and i-STT’s historical consolidated financial statements and notes included elsewhere in this proxy statement. The unaudited pro forma combined and unaudited pro forma equivalent per share data combine Equinix’s, Pihana’s and i-STT’s results of operations for the year ended December 31, 2001, Equinix’s, Pihana’s and i-STT’s results of operations for the nine months ended September 30, 2002, with Equinix’s, Pihana’s and i-STT’s financial position at September 30, 2002. No cash dividends have ever been declared or paid on our, Pihana’s or i-STT’s common stock.
 
Comparative historical and pro forma per share data:
 
      
Equinix

 
      
Nine Months Ended
September 30, 2002

      
Year Ended
December 31, 2001

 
Historical per common share data:
                     
Loss per share—basic and diluted
    
$
(0.88
)
    
$
(2.39
)
      


    


Net book value per share(1)
    
$
1.50
 
    
$
2.54
 
      


    


 
      
i-STT

 
      
Nine Months Ended
September 30, 2002

      
Year Ended
December 31, 2001

 
Historical per common share data(2):
                     
Loss per share—basic and diluted
    
$
(0.11
)
    
$
(0.93
)
      


    


Net book value per share(1)
    
$
(0.10
)
    
$
0.00
 
      


    


 
      
Pihana

 
      
Nine Months Ended
September 30, 2002

      
Year Ended December 31, 2001

 
Historical per common share data:
                     
Loss per share—basic and diluted
    
$
(0.94
)
    
$
(0.37
)
      


    


Net book value per share(1)
    
$
0.52
 
    
$
1.44
 
      


    


 
      
Combination

 
      
Nine Months Ended September 30, 2002

      
Year Ended December 31, 2001

 
Pro forma combined per common share data:
                     
Loss per combined company’s basic and diluted share
    
$
(0.49
)
    
$
(0.92
)
      


    


Loss per equivalent i-STT basic and diluted share(3)
    
$
(0.85
)
    
$
(1.60
)
      


    


Loss per equivalent Pihana basic and diluted share(3)
    
$
(0.31
)
    
$
(0.59
)
      


    


Pro forma net book value per combined company’s share(1)
    
$
1.24
 
          
      


          
Pro forma net book value per equivalent i-STT share(3)
    
$
2.15
 
          
      


          
Pro forma net book value per equivalent Pihana share (3)
    
$
0.79
 
          
      


          
Pro forma combined per common share data, as adjusted for anticipated reverse stock split(4):
                     
Loss per combined company’s basic and diluted share
    
$
(8.87
)
    
$
(16.50
)
      


    


Loss per equivalent i-STT basic and diluted share(3)
    
$
(15.38
)
    
$
(28.62
)
      


    


Loss per equivalent Pihana basic and diluted share(3)
    
$
(5.67
)
    
$
(10.54
)
      


    


Pro forma net book value per combined company’s share(1)
    
$
22.38
 
          
      


          
Pro forma net book value per equivalent i-STT share(3)
    
$
38.81
 
          
      


          
Pro forma net book value per equivalent Pihana share(3)
    
$
14.29
 
          
      


          

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(1)
 
Equinix’s, Pihana’s and i-STT’s historical net book value per share of common stock is computed by dividing stockholders’ equity at period end by the number of shares of common stock outstanding at the respective period end. The pro forma net book value per share of common stock of the combined company is computed by dividing the pro forma stockholders’ equity by the pro forma number of shares of Equinix’s common stock outstanding at the respective period end, assuming the combination, the financing, the senior note exchange and the amendment to our credit facility had occurred as of that date.
(2)
 
Prepared on an as converted basis for Pihana preferred stock.
(3)
 
The equivalent pro forma per share data is calculated by multiplying the respective pro forma share data by the pro forma exchange ratio for Pihana and i-STT, which is 0.6387 and 1.7343, respectively.
(4)
 
On November 25, 2002, the Nasdaq National Market notified the Company that as a result of the combination, financing and senior note exchange, the Company will be required to submit an application to re-qualify for initial listing on the Nasdaq National Market. One of the conditions to qualifying for initial listing is that the Company’s stock price must trade at or above $5.00 per share. For the last several months, the Company’s common stock has traded substantially below $5.00. To bring the trading price of the Company’s common stock above $5.00, the Company’s board of directors has authorized a reverse stock split to reduce the number of shares of the Company’s common stock outstanding. As a result of the reverse stock split, shares of the Company’s common stock will be combined into a smaller number of shares of the Company’s common stock. While the reverse stock split will reduce the number of shares held by each of the Company’s stockholders, it will not change the percentage of the Company’s common stock owned by each stockholder. Based on the Company’s stock price on December 6, 2002 of $0.28 per share, in order to achieve the $5.00 minimum share price, the Company would need to complete a reverse stock split such that for every 17.86 shares currently outstanding, there would be one share outstanding following such reverse stock split. The Company anticipates that the actual reverse stock split ratio will cause the Company’s stock price to exceed the $5.00 minimum requirement. Shares issuable in the combination, the financing and the senior note exchange will be adjusted to reflect the reverse stock split. While the exact reverse stock split is not yet known at this time, at a minimum, it will be whatever is required to bring the Company into compliance with the minimum $5.00 per share Nasdaq requirement. As a result, an 18 for 1 reverse stock split has been reflected based on the current trading levels of the Company’s common stock.

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Table of Contents
RISK FACTORS
 
You should carefully consider the following risk factors before you decide whether to vote to approve the issuance of our shares in the combination, the financing and the senior note exchange, and whether to adopt the charter merger. You should also consider all of the other information included in this proxy statement and the additional information in our other reports on file with the SEC, including our annual report on Form 10-K for the year ended December 31, 2001.
 
Risks Related to the Combination, the Financing and the Senior Note Exchange
 
The combination, the financing and the senior note exchange will significantly dilute our existing stockholders’ ownership interests.
 
In connection with the combination, the financing and the senior note exchange, we will issue, or commit to issue, shares of our common stock and preferred stock (and instruments convertible or exercisable into shares of our common stock and preferred stock) representing approximately 77.5% of our capitalization as of the closing. As a result, our existing stockholders will own approximately 22.5% of the company following the closing of the combination, the financing and the senior note exchange. The issuance of stock in connection with these transactions will significantly dilute our existing stockholders’ ownership interests.
 
The closing of the combination, the financing and the senior note exchange will significantly change our ownership structure. The table below indicates the relative ownership percentage of the combined company that will be owned by our existing stockholders, the holders of our senior notes who exchange their senior notes, STT Communications and the former stockholders of Pihana. These percentages are subject to adjustment at the closing of the combination based on closing conditions in the transaction documents and the actual amount of senior notes exchanged. See “The Combination” beginning on page 55.
 
Stockholders

    
Approximate     %
of our Capital Stock

    
Approximate     %
of our Voting Stock following the Financing**

    
Following the closing of the Combination

    
Following the
Financing **

    
Existing stockholders*
    
30.7%
    
22.5%
    
25.7%
Senior noteholders participating in the exchange
    
17.8%
    
13.1%
    
14.9%
STT Communications
    
28.3%
    
47.4%
    
40.0%
Former Pihana preferred stockholders
    
23.2%
    
17.0%
    
19.4%
 
 
*
 
Our existing stockholders’ capital stock is calculated based on the total number of shares of our common stock outstanding, plus all shares of our common stock issuable upon the exercise of our outstanding stock options and warrants with an exercise price less than $0.306 per share (as adjusted for the assumed cashless exercise of those options and warrants).
 
**
 
The percentages in this column assume we issue $30.0 million of convertible secured notes and related warrants in the financing to STT Communications, and the subsequent conversion of all notes and the exercise of all warrants issued to STT Communications into capital stock, but does not include shares of our stock issuable upon exercise of the change in control warrants and cash trigger warrants described in this proxy statement. For two years following the closing, STT Communications has agreed to convert its convertible secured notes and warrants into shares of our non-voting preferred stock if conversion of the notes and warrants would cause STT Communications to hold more than 40% of our outstanding voting stock. This restriction will expire before the second anniversary of the closing if enumerated events occur. See “Governance of the Combined Company” beginning on page 89.

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Table of Contents
 
Upon completion of the combination, STT Communications will hold a substantial portion of our stock and will have significant influence over matters requiring stockholder consent.
 
Upon completion of the combination, STT Communications will beneficially own approximately 28.3% of our outstanding capital stock. Because of the diffuse ownership of our stock, STT Communications will have significant influence over matters requiring our stockholder approval following the combination. Following the expiration of restrictions on STT Communications preventing it from converting its convertible secured notes and warrants into voting stock if, as a result, STT Communications will own more than 40% of our voting stock, STT Communications will effectively control the company and the election of directors to our board of directors. Consequently, STT Communications will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could prevent or delay a third party from acquiring or merging with us.
 
There are a number of conditions that must be satisfied prior to closing these transactions; if the proposed transactions are not consummated, we will most likely seek bankruptcy protection.
 
The combination, the financing and the senior note exchange have a number of conditions that must be satisfied prior to closing these transactions. For instance, the combination is conditioned on the successful completion of the senior note exchange. This condition requires us to retire at least $124.9 million of our senior notes in the senior note exchange. Prior to signing the combination agreement we only had offers to exchange outstanding senior notes from holders of $101.2 million of our senior notes, requiring the voluntary participation by holders of a significant amount of senior notes. If more than $22.3 million of our senior notes remain outstanding after the senior note exchange, we may be unable to complete the combination and financing. This condition may be waived by two of the three combining companies. However, even if this condition is successfully waived, the existing offers to tender $101.2 million are conditioned on $32.2 million or less of our senior notes remaining outstanding after the completion of the senior note exchange.
 
In addition, these transactions are conditioned upon our stockholders approving the proposals described in this proxy statement.
 
If these conditions are not met or waived and if the combination, the financing and the senior note exchange are not consummated, we will most likely seek bankruptcy protection. In the event of a bankruptcy, we anticipate our existing stockholders will be diluted to 0-5% of our capitalization.
 
We may be required to pay significant liquidated damages if our stockholders do not approve the issuance of shares in connection with the combination, financing and senior note exchange or if our board of directors changes its recommendation to vote in favor of these transactions.
 
If our stockholders do not approve the issuance of shares in connection with the combination, financing and senior note exchange, then STT Communications and Pihana may terminate the combination agreement and we will be required to pay up to $750,000 to each of Pihana and STT Communications to cover their expenses. In addition, if we enter into an alternate transaction within twelve months of the termination, we would be obligated to pay to each of Pihana and STT Communications liquidated damages equal to the difference between $1.3 million and the expenses already paid to such party.
 
If our board of directors changes its recommendation from one in favor of the combination to one against the combination or neutral with respect to the combination, does not recommend against a tender offer by a third party or if we enter into an alternate transaction, then we will be required to pay liquidated damages of $1.3 million to each of Pihana and STT Communications if the combination agreement is terminated. Payment of these liquidated damages would represent a significant portion of our remaining cash and negatively affect our operating results.

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Table of Contents
 
Failure to complete the combination, financing and senior note exchange could negatively affect our operating results and our ability to enter into alternative transactions.
 
If the combination, financing and senior note exchange are not completed for any reason, regardless of whether we seek bankruptcy protection, we will likely experience a number of adverse consequences, including the following:
 
 
 
the price of our common stock may decline to the extent that the current market price of our common stock reflects a market assumption that the combination will be completed;
 
 
 
an adverse reaction from investors and potential investors may reduce future financing opportunities;
 
 
 
our costs related to these transactions, including legal and accounting fees, must be paid even if these transactions are not completed; and
 
 
 
we may be obligated to pay the expenses of STT Communications or Pihana, up to $750,000 each, if the combination agreement is terminated.
 
In addition, if the combination is terminated and we seek another merger or business combination, there can be no assurance that we will be able to find a suitable partner at an attractive price. In addition, while the combination agreement is in effect, we are prohibited from soliciting, initiating or encouraging or entering into extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party. As a result of this prohibition, each company will be precluded from discussing potential transactions and, should the combination not occur, may lose an opportunity for a transaction with another potential partner at a favorable price.
 
Our officers and two members of our management team who are directors may have different interests from yours that may influence them to recommend these transactions.
 
Our officers and two members of our management team who are directors have interests in the combination and participate in arrangements that are different from, or are in addition to, those of our stockholders generally. Specifically, immediately following the closing, the combined company will issue options to employees of the combined company which will represent in the aggregate approximately 5 to 8% of the combined company’s capitalization, including significant grants to our executives, who will comprise the majority of the combined company’s management team. The options granted to these officers, and the two members of our board who are part of our management team will mitigate the dilutive effects of the combination, the financing and the senior note exchange on their current equity positions. Therefore, although we believe each such officer and director has complied with their fiduciary duties, they could be more likely to vote to recommend these transactions to our board of directors than if they were not anticipating such option grants. You should consider whether these interests may have influenced these officers to support or recommend these transactions.
 
Equinix, i-STT and Pihana have limited operating histories and the market for each company’s services is still in its early stages.
 
We were founded in June 1998 and did not recognize any revenue until November 1999. i-STT was founded in January 2000 and did not recognize any revenue until May 2000. Pihana was founded in June 1999 and did not recognize any revenue until June 2000. These three companies’ limited history makes evaluating their operations and the proposed scale of the combined business difficult. The combined company expects that it will encounter challenges and difficulties frequently experienced by early-stage companies in new and rapidly evolving markets, such as its ability to generate cash flow, hire, train and retain sufficient operational and technical talent, and implement its plan with minimal delays. The combined company may not successfully address any or all of these challenges and the failure to do so would seriously harm its business plan and operating results, and affect its ability to raise additional funds.
 
If the combined company is unable to meet these challenges and generate higher revenues while reducing costs, it may not be able to comply with the covenants in the credit facility. If the combined company breaches

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Table of Contents
the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
Equinix, i-STT and Pihana have each incurred substantial losses in the past, may continue to incur additional losses in the future and will not be profitable until the combined company reverses this trend.
 
We incurred losses of approximately $188.4 million for 2001, i-STT incurred losses of approximately $27.0 million for 2001 and Pihana incurred losses of approximately $43.9 million for the same period. We incurred losses of approximately $82.3 million for the nine months ended September 30, 2002, i-STT and Pihana incurred losses of $5.6 million and $113.0 million respectively, for the same period. In recent periods, Equinix, i-STT and Pihana have not generated cash from operations. Even if the combined company achieves profitability, given the competitive and evolving nature of the industry in which it operates, the combined company may not be able to sustain or increase profitability on a quarterly or annual basis.
 
The combination will delay, and may prevent, our profitability as a result of factors including:
 
 
 
Pihana’s data centers are generating significant operating losses and have lower gross margins;
 
 
 
costs associated with integrating the three businesses; and
 
 
 
fees and costs associated with completing these transactions, including professional fees.
 
As a result of these increased expenses, the combined company will need to increase revenues in order to reach profitability. If we are unable to sufficiently grow revenues while reducing costs, we may not be able to comply with the cash covenants and EBITDA ratios in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
The combined company expects its operating results to fluctuate.
 
Equinix, i-STT and Pihana have each experienced fluctuations in their respective results of operations on a quarterly and annual basis. The fluctuation in their operating results may cause the market price of the combined company’s common stock to decline. The combined company expects to experience significant fluctuations in our operating results in the foreseeable future due to a variety of factors, including:
 
 
 
changes in general economic conditions and specific market conditions in the telecommunications and Internet industries;
 
 
 
conditions related to international operations;
 
 
 
growth of Internet use;
 
 
 
customer insolvency;
 
 
 
the ability of our customers to obtain financing or to fund their capital expenditures;
 
 
 
demand for space and services at its IBX hubs;
 
 
 
our pricing policies and the pricing policies of its competitors;
 
 
 
the timing of customer installations and related payments;
 
 
 
customer retention and satisfaction;
 
 
 
the provision of customer discounts and credits;
 
 
 
the mix of current and proposed products and services and the gross margins associated with its products and services;

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competition in the markets;
 
 
 
the timing and magnitude of capital expenditures and expenses related to the expansion of sales, marketing, operations and acquisitions, if any, of complementary businesses and assets;
 
 
 
the effects of terrorist activity and armed conflict, such as disruptions in general economic activity, changes in logistics and security arrangements, and reduced customer demand for our services;
 
 
 
the cost and availability of adequate public utilities, including power;
 
 
 
ability to obtain, transfer, or maintain licenses required by governmental entities with respect to the combined business; and
 
 
 
compliance with governmental regulation with which we have little experience.
 
Any of the foregoing factors, or other factors discussed elsewhere in this proxy statement, could have a material adverse effect on our business, results of operations, and financial condition. Although Equinix, i-STT and Pihana have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future operating results. It is possible that the combined company may never achieve profitability on a quarterly or annual basis. In addition, a relatively large portion of the combined company’s expenses is fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation and amortization, and interest expenses. Therefore, the combined company’s results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior reporting periods should not be relied upon as indications of the combined company’s future performance. In addition, operating results of the combined company in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, the combined company could experience an immediate and significant decline in the trading price of its stock.
 
If the combined company cannot generate higher revenues, while reducing costs by combining the businesses, it may not be able to comply with the covenants in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
If the combination, financing and senior note exchange do not close by December 31, 2002 the costs to the combined company will be increased, and there may be adverse tax consequences to the combined company.
 
If the combination, financing and senior note exchange close after December 31, 2002, the transaction costs associated with these transactions will be increased to a level greater than planned. In addition, the cost benefits we currently plan for in the combination will not be fully realized. If the costs associated with these transactions significantly exceed expectations or if we are unable to recognize sufficient cost savings in the combination, the combined company may not be able to comply with the covenants in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
In general, if we do not incur sufficient losses in the tax year in which the combination, the financing and the senior note exchange close, we will be forced to utilize available net operating loss carryforwards to offset the cancellation of indebtedness income generated by the senior note exchange. However, a number of states in which we are subject to tax, including California and New Jersey, have adopted legislation suspending the ability to utilize net operating loss carryforwards for state tax purposes. If the combination, financing and senior note exchange do not close on or prior to December 31, 2002, the likelihood that we will have sufficient losses incurred during the tax year in which such transactions do ultimately close to fully offset the cancellation of indebtedness income generated by the senior note exchange diminishes, and, therefore, the likelihood that we will have a material state tax liability as a result of the senior note exchange increases.

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If we cannot successfully integrate Pihana’s and i-STT’s respective existing business operations, the combined company may not achieve the anticipated benefits of the combination.
 
Integrating i-STT and Pihana into our business operations involves a number of risks, including:
 
 
 
the difficulties and expenses in combining the operations, technology and systems of the three companies;
 
 
 
the different geographic locations of the principal operations of us, i-STT and Pihana;
 
 
 
the difficulties in integrating the companies’ key revenue-generating services in a way that would be accepted in the market;
 
 
 
the difficulties in the creation and maintenance of uniform standards, controls, procedures and policies;
 
 
 
the diversion of management’s attention from ongoing operations;
 
 
 
the challenges in keeping and attracting customers; and
 
 
 
the introduction of new or enhanced services.
 
If the combined company is to realize the anticipated benefits of the combination, our operations must be efficiently and effectively integrated with the operation of i-STT and Pihana. There can be no assurance that the integration will be successful or that the anticipated benefits of the combination will be realized. If the combined company cannot generate higher revenues, while reducing costs, it may not be able to comply with the covenants in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
In addition, the i-STT and Pihana businesses have never operated as part of a publicly-held company and will now be subject to rigorous disclosure and reporting obligations. Applying these more rigorous requirements to i-STT and Pihana may significantly impact their reported financial results due to increased controls over their revenue and liabilities. Further, the process of combining the companies could create uncertainty among employees about their future roles with the combined company, thereby negatively affecting employee morale. This uncertainty may adversely affect the ability of the combined company to retain some of its key employees after the combination.
 
If the combined company cannot effectively integrate and manage international operations, its revenues may not increase and its business and results of operations would be harmed.
 
In 2001, our sales outside North America represented less than 1% of our revenues, i-STT’s sales outside North America represented approximately 100% of its revenues and Pihana’s sales outside North America represented approximately 34% of its revenues. We anticipate that, for the foreseeable future, approximately 20% of the combined company’s revenues will be derived from sources outside North America. The combined company’s management team will be comprised primarily of our executives, some of whom have had limited or no experience overseeing international operations.
 
The combined company may experience gains and losses resulting from fluctuations in foreign currency exchange rates, for which hedging activities may not adequately protect us. Where our prices are denominated in U.S. dollars, our sales could be adversely affected by declines in foreign currencies relative to the U.S. dollar, thereby making our products more expensive in local currencies. The combined company’s international operations are generally subject to a number of additional risks, including:
 
 
 
costs of customizing IBX hubs for foreign countries;
 
 
 
protectionist laws and business practices favoring local competition;
 
 
 
greater difficulty or delay in accounts receivable collection;

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difficulties in staffing and managing foreign operations;
 
 
 
political and economic instability;
 
 
 
ability to obtain, transfer, or maintain licenses required by governmental entities with respect to the combined business; and
 
 
 
compliance with governmental regulation with which we have little experience.
 
To date, the majority of Equinix’s and Pihana’s revenues and costs have been denominated in U.S. dollars. However, the combined company expects that in the future an increasing portion of revenues and costs will be denominated in foreign currencies. Although the combined company may undertake foreign exchange hedging transactions to reduce foreign currency transaction exposure, it does not currently intend to eliminate all foreign currency transaction exposure.
 
The combined company needs to improve and implement financial and managerial controls and improve its reporting systems and procedures. If the combined company is unable to do so successfully, it may not be able to manage growth effectively and its operating results would be harmed.
 
The combination will place a significant strain on management, information systems and resources. In order to manage this growth effectively, the combined company will need to continue to improve its financial and managerial controls and reporting systems and procedures. Any inability of the combined company’s management to integrate additional companies, employees, technology advances and customer service into operations and to eliminate unnecessary duplication may have a materially adverse effect on its business, financial condition and results of operations.
 
The combined company may be forced to take steps, and may be prevented from pursuing certain business opportunities, to ensure compliance with certain tax-related covenants agreed to by us in the combination agreement.
 
We agreed to a covenant in the combination agreement (which we refer to as the FIRPTA covenant) that we would use all commercially reasonable efforts to ensure that at all times from and after the closing of the combination until such time as neither STT Communications nor its affiliates hold our capital stock or debt securities (or the capital stock received upon conversion of the debt securities) received by STT Communications in connection with the consummation of the transactions contemplated in the combination agreement, none of our capital stock issued to STT Communications constitute “United States real property interests” within the meaning of Section 897(c) of the Internal Revenue Code of 1986, which we call the Code. Under Section 897(c) of the Code, our 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 us equals or exceeds 50% of the sum of the aggregate fair market values of (a) our “United States real property interests,” (b) our interests in real property located outside the U.S., and (c) any other assets held by us which are used or held for use in our trade or business. Given that we currently own significant amounts of “United States real property interests,” we may be limited with respect to the business opportunities we may pursue, particularly if the business opportunities would increase the amounts of “United States real property interests” owned by us or decrease the amount of other assets owned by us. In addition, pursuant to the FIRPTA covenant we may be forced to take commercially reasonable proactive steps to ensure our 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 of Singapore which would issue shares of its capital stock in exchange for all of our outstanding stock (this reorganization would require the submission of that transaction to our stockholders for their approval and the consummation of that exchange).
 

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Customers of the combined company will include numerous related parties of i-STT.
 
In the past, a substantial portion of i-STT’s financing, as well as its revenues, has come from its affiliates. i-STT will continue to have contractual and other business relationships and may engage in material transactions with affiliates of STT Communications. Circumstances may arise in which the interests of STT Communications’ affiliates may conflict with the interests of the combined company’s other stockholders. In addition, Singapore Technologies Pte Ltd, an affiliate of STT Communications, makes investments in various companies; it has invested in the past, and may invest in the future, in entities that compete with the combined company. In the context of negotiating commercial arrangements with affiliates, conflicts of interest have arisen in the past and may arise, in this or other contexts, in the future. There can be no assurance that any conflicts of interest will be resolved in the combined company’s favor.
 
The combination could harm key third party relationships.
 
Our current and potential relationships, as well as the present and potential relationships of i-STT and Pihana, with customers and other third parties may be harmed by the combination. Uncertainties following the combination may cause these parties to delay decisions regarding these relationships. Any changes in these relationships could harm the combined company’s business. Customers of Equinix, i-STT, or Pihana and other third parties may, in response to the announcement of the combination or loss of employees related to the integration of the businesses, delay or defer decisions concerning Equinix, i-STT, or Pihana. For example, the combination agreement requires Pihana to divest its data center in Korea. Many of the customers in Pihana’s data center in Korea are potential customers of the combined company’s other IBX hubs. The transfer or closure of Pihana’s data center in Korea may result in the customers of Pihana’s Korea data center choosing to do business with competitors of the combined company in other markets. That transfer could reduce or eliminate the combined company’s revenue with respect to those customers and could have a negative affect on the combined company’s operating results. The combined company could experience a decrease in expected revenue as a consequence of uncertainties associated with the combination. Any delay or deferral in those decisions by customers of Equinix, i-STT, or Pihana or other third parties could have a material adverse effect on the business of the combined company.
 
Risks Related to Equinix, Inc.
 
The combined company’s success is dependent on the retention of its executive officers and key employees following the combination.
 
The combined company will be substantially dependent upon the continued service of our executive officers. In addition, the combined company will be dependent on the retention of key employees of Pihana and i-STT who have knowledge of the applicable local business environment and data center operations. Without these individuals as part of the management team for the combined company, it may be significantly more difficult to efficiently and effectively integrate our critical functions with those of i-STT and Pihana and create a combined company that can compete effectively against other Internet infrastructure companies.
 
If the economy does not improve and the use of the Internet and electronic business does not grow, revenues of the combined company may not grow.
 
Acceptance and use of the Internet may not continue to develop at historical rates and a sufficiently broad base of consumers may not adopt or continue to use the Internet and other online services as a medium of commerce. Demand for Internet services and products are subject to a high level of uncertainty and are subject to significant pricing pressure. In addition, even if consumers do adopt and continue to use online services, we do not expect a significant increase in revenues until the economy begins to improve generally. As a result, we cannot be certain that a viable market for our IBX hubs will materialize. If the market for the combined company’s IBX hubs grows more slowly than we currently anticipate, the combined company’s revenues will not

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grow and its operating results will suffer. If the combined company cannot grow revenues while reducing costs, it may not be able to comply with the covenants in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down and the combined company will not have sufficient cash reserves to repay such amounts.
 
We have significant debt and we may not generate sufficient cash flow to meet our debt service obligations.
 
Assuming we retire $124.9 million of our senior notes in the senior note exchange and we issue $30.0 million of convertible secured notes, after the combination, the financing and the senior note exchange our total debt will likely consist primarily of the following:
 
 
 
a total of $22.3 million principal amount of senior notes;
 
 
 
a total of $92.5 million principal amount of loans under our credit facility;
 
 
 
a total of $30.0 million of newly issued convertible secured notes; and
 
 
 
approximately $9.0 million of other outstanding debt facilities and capital lease obligations.
 
The amount of the combined company’s debt could have important consequences, including:
 
 
 
impairing its ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes;
 
 
 
requiring it to dedicate a substantial portion of its operating cash flow to paying principal and interest on indebtedness, thereby reducing the funds available for operations;
 
 
 
limiting its ability to grow and make capital expenditures due to the financial covenants contained in its debt arrangements;
 
 
 
impairing its ability to adjust rapidly to changing market conditions, invest in new or developing technologies, or take advantage of significant business opportunities that may arise; and
 
 
 
making the combined company more vulnerable if a general economic downturn continues or if its businesses experience difficulties.
 
If the combined company cannot generate sufficient additional revenue and recognize sufficient synergy savings by combining the businesses, it may not be able to meet its debt service obligations or repay its debt when due or comply with other covenants in the credit facility. If the combined company breaches the credit facility, the banks could require repayment of all amounts previously drawn down, and the combined company will not have sufficient cash reserves to repay such amounts.
 
We may be unable to raise the funds necessary to repay or refinance our indebtedness.
 
We will be obligated to make principal and interest payments on our credit facility each year until 2006 and on our senior notes each year until 2007. Additionally, in 2006 our credit facility matures and in 2007 the convertible secured notes mature and our senior notes mature. Each of these obligations require significant amounts of liquidity. We may need additional capital to fund those obligations. Our ability to arrange financing and the cost of this financing will depend upon many factors, including:
 
 
 
general economic and capital markets conditions generally, and in particular the non-investment grade debt market;
 
 
 
conditions in the Internet infrastructure market;
 
 
 
credit availability from banks or other lenders;
 
 
 
investor confidence in the telecommunications industry generally and our company specifically;

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the success of our IBX hubs; and
 
 
 
provisions of tax and securities laws that are conducive to raising capital.
 
If we need additional funds, our inability to raise them will have an adverse effect on our operations. If we decide to raise additional funds by incurring debt, we may become subject to additional or more restrictive financial covenants and ratios.
 
We are subject to restrictive covenants under the credit facility that limit our flexibility in managing our business.
 
Our credit facility requires that the combined company maintain specific financial ratios and comply with covenants, including a monthly cash covenant, and contains numerous restrictions on our ability to incur debt, pay dividends or make other restricted payments, sell assets, enter into affiliate transactions and take other actions. Furthermore, our existing financial arrangements are, and future financing arrangements are likely to be, secured by substantially all of our assets. If we are unable to meet the terms of the financial covenants or if we breach any of these covenants, a default could result under one or more of these agreements. A default, if not waived by our lenders, could result in the acceleration of outstanding indebtedness and cause our debt to become immediately due and payable. If an acceleration occurs, we will not be able to repay our debt, and it is unlikely that we will be able to borrow sufficient additional funds to refinance our debt. Even if new financing is made available to us, it may not be available on terms acceptable to us.
 
The combined company may not be able to maintain its listing on The Nasdaq National Market.
 
Our stock is currently traded on The Nasdaq National Market. Under Nasdaq’s listing maintenance standards, if the closing bid price of a company’s common stock remains under $1.00 per share for 30 consecutive trading days, Nasdaq will issue a deficiency notice to that company. If the closing bid price does not reach at least $1.00 per share for a minimum of ten consecutive trading days during the 90 calendar days following the issuance of the deficiency notice from Nasdaq, Nasdaq may delist that company’s common stock from trading on The Nasdaq National Market. On May 16, 2002 we received a notice from Nasdaq stating that we were not in compliance with Nasdaq’s continued listing requirements because the minimum closing bid price of our common stock had remained below $1.00 for 30 consecutive trading days. The letter further stated that the closing bid price of our common stock must be at least $1.00 per share for ten consecutive trading days during the 90-day period subsequent to May 16, 2002, or Nasdaq would delist our common stock from trading on The Nasdaq National Market on or about August 14, 2002. On August 15, 2002, we received a notice from Nasdaq indicating that the failure of our common stock to maintain Nasdaq’s minimum closing bid price requirement of $1.00 has continued beyond the 90-day probationary period allowed under The Nasdaq National Marketplace Rules and, therefore, our common stock may be delisted. On August 21, 2002, we appealed the delisting decision and requested the delisting be stayed pending a hearing before the Nasdaq Qualifications Panel. A hearing was granted and we appeared before the panel on October 3, 2002. On November 25, 2002 the Nasdaq Qualifications Panel issued a decision to continue the listing of our common stock on The Nasdaq National Market. However, such continuance is contingent upon our ability to demonstrate compliance with all of the requirements for initial listing on The Nasdaq National Market. In addition, the Panel’s decision is contingent upon the completion of the combination and related transactions on or before December 31, 2002.
 
The initial listing process can be time consuming, expensive and can divert management’s attention away from the integration of the combined company. In addition, it is possible that the combined company would not meet the initial listing requirements of The Nasdaq National Market. In order to meet the initial listing requirements, the combined company must meet all of the requirements under at least one of three listing standards for initial listing on The Nasdaq National Market. The listing standards include minimum financial requirements for some or all of the following categories: stockholders’ equity of $15.0 million, income from continuing operations before income taxes of $1.0 million, 1.1 million publicly held shares, $8.0 million market value of publicly held shares, $5 bid price, 400 round lot shareholders and 3 market makers. In addition, the

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listing standards include corporate governance requirements. The entry fees for initial listing vary depending on the number of shares being listed, ranging from $100,000 to $150,000. As of date of this filing, we would not meet the minimum bid price requirement for initial listing.
 
In order to avoid a delisting of our common stock, we will be required to take various measures, including effecting a reverse split of our common stock. We cannot predict that a reverse stock split will increase the market price for our common stock. The history of similar stock split combinations for a company in like circumstances is often not positive. There is no assurance that the market price per share of our common stock following a reverse stock split will either exceed or remain in excess of the $5.00 minimum bid price as required by Nasdaq or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq.
 
If the combined company’s stock is delisted and thus no longer eligible for quotation on The Nasdaq National Market, it would trade either as a Nasdaq Small Cap issue or in the over-the-counter market, both of which are viewed by most investors as less desirable and less liquid marketplaces. The loss of the combined company’s listing on The Nasdaq National Market would also complicate compliance with state blue-sky laws. Furthermore, our ability to raise additional capital would be severely impaired. As a result of these factors, the value of the common stock would decline significantly.
 
A reverse split of our common stock will result in a greater number of stockholders with odd lots of less than 100 shares of our common stock, which may result in higher transaction fees and decreased liquidity for such stockholders.
 
If the proposed reverse stock is implemented, it will increase the number of our stockholders who own “odd lots” of less than 100 shares of our common stock. Brokerage commissions and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. As a result, an increased number of our stockholders will have increased costs associated with the sale of their stock and may have increased difficulty selling their shares.
 
A significant number of shares of our capital stock issued in connection with the combination, the financing and the senior note exchange may be sold in the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.
 
As described in this proxy statement, we are issuing a large number of shares of our capital stock to Pihana stockholders, STT Communications, other investors purchasing convertible secured notes in the financing and holders of our senior notes in connection with the combination, financing and senior note exchange. The shares of common stock issued in the senior note exchange may be sold into the public market immediately following the closing of the exchange. The shares of common stock issued in connection with the combination will be registered for resale within six months. Subject to the restrictions described in this proxy statement, the senior notes and warrants issued in connection with the financing are immediately convertible or exercisable into shares of common stock and the underlying shares of common stock may be registered for resale within six months of the closing. Sales of a substantial number of shares of our common stock by these parties within any narrow period of time could cause our stock price to fall. In addition, the issuance of the additional shares of our common stock as a result of these transactions will reduce our earnings per share, if any. This dilution could reduce the market price of our common stock unless and until the combined company achieves revenue growth or cost savings and other business economies sufficient to offset the effect of this issuance. There can be no assurance that the combined company will achieve revenue growth, cost savings or other business economies, or that our stockholders will achieve greater returns as a stockholder of the combined company than as a stockholder of our current company.

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Our stock price is volatile and the number of shares of our common stock to be received in the combination will not be adjusted in the event of any change in our stock price.
 
Under the combination agreement, the number of shares of our common stock that i-STT and Pihana stockholders will receive in the combination will not be adjusted because of any increase or decrease in the price of Equinix common stock as reflected on The Nasdaq National Market. The price of our common stock at the closing may vary from its price on the date of this proxy statement and on the date of our special meeting. Further, under the combination agreement, neither Equinix, i-STT nor Pihana will have the right to terminate or renegotiate the combination agreement or to resolicit proxies as a result of any increase or decrease in the value of our common stock. If the price of our common stock goes up substantially, it may appear we have issued too many shares in exchange for the assets we are receiving in the combination. The market price of our common stock, like that of many other Internet infrastructure companies, has been and will likely continue to be volatile. Recently, the stock market in general and the shares of Internet infrastructure companies in particular, have experienced significant price fluctuations. The market price of our common stock may continue to fluctuate significantly in response to various factors, including without limitation:
 
 
 
changes in our business, operations or prospects;
 
 
 
the timing of the completion of the combination;
 
 
 
the prospects of post-combination operations; and
 
 
 
general market and economic conditions.
 
The combined company’s profitability will be affected by the average selling price of its services and its operations efficiency rates.
 
Decreases in the average selling prices of our, i-STT’s, and Pihana’s services have had and will continue to have a material adverse effect on its profitability. Historically, the average per square foot selling price of our, i-STT’s and Pihana’s services have declined since the commencement of their respective operations. The combined company’s ability to achieve profitability will continue to be dependent, in large part, upon its ability to offset any decreases in average per square foot selling prices by improving operations efficiency, and increasing the value added services provided at its IBX hubs. If the combined company is unable to do so, its business, financial condition and results of operations could be materially adversely affected.
 
The combined company will resell products and services of third parties that may require that it pay for such services even if its customers fail to pay the combined company for the services which may have a negative impact on the combined company’s operating results.
 
In order to provide resale services such as bandwidth, managed services, backup and recovery services and other network management services, the combined company will contract with third party service providers. These services require the combined company to enter into fixed term contracts for services with third party suppliers of products and services. If the combined company experiences the loss of a customer who has purchased a resale product, the combined company will remain obligated to continue paying moneys to suppliers for the term of the underlying contracts. The payment of these obligations without a corresponding payment from customers will reduce the combined company’s financial resources and may have a material adverse affect on the combined company’s financial performance and operating results.
 
The combined company may not be able to compete successfully against current and future competitors.
 
The combined company’s IBX hubs and other products and services must be able to differentiate themselves from existing providers of space and services for telecommunications companies, web hosting companies and other colocation providers. In addition to competing with neutral colocation providers, it must compete with traditional colocation providers, including local phone companies, long distance phone companies, Internet service providers and web hosting facilities. Likewise, with respect to the combined company’s other products

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and services, including managed services, bandwidth services and security services, the combined company must compete with more established providers of similar services. Most of these companies have longer operating histories and significantly greater financial, technical, marketing and other resources than the combined company.
 
Because of their greater financial resources, some of these companies have the ability to adopt aggressive pricing policies. As a result, in the future, the combined company may suffer from pricing pressure that would adversely affect its ability to generate revenues and adversely affect its operating results. In addition, these competitors could offer colocation on neutral terms, and may start doing so in the same metropolitan areas where we have IBX hubs. Some of these competitors may also provide the combined company’s target customers with additional benefits, including bundled communication services, and may do so in a manner that is more attractive to the combined company’s potential customers than obtaining space in the combined company’s IBX hubs. We believe the combined company’s neutrality provides it with an advantage over these competitors. However, if these competitors were able to adopt aggressive pricing policies together with offering colocation space, the combined company’s ability to generate revenues would be materially adversely affected.
 
The combined company may also face competition from persons seeking to replicate its IBX concept. Competitors may operate more successfully or form alliances to acquire significant market share. Furthermore, enterprises that have already invested substantial resources in peering arrangements may be reluctant or slow to adopt the combined company’s approach that may replace, limit or compete with their existing systems. In addition, other companies may be able to attract the same potential customers that the combined company will be targeting. Once customers are located in competitors’ facilities, it will be extremely difficult to convince them to relocate to the combined company’s IBX hubs.
 
Because the combined company depends on the development and growth of a balanced customer base, failure to attract and retain this base of customers could harm the combined company’s business and operating results.
 
The combined company’s ability to maximize revenues depends on its ability to develop and grow a balanced customer base, consisting of a variety of companies, including network service providers, site and performance management companies, and enterprise and content companies. The more balanced the customer base within each IBX hub, the better the combined company will be able to generate significant interconnection revenues, which in turn increases its overall revenues. The combined company’s ability to attract customers to its IBX hubs will depend on a variety of factors, including the presence of multiple carriers, the mix of products and services offered by the combined company, the overall mix of customers, the IBX hub’s operating reliability and security and the combined company’s ability to effectively market its services. In addition, some of the combined company’s customers are and will 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 hubs. This may be disruptive to the combined company’s business and may adversely affect their business, financial condition and results of operations.
 
The combined company’s products and services have a long sales cycle that may materially adversely affect the combined company’s business, financial condition and results of operations.
 
A customer’s decision to license cabinet space in the IBX hubs and to purchase additional services typically involves a significant commitment of resources and will be influenced by, among other things, the customer’s confidence in the combined company’s financial strength. In addition, some customers will be reluctant to commit to locating in the combined company’s IBX hubs until they are confident that the IBX hub has adequate carrier connections. As a result, the combined company will have a long sales cycle. Delays due to the length of the combined company’s sales cycle may materially adversely affect its business, financial condition and results of operations.
 

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The combined company will depend on a number of third parties to provide Internet connectivity to its IBX hubs; if connectivity is interrupted or terminated, our operating results and cash flow will be materially adversely affected.
 
The presence of diverse telecommunications carriers’ fiber networks to our IBX hubs is critical to our ability to attract new customers. We believe that the availability of carrier capacity will directly affect our ability to achieve our projected results.
 
We are not a telecommunications carrier, and as such we rely on third parties to provide our customers with carrier services. We rely primarily on revenue opportunities from their customers to encourage carriers to invest the capital and operating resources required to build facilities from their locations to our IBX hubs. Carriers will likely evaluate the revenue opportunity of an IBX hub based on the assumption that the environment will be highly competitive. There can be no assurance that any carrier will elect to offer its services within the combined company’s IBX hubs. In addition, there can be no assurance once a carrier has decided to provide Internet connectivity to the combined company’s IBX hubs that it will continue to do so for any period of time.
 
The construction required to connect multiple carrier facilities to the combined company’s IBX hubs is complex and involves factors outside of its control, including regulatory processes and the availability of construction resources. If the establishment of highly diverse Internet connectivity to the combined company’s IBX hubs does not occur or is materially delayed or is discontinued, the combined company’s operating results and cash flow will be adversely affected. Further, many carriers are experiencing business difficulties. As a result, some carriers may be forced to terminate connectivity within the combined company’s IBX hubs. For example, on January 16, 2001, NorthPoint Communications, a carrier in one of our IBX hubs, announced that it filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, NorthPoint terminated connectivity in our IBX hubs after its assets were sold. As an additional example, Worldcom, a significant carrier within our IBX hubs, has also recently filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.
 
Any failure of the combined company’s physical infrastructure or services could lead to significant costs and disruptions that could reduce its revenue and harm its business reputation and financial results.
 
The combined company’s business depends on providing customers with highly reliable service. We must protect customers’ IBX infrastructure and customers’ equipment located in our IBX hubs. The services we provide are subject to failure resulting from numerous factors, including:
 
 
 
human error;
 
 
 
physical or electronic security breaches;
 
 
 
fire, earthquake, flood and other natural disasters;
 
 
 
water damage;
 
 
 
power loss;
 
 
 
sabotage and vandalism; and
 
 
 
failure of business partners who provide the combined company’s resale products.
 
Problems at one or more of the combined company’s IBX hubs, whether or not within our control, could result in service interruptions or significant equipment damage. In the past, a limited number of our customers have experienced temporary losses of power and failure of our services levels on products such as bandwidth connectivity. If the combined company incurs significant financial commitments to its customers in connection with a loss of power, or its failure to meet other service level commitment obligations, its liability insurance may not be adequate to cover those expenses. In addition, any loss of services, equipment damage or inability to meet its service level commitment obligations, particularly in the early stage of the combined company’s development,

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could reduce the confidence of its customers and could consequently impair its ability to obtain and retain customers, which would adversely affect both its ability to generate revenues and its operating results.
 
Furthermore, the combined company will be dependent upon internet service providers, telecommunications carriers and other website operators in the U.S., Asia and elsewhere, some of which may have experienced significant system failures and electrical outages in the past. Users of the combined company’s services may in the future experience difficulties due to system failures unrelated to systems and services of the combined company. If for any reason, these providers failed to provide the required services, the combined company’s business, financial condition and results of operations could be materially adversely impacted.
 
A portion of the managed services business we will acquire in the combination involves the processing and storage of confidential customer information. Inappropriate use of those services could jeopardize the security of customers’ confidential information causing losses of data or financially impacting us or our customers. Efforts to alleviate problems caused by computer viruses or other inappropriate uses or security breaches may lead to interruptions, delays or cessation of our managed services.
 
There is no known prevention or defense against denial of service attacks. During a prolonged denial of service attack, the Internet service will not be available for several hours, thus impacting hosted customers on-line business transactions. Affected customers might file claims against the combined company under such circumstances.
 
To the extent a failure of the combined company’s physical infrastructure, services, or services provided by service providers results in decreased revenues, the combined company may not be able to comply with covenants in its credit facility. If the combined company is unable to comply with covenants in its credit facility, the banks may require repayment of all outstanding amounts, and the combined company will not have sufficient cash reserves to repay those amounts.
 
The combined company’s business could be harmed by prolonged electrical power outages or shortages, increased costs of energy or general availability of electrical resources.
 
The combined company’s IBX hubs are susceptible to regional costs of power, electrical power shortages, planned or unplanned power outages caused by these shortages, such as those that occurred in California during 2001, and limitations, especially internationally, of adequate power resources. The overall power shortage in California has increased the cost of energy, which we may not be able to pass on to the combined company’s customers. We attempt to limit exposure to system downtime by using backup generators and power supplies. Power outages, which last beyond the combined company’s backup and alternative power arrangements, could harm its customers and its business.
 
The combined company may experience service interruptions, loss of customers and drain on resources if it is unable to renew its facility leases.
 
The combined company will have several short term leases on its IBX hubs that are located outside of North America. For example, i-STT currently leases approximately 86,100 square feet for its facility in Singapore, of which approximately 71,900 square feet expire in July 2003. Upon its expiration, the combined company may not be able to renew its leases under reasonable terms, if at all and may have to relocate its IBX hubs to other facilities. A relocation of any IBX hub could result in service interruptions and significant additional expenses. In addition, seeking a new facility could divert management’s attention and the combined company’s resources.
 
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, and electronic commerce remain largely unsettled, even in areas where

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there has been some legislative action. This is true both in the U.S. and the various foreign countries in which the combined company will 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 those of the combined company. The combined company has little experience with such international regulatory issues and substantial resources of the company may be required to comply with regulations or bring any non-complaint business practices into compliance with such regulations. In addition, the development of the market for online commerce and the displacement of traditional telephony service by the Internet and related communications services may prompt increased call for more stringent consumer protection laws or other regulation both in the U.S. and abroad, that may impose additional burdens on companies conducting business online and their services providers. The compliance with, adoption of or modification of laws or regulations relating to the Internet, or interpretations of the existing law, could have a material adverse effect on the combined company’s business, financial condition and results of operation.
 
Recent terrorist activity throughout the world and military action to counter terrorism could adversely impact the combined company’s 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 other acts of war or hostility appear to be having an adverse effect on business, financial and general economic conditions internationally. These effects may, in turn, result in increased costs due to the need to provide enhanced security, which would have a material adverse effect on the combined company’s business and results of operations. These circumstances may also adversely affect the combined company’s ability to attract and retain customers, its ability to raise capital and the operation and maintenance of its IBX hubs.
 
The combined company may make acquisitions, which pose integration and other risks that could harm the combined company’s business.
 
We may seek to acquire complementary businesses, products, services and technologies. As a result of these acquisitions, we may be required to incur additional debt and expenditures and issue additional shares of the combined company’s stock to pay for the acquired business, product, service or technology, which will dilute existing stockholders’ ownership interest in the combined company. In addition, if we fail to successfully integrate and manage acquired businesses, products, services and technologies, the combined company’s business and financial results would be harmed.
 
We are subject to securities class action litigation, which may harm our business and results of operations.
 
In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. During the quarter ended September 30, 2001, putative shareholder class action lawsuits were filed against us, a number of our officers and directors, and several investment banks that were underwriters of our initial public offering. The suits allege that the underwriter defendants agreed to allocate stock in our initial public offering to certain investors 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 it did not disclose these arrangements. The defense of this litigation may increase the combined company’s expenses and divert its management’s attention and resources. An adverse outcome in this litigation could seriously harm the combined company’s business and results of operations. In addition, the combined company may, in the future, be subject to other securities class action or similar litigation.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of the management of Equinix, i-STT and Pihana, based on information currently available to each company’s management. The use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “should,” “likely” or similar expressions indicates that a forward-looking statement is being made. Forward-looking statements include, among other things, the information concerning possible or assumed future results of operations of the combined company set forth under:
 
 
 
“Summary”;
 
 
 
“Risk Factors”;
 
 
 
“The Combination”;
 
 
 
“The Financing”;
 
 
 
“The Senior Note Exchange”;
 
 
 
“Unaudited Pro Forma Combined Consolidated Condensed Financial Statements”;
 
 
 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations of Equinix”;
 
 
 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations of i-STT”; and
 
 
 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations of Pihana.”
 
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and stockholder values of Equinix, i-STT and Pihana may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. Stockholders are cautioned not to put undue reliance on any forward-looking statements. Those statements are made in reliance on the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under “Risk Factors” beginning on page 24. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Equinix, i-STT and Pihana expressly disclaim any obligation to update or alter forward-looking statements, whether as a result of new information, future events or otherwise.

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MARKET PRICE AND DIVIDEND INFORMATION
 
Equinix Common Stock
 
Our common stock is traded on The Nasdaq National Market under the symbol “EQIX.” Our common stock began trading in August 2000. The following table sets forth the range of high and low sales prices reported on The Nasdaq National Market for our common stock for the periods indicated.
 
    
Common Stock Price

    
High

  
Low

Year ended December 31, 2000:
             
Third Quarter (beginning August 10, 2000)
  
$
16.19
  
$
8.88
Fourth Quarter
  
 
9.75
  
 
3.50
Year ended December 31, 2001:
             
First Quarter
  
$
7.00
  
$
1.25
Second Quarter
  
 
1.73
  
 
0.59
Third Quarter
  
 
1.43
  
 
0.38
Fourth Quarter
  
 
3.37
  
 
0.39
Year ended December 31, 2002:
             
First Quarter
  
$
3.38
  
$
1.06
Second Quarter
  
 
1.15
  
 
0.35
Third Quarter
  
 
0.58
  
 
0.21
Fourth Quarter (through November 22, 2002)
  
 
0.36
  
 
0.22
 
On October 1, 2002, the last full trading day prior to the public announcement of the execution and delivery of the combination agreement, the last reported sale price of our common stock on The Nasdaq National Market was $0.36 per share. On November 22, 2002, the last reported sale price of our common stock on The Nasdaq National Market was $0.28 per share.
 
Because the market prices of our common stock may fluctuate, the market prices per share of the shares of our common stock that holders of i-STT and Pihana capital stock will receive in the combination, as reported on The Nasdaq National Market, may increase or decrease prior to the combination.
 
i-STT Capital Stock
 
i-STT’s capital stock is not publicly traded.
 
Pihana Capital Stock
 
Pihana’s capital stock is not publicly traded.
 
Stockholders
 
As of September 30, 2002, we had issued and outstanding 98,892,711 shares of our common stock held by approximately 461 stockholders of record.
 
As of October 2, 2002, i-STT had issued and outstanding 54,000,000 shares of its stock, all of which are held by STT Communications.
 
As of October 2, 2002, Pihana had issued and outstanding 34,765,057 shares of its common stock and 85,189,965 shares of its preferred stock held by approximately 56 stockholders of record.
 
Dividends
 
Neither Equinix, i-STT nor Pihana have ever declared or paid cash dividends on their respective capital stock. The combined company currently expects to retain future earnings, if any, for use in the operation and expenses of our business and does not anticipate paying any cash dividends in the foreseeable future.

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OUR SPECIAL MEETING
 
General Information
 
This proxy statement is furnished in connection with the solicitation of proxies by our board of directors for a special meeting of stockholders to be held at the offices of Willkie Farr & Gallagher located at 787 Seventh Avenue, New York, New York 10019, on Monday, December 30, 2002, beginning at 9:00 a.m. Eastern Time, and at any adjournment or postponement of the special meeting.
 
Voting Rights and Solicitation of Proxies
 
Our common stock is the only type of security entitled to vote at the special meeting. At the close of business on November 22, 2002, the record date for determination of stockholders entitled to vote at the special meeting, there were 98,892,711 shares of common stock outstanding. Each stockholder of record on the record date is entitled to one vote for each share of common stock held by such stockholder on the record date. All votes will be tabulated by the inspector of elections appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
 
Quorum Required
 
Our bylaws provide that the holders of a majority of our common stock issued and outstanding and entitled to vote at the special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining the presence of a quorum.
 
Votes Required
 
Proposal 1.    Approval of the issuance of shares of our common stock and preferred stock in connection with the combination, the financing and the senior note exchange, requires the affirmative vote of a majority of the shares of common stock present at the special meeting and entitled to vote at the special meeting so long as quorum of stockholders is achieved. Abstentions will have the same effect as a vote cast “against” the proposal. Broker non-votes will have no effect on the approval.
 
Proposal 2.    Adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares of common stock entitled to vote at the special meeting. Abstentions and broker non-votes will have the same effect as a vote cast “against” the proposal.
 
Proxies
 
Whether or not you are able to attend our special meeting, you are urged to complete and return the enclosed proxy, which is solicited by the board of directors and which will be voted as you direct on your proxy when properly completed. In the event no directions are specified, such proxies will be voted as follows:
 
 
1.
 
FOR approval of the issuance of shares of our common stock and preferred stock in connection with the combination, the financing and the senior note exchange; and
 
 
2.
 
FOR adoption of the agreement and plan of merger, dated as of October 17, 2002, by and between us and our wholly-owned subsidiary, Eagle Oasis, Inc.
 
You may also revoke or change your proxy at any time before the special meeting. To do this, send a written notice of revocation or another signed proxy with a later date to our corporate secretary so that it is received at our principal executive offices before the beginning of the special meeting. You may also automatically revoke your proxy by attending the special meeting and voting in person. All shares represented by a valid proxy received prior to the special meeting will be voted.

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Solicitation of Proxies
 
We have retained Georgeson Shareholder Communications, Inc. at a cost of approximately $10,000 to solicit proxies. We will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of this proxy statement, the proxy, and any additional solicitation material furnished to stockholders. Copies of solicitation material will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. In addition, we may reimburse such persons for their costs of forwarding the solicitation material to such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by telephone, telegram or other means by our directors, officers, employees or agents. No additional compensation will be paid to these individuals for those services.
 
Appraisal Rights
 
Our stockholders are not entitled to appraisal rights in connection with the issuance of shares of our common stock and shares of our preferred stock in connection with any of the proposals in this proxy statement or in connection with the transactions contemplated by the charter merger.

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PROPOSAL 1
 
THE ISSUANCE OF SHARES IN CONNECTION WITH THE COMBINATION,  THE FINANCING AND THE SENIOR NOTE EXCHANGE
 
This section of this proxy statement describes material aspects of the combination, the financing and the senior note exchange. Although the description covers the material terms of the transaction, this summary may not contain all of the information important to our stockholders about each transaction. You should carefully read the combination agreement which is attached as Annex A and the other documents to which you are referred in this proxy statement for a more complete understanding of the combination.
 
Background of the Combination, the Financing and the Senior Note Exchange
 
In recent years, as a part of the continuous evaluation of our business, we have regularly considered a variety of strategic initiatives and transactions with a view toward increasing stockholder value. We have explored different strategic alternatives, including the consideration of acquisitions, dispositions and commercial relationships.
 
Commencing in mid-2001, members of our executive management team began to explore various financing strategies and alternatives intended to reduce our outstanding debt and to raise new equity capital. These strategies and alternatives included raising new equity, issuing new debt, commencing a tender for all of our bonds in exchange for equity only, and reorganizing either through a formal bankruptcy proceeding or through an out-of-court restructuring. Given the economy, and specifically the environment in the telecommunication sector, we had no other alternatives that would have allowed us to avoid filing for bankruptcy protection, other than the proposed combination and financing. We believe that a bankruptcy filing would negatively impact our underlying business and would result in the value of our existing equity being virtually, if not entirely, eliminated. As a result, we rejected these alternatives.
 
In August 2001, we began discussions with Pihana regarding the possibility of entering into a strategic sales relationship. These discussions continued over the course of the next month and, in September 2001, we entered into a strategic selling agreement with Pihana whereby we would refer our customers seeking a colocation facility in Asia to Pihana’s data centers. We selected Pihana because their business model, specifically their focus on maintaining a carrier-neutral status, was most closely aligned with our business model, which is critical to our ability to service many of our existing and prospective customers. No other entities in Asia were as closely aligned with our business model as Pihana.
 
In late October 2001, our board of directors, together with our executive management team, discussed our existing capital structure, future capital requirements and financing strategies and alternatives potentially available to us, including the possibility of raising additional equity capital and using a portion of the proceeds from an equity capital infusion to retire a portion of our outstanding senior notes.
 
Beginning in early November 2001, members of our executive management team had numerous meetings with a number of potential equity investors.
 
On November 12, 2001, members of the Pihana executive management team presented to our executive management team an overview of Pihana’s business and discussed in a preliminary manner the possibility of Pihana collaborating in some manner with us, including a possible merger to strengthen both of our businesses.
 
In January 2002, our and Pihana’s executive management teams continued to explore the possibility of collaborating together, including a combination of the companies’ facilities, management agreements for specified facilities or a combination of the two businesses.

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On February 12, 2002, our board of directors held a regular meeting and discussed, among other matters, the status of discussions with potential equity investors. At this meeting, our board of directors authorized management to engage a financial advisor to assist us in, among other things, developing a comprehensive financing strategy, including raising additional capital. We subsequently engaged Salomon Smith Barney.
 
Through February and March of 2002, we continued to discuss with Pihana, on a preliminary basis, the possibility of working together, including combining our two businesses.
 
Commencing in early March 2002, with the assistance of our financial advisor, more than 60 financial investors were identified and contacted to determine such investors’ interest in making an investment in our securities. One of the investors contacted was Columbia Capital, a large stockholder of Pihana. Of those investors contacted, approximately 25 agreed to execute a non-disclosure agreement and review materials regarding our business and the proposed transaction.
 
Beginning in late March 2002, members of our executive management team and representatives of our financial advisor met with more than 20 potential investors.
 
At a meeting with Columbia Capital, an investor in Pihana, on April 3, 2002, Columbia Capital preliminarily indicated that it might be interested in participating in a financing transaction if the transaction included our acquisition of Pihana.
 
During the next several months, we had numerous meetings with potential investors, including multiple follow up due diligence sessions and negotiations regarding possible transaction structures and post-transaction capitalization.
 
In April and May 2002, there were numerous meetings and negotiations among us, Pihana, Columbia Capital and the parties’ advisors to discuss further the status of the two businesses and the various proposals. These discussions focused on the possibilities of a transaction that would include our acquisition of Pihana, a capital investment in our secured convertible debt obligations by Columbia Capital and other Pihana stockholders, a reduction in our overall debt to a specified level and a restructuring of the covenants under our credit facility.
 
Throughout May 2002, we, together with our advisors, met with Pihana, its advisors and Columbia Capital numerous times to further discuss the terms and conditions of a possible transaction.
 
In mid-June 2002, Pihana indicated to us that it and its advisor would be able to introduce to us another party that expressed interest in participating in a business combination and financing transaction. Pihana and its advisor subsequently introduced us to Singapore Technologies Telemedia and STT Communications. STT Communications and Pihana agreed between themselves that each would participate in a transaction with us only if the other also participated.
On June 20, 2002, a member of our executive management team and a member of Pihana’s executive management team and its advisors met with several i-STT and STT Communications executives in Singapore to present an overview of our business and Pihana’s business and a possible business combination and financing.
 
On June 24, 2002, our board of directors held a special meeting to discuss, among other things, the status of our financing efforts and to receive an update on the meetings with i-STT and STT Communications.
 
In mid-July 2002, we held a number of discussions with Pihana, Columbia Capital and STT Communications and our respective advisors regarding the possible structure and terms and conditions of a business combination and financing. Each of the parties also began due diligence reviews at the end of July 2002.

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On August 2, 2002, our board of directors held a regular meeting during which, among other matters, it discussed the status of the negotiations with STT Communications, Pihana and Columbia Capital as well as the possibility of other financing alternatives.
 
Through August 2002, we continued to discuss the terms and conditions of a business combination and financing with Pihana, Columbia Capital and STT Communications and our respective advisors, including the purchase prices related to the combination, the financial terms and related operational covenants of the financing, conditions to the consummation of the combination and financing, the necessary working capital requirements of the combined company, the necessary reduction in our outstanding debt and the terms and conditions of a renegotiated credit facility. In late August 2002, members of our executive management team met with representatives of our senior lenders and a number of holders of our senior notes to provide an overview of the possible business combination and financing transaction. These discussions were subject to confidentiality agreements.
 
Negotiations among Equinix, Pihana, Columbia Capital, STT Communications, our senior lenders and certain holders of our senior notes continued through September 2002, with discussions focused on a wide variety of issues, including the terms and conditions of the combination, the financing, the senior note exchange and the amendment to our credit facility. At this time, Columbia Capital advised us that it would not be able to participate in the financing as the parties had been contemplating. The parties’ due diligence efforts continued throughout the month.
 
On September 16, 2002, our board of directors held a special meeting with our executive management team, together with our legal and financial advisors, at which our board of directors reviewed the general structure of the proposed business combination and financing transaction and authorized our management team to continue negotiating the terms of the proposed transaction. At this meeting, our management and our advisors reviewed in detail with our board of directors the material terms of the transaction as currently proposed as well as the open issues not yet resolved by the parties.
 
Following this meeting through September 30, 2002, we, Pihana, STT Communications, our senior lenders and significant holders of our senior notes continued to negotiate the financial terms and conditions of the possible transaction. The parties also continued to finalize their due diligence reviews.
 
Late in the day on September 30, 2002, our board of directors met with our executive management team, together with our legal and financial advisors. Our management and advisors updated our board of directors on the resolution of issues that were not previously resolved. Salomon Smith Barney reviewed its financial analysis of the aggregate consideration to be paid by Equinix in the combination and informed our board of directors that, assuming no material changes in the transactions, and subject to review of the definitive combination agreement and related agreements, it would be in a position to deliver an opinion regarding the fairness, from a financial point of view, to Equinix of the aggregate consideration to be paid by Equinix in the combination. Salomon Smith Barney’s opinion was subsequently delivered in connection with the execution of the combination agreement. Following a full discussion, our board of directors approved the combination and financing as well as related matters, and authorized our management to enter into the combination agreement, the securities purchase agreement and related agreements.
 
Early in the morning on October 2, 2002, the parties executed and delivered the combination agreement and the securities purchase agreement and we issued a press release announcing the transaction.
 
Our Reasons for the Combination, the Financing and the Senior Note Exchange
 
Our board of directors believes that the terms of the combination agreement and the transactions contemplated thereby are in our best interests and the interests of our stockholders. Accordingly, at a meeting held on September 30, 2002, our board of directors approved the combination agreement and recommends that

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our stockholders approve the issuance of shares of our common stock and preferred stock in connection with the combination, the financing and the senior note exchange. The summary set forth below briefly describes the reasons, factors and information taken into account by our board of directors in reaching its conclusion. Our board of directors did not assign any relative or specific weights to the factors considered in reaching its determination, and individual directors may have given differing weights to different factors.
 
In reaching its determination, our board of directors consulted with our management and legal and financial advisors, and carefully considered a number of benefits, including:
 
 
 
Additional Capital.    Our board of directors considered the opportunity to raise sufficient additional capital to retire more than $130 million of our aggregate debt, through the payment of cash and issuance of equity. The retirement of this debt significantly enhances the financial position of the combined company going forward.
 
 
 
Potential Bankruptcy.    Our board of directors considered that we do not have sufficient cash reserves to pay our debts and that we will most likely seek bankruptcy protection if we do not complete the combination, the financing or a similar transaction.
 
 
 
Financial Considerations.    Our board of directors evaluated the financial terms of the combination agreement and their effect on the holders of our common stock. Our board of directors also considered the financial performance and condition, businesses and prospects of Equinix, i-STT and Pihana on a stand-alone and combined basis, including information with respect to the respective earnings history and performance of each of the companies, as well as the results of our due diligence review of the companies. With respect to i-STT it was important that its operations were essentially break-even and with respect to Pihana it was important that despite the fact its operations were running at a loss, that they were projected to have cash in excess of $25.0 million as of December 31, 2002. In addition, our board of directors believes that the combination will create a stronger, more competitive company with greater growth potential and long-term financial stability than we would have on our own, and will, potentially, allow our stockholders to share in the combined company’s new growth as a result of the combination.
 
 
 
Complementary Nature of Businesses.    Our board of directors considered the strategic fit between the carrier-neutral business models of Equinix, i-STT, and Pihana, including an analysis of the customer bases, product offerings and geographic areas of service. Our board of directors evaluated the potential of the combined company to successfully compete in the global marketplace with the advantages of scale and geographic reach in key cities in the U.S. and Asia and determined that we would achieve significant competitive advantage exists with the combination. Additionally, our board of directors believes there are significant revenue opportunities to be gained in expanding important channel partnership relationships, such as IBM and Electronic Data Systems, serving the international needs of strategic customers such as America Online and Electronic Arts, and expanding the product and service offerings to existing and new customers in the combined company.
 
 
 
Market Potential.    Our board of directors considered the expanded market opportunity available as the combined company of Equinix, i-STT and Pihana creates the largest global network company of neutral Internet exchange services company and significantly expands the market potential of each company. The respective companies gain access to new markets and additional growth potential without expending additional capital.
 
 
 
Operational Benefits.    Our board of directors considered the benefits from leveraging core strengths in sales, marketing and network engineering as well as the benefits gained from the rationalization of technologies and overhead operations in combining the three companies.
 
 
 
The Financial Presentation and Opinion of Our Financial Advisor.    Our board of directors considered the financial presentation of Salomon Smith Barney with respect to the combination, including its written opinion dated October 2, 2002 to our board of directors as to the fairness, from a financial point

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of view and as of the date of its opinion, to Equinix of the aggregate consideration to be paid by Equinix in the combination, as more fully described under the section entitled “Opinion of Our Financial Advisor.”
 
 
 
Terms of the Combination Agreement and Related Agreements.    Our board of directors took into consideration the terms of the combination agreement and the related agreements, including the form and amount of consideration and the representations, warranties, covenants and conditions contained in those agreements. Our board of directors also considered the possibility of other financial alternatives to the combination. Our board of directors determined that the combination was the most effective transaction available to us for the purposes of enhancing long-term value for our stockholders.
 
Our board also identified and considered a number of potentially negative factors in its deliberations concerning the combination, including the following:
 
 
 
the risk that the potential benefits and synergies of the combination may not be realized;
 
 
 
the risk that the combination might not be consummated despite the efforts of the parties, even if approved by our stockholders;
 
 
 
the challenges of integrating the management teams, cultures, and organizations of the three companies;
 
 
 
the risk of disruption of the on-going businesses of Equinix, i-STT and Pihana, including sales momentum, as a result of uncertainties created by the announcement of the combination;
 
 
 
the substantial charges to be incurred in connection with the combination, including the costs of integrating the businesses and transaction expenses arising from the combination;
 
 
 
the risk that Pihana’s cash position will not meet expectations, given the current market environment; and
 
 
 
the risk that, despite the efforts of the combined company, key technical and management personnel might not remain employed by the combined company.
 
The discussion of the information and factors considered by our board of directors is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation of the combination, our board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weight to the specific factors considered in reaching their determination.
 
Recommendation of Our Board of Directors
 
For the reasons discussed above, our board of directors has unanimously approved and adopted the combination, the financing and the senior note exchange and believes that the terms of those transactions are in our best interests and those of our stockholders. Our board of directors unanimously recommends that our stockholders vote FOR the approval of the issuance of shares in the combination, the financing and the senior note exchange.
 
Opinion of Our Financial Advisor
 
We retained Salomon Smith Barney to act as our financial advisor in connection with the proposed combination. In connection with this engagement, we requested that Salomon Smith Barney evaluate the fairness, from a financial point of view, to Equinix of the aggregate consideration to be paid by Equinix in the combination. Salomon Smith Barney delivered to the Equinix board of directors a written opinion dated October 2, 2002, the date of execution of the combination agreement, to the effect that, as of that date and based on and subject to the matters described in the opinion, the aggregate consideration to be paid by Equinix in the combination was fair, from a financial point of view, to Equinix. In this section we refer to the combination, the financing, the senior note exchange and the amendment to our credit facility collectively as the “transactions.”

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In arriving at its opinion, Salomon Smith Barney:
 
 
 
reviewed the combination agreement and related documents;
 
 
 
held discussions with our senior officers, directors and our other representatives and advisors and senior officers and other representatives of Pihana and i-STT concerning the businesses, operations and prospects of Equinix, Pihana and i-STT;
 
 
 
examined publicly available business and financial information relating to Equinix and other business and financial information relating to Pihana and i-STT;
 
 
 
examined financial forecasts, estimates and other information and data relating to Equinix, Pihana and i-STT, which were provided to or otherwise discussed with Salomon Smith Barney by the management of Equinix, Pihana and i-STT, including operational benefits anticipated by the management of Equinix to result from the transactions;
 
 
 
reviewed the financial terms of the transactions as described in the combination agreement and related documents or as otherwise described to Salomon Smith Barney by our representatives in relation to, among other things, current and historical market prices and trading volumes of our common stock, the historical and projected earnings and other operating data of Equinix, Pihana and i-STT, and the capitalization and financial condition of Equinix, Pihana and i-STT, including the liquidity needs of, and capital resources available to, Equinix;
 
 
 
analyzed the estimated present value of unlevered, after-tax free cash flows of Equinix using assumptions of future financial performance of Equinix before and after giving effect to the transactions provided to or discussed with Salomon Smith Barney by our management;
 
 
 
considered, to the extent publicly available, the financial terms of bankruptcy transactions effected which Salomon Smith Barney considered relevant;
 
 
 
reviewed financial, stock market and other publicly available information relating to the businesses of other companies whose operations Salomon Smith Barney considered relevant in evaluating those of Equinix;
 
 
 
evaluated the potential pro forma financial impact of the transactions on Equinix;
 
 
 
at our direction, solicited, and held discussions with, third parties regarding a possible investment in, or strategic transaction with, Equinix; and
 
 
 
conducted other analyses and examinations and considered other financial, economic and market criteria as Salomon Smith Barney deemed appropriate in arriving at its opinion.
 
In rendering its opinion, Salomon Smith Barney assumed and relied, without independent verification, on the accuracy and completeness of all financial and other information and data publicly available or furnished to or otherwise reviewed by or discussed with it. With respect to financial forecasts, estimates and other information and data relating to Equinix, Pihana and i-STT provided to or otherwise discussed with Salomon Smith Barney, Equinix’s, Pihana’s and i-STT’s management advised Salomon Smith Barney that those forecasts, estimates and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of Equinix’s, Pihana’s and i-STT’s management as to the future financial performance of Equinix, Pihana and i-STT, the pro forma capital structure of Equinix and other matters, and Salomon Smith Barney assumed, with our consent, that the financial results reflected in those forecasts, estimates and other information and data would be realized in the amounts and at the times projected. Salomon Smith Barney assumed, with our consent, that the transactions will be consummated in accordance with their terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory and third party approvals and consents for the transactions, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Equinix, Pihana or i-STT or the contemplated benefits to Equinix of the transactions.

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Salomon Smith Barney did not express any opinion as to what the value of our common stock or our other securities issuable in connection with the transactions actually will be when issued or the prices at which those securities will trade or otherwise be transferable at any time. Salomon Smith Barney did not make and was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Equinix, Pihana or i-STT and did not make any physical inspection of the properties or assets of Equinix, Pihana or i-STT. Our representatives advised Salomon Smith Barney, and at our direction Salomon Smith Barney assumed, that the financing, the senior note exchange and the amendment to our credit facility would not occur in the absence of the combination. Our representatives also advised Salomon Smith Barney and, at our direction Salomon Smith Barney assumed, that, given Equinix’s financial condition and near-term prospects, including, without limitation, its financial ability to satisfy its outstanding obligations and working capital requirements, and the results of the business strategies and financial alternatives which Equinix had explored to date, Equinix’s most likely available alternatives were (a) to commence bankruptcy or similar proceedings or (b) to effect the transactions. Accordingly, with our consent, for purposes of Salomon Smith Barney’s opinion, Salomon Smith Barney’s evaluation of the aggregate consideration to be paid in the combination was based on a comparison of the estimated per share value of our common stock before and after giving effect to the transactions. Salomon Smith Barney’s opinion does not address any other aspect of the transactions, the relative merits of the transactions as compared to any alternative business strategies or financial alternatives that might exist for Equinix or the effect of any other transaction in which Equinix might engage. Salomon Smith Barney’s opinion is necessarily based on information available to Salomon Smith Barney, and financial, stock market and other conditions and circumstances existing and disclosed to Salomon Smith Barney, as of the date of its opinion. We imposed no other instructions or limitations on Salomon Smith Barney with respect to the investigations made or procedures followed by Salomon Smith Barney in rendering its opinion.
 
The full text of Salomon Smith Barney’s written opinion dated October 2, 2002, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Appendix B and incorporated into this proxy statement by reference. Salomon Smith Barney’s opinion was provided in connection with the combination and relates only to the fairness, from a financial point of view, to Equinix of the aggregate consideration to be paid by Equinix in the combination, does not address any other aspect of the combination or any aspect of any related transaction, including the financing, the senior note exchange or the amendment to our credit facility, and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the combination or any related transaction.
 
In preparing its opinion, Salomon Smith Barney performed a variety of financial and comparative analyses, including those described below. The summary of these analyses is not a complete description of the analyses underlying Salomon Smith Barney’s opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to summary description. Accordingly, Salomon Smith Barney believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.
 
In its analyses, Salomon Smith Barney considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Equinix, Pihana and i-STT. No company, transaction or business used in those analyses as a comparison is identical to Equinix, Pihana and i-STT or the proposed transactions, and an evaluation of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the transactions, public trading or other values of the companies, business segments or transactions analyzed.
 
The estimates contained in Salomon Smith Barney’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which

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may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not necessarily purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, Salomon Smith Barney’s analyses and estimates are inherently subject to substantial uncertainty.
 
Salomon Smith Barney’s opinion and analyses were only one of many factors considered by the Equinix board of directors in its evaluation of the combination and should not be viewed as determinative of the views of the Equinix board or management with respect to the combination or the aggregate consideration to be paid by Equinix in the combination.
 
The following is a summary of the material financial analyses performed by Salomon Smith Barney in connection with the rendering of its opinion dated October 2, 2002 to our board of directors. The financial analyses summarized below include information presented in tabular format. In order to fully understand Salomon Smith Barney’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Salomon Smith Barney’s financial analyses.
 
Equinix Financial Analyses
 
Introduction.    Salomon Smith Barney’s evaluation of the aggregate consideration to be paid by Equinix in the combination was based on a comparison of the estimated per share value of our common stock before and after giving effect to the transactions. Salomon Smith Barney performed discounted cash flow analyses for Equinix both on a standalone and pro forma basis in order to compare the estimated implied per share equity reference ranges for Equinix before and after giving effect to the transactions and also analyzed the estimated implied equity reference range for Equinix based on the financial terms of selected transactions involving companies in the web hosting industry that either were sold or recapitalized through a bankruptcy process. Salomon Smith Barney also performed a contribution analysis in which Salomon Smith Barney compared the estimated percentage of selected operational metrics which Equinix would contribute to the combined company relative to the estimated equity percentage ownership in the combined company of current holders of our common stock. Each of these analyses are more fully described below.
 
Discounted Cash Flow Analyses
 
Standalone.    Salomon Smith Barney performed a discounted cash flow analysis of Equinix to calculate the estimated present value of the unlevered, after-tax free cash flows that Equinix could generate over calendar years 2003 through 2006 on a standalone basis. Estimated financial data for Equinix were based on internal estimates of and discussions with our management assuming a hypothetical funding scenario consisting of a $50.0 million investment for a 45% equity interest in Equinix, a $50.0 million reduction in the aggregate principal amount outstanding under our credit facility in exchange for $10.0 million in cash and a 22.5% equity interest in Equinix and an exchange of all of our outstanding senior notes for a 27.5% equity interest in Equinix. Salomon Smith Barney calculated a range of estimated future perpetual cash flows by applying perpetuity growth rates ranging from 0.75% to 2.25% to Equinix’s calendar year 2006 estimated free cash flow. The present value of cash flows was calculated using discount rates ranging from 16.0% to 18.0%.
 
Pro Forma.    Salomon Smith Barney also performed a discounted cash flow analysis of Equinix to calculate the estimated present value of the pro forma, unlevered, after-tax free cash flows that Equinix could generate over fiscal years 2003 through 2006 after giving effect to the transactions. Estimated financial data for Equinix were based on internal estimates of and discussions with our management assuming payment in kind of interest accruing through maturity on all outstanding Series A-1 convertible secured notes. Salomon Smith Barney calculated a range of estimated future perpetual cash flows by applying perpetuity growth rates ranging from

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1.25% to 2.75% to Equinix’s calendar year 2006 estimated free cash flow. The present value of cash flows was calculated using discount rates ranging from 16.0% to 18.0%.
 
The standalone and pro forma discounted cash flow analyses described above indicated the following estimated implied per share equity reference range for Equinix on a standalone basis, as compared to the estimated implied per share equity reference range for Equinix after giving effect to the transactions:
 
Estimated Implied Per Share Equity
Reference Range for Equinix Standalone

  
Estimated Implied Per Share Equity
Reference Range for Equinix Pro Forma

$0.18 to $0.23
  
$0.61 to $0.82
 
Bankruptcy Exit Precedents Analysis
 
Salomon Smith Barney reviewed exiting firm values and implied firm value multiples in five selected transactions involving companies in the web hosting industry that either were sold or recapitalized through a bankruptcy process. Salomon Smith Barney reviewed firm values in the selected transactions as a multiple of latest fiscal quarter annualized and latest 12 months estimated revenue. All multiples for the selected transactions were based on latest publicly available information for each target company prior to bankruptcy. Estimated financial data for Equinix were based on internal estimates of and discussions with our management. Salomon Smith Barney applied ranges of selected multiples of latest fiscal quarter annualized and latest 12 months estimated revenue derived from the selected transactions to corresponding data of us as of June 30, 2002 to calculate an estimated implied firm value range for Equinix. Equinix’s net debt was then deducted in order to derive an implied equity reference range for Equinix. Given that Equinix’s net debt exceeded the range of firm values calculated for Equinix (regardless of whether the face value or estimated market value of Equinix’s outstanding indebtedness was used), this analysis indicated that the estimated implied equity reference range for Equinix was not meaningful. Salomon Smith Barney also noted that the percentage of the aggregate consideration received by, or percentage ownership in the recapitalized companies of, holders of common stock in the selected transactions ranged from approximately 0% to 10%.
 
Contribution Analysis
 
Salomon Smith Barney reviewed the relative contributions of Equinix, i-STT and Pihana to estimated calendar years 2002, 2003 and 2004 revenue and earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, of the combined company as adjusted for each entity’s net debt contribution. Estimated data for Equinix, i-STT and Pihana were based on internal estimates of and discussions with the management of Equinix, i-STT and Pihana, reflecting, in the case of their net debt contributions, the market value of Equinix senior notes and the $30.0 million investment by STT Communications in the financing. Salomon Smith Barney then compared Equinix’s percentage contributions of estimated calendar years 2002, 2003 and 2004 revenue and EBITDA to the combined company relative to the estimated equity percentage ownership in the combined company of current holders of our common stock after giving effect to the transactions assuming payment in kind of interest accruing through maturity on all outstanding Series A-1 convertible secured notes. This analysis indicated the following estimated implied contribution percentage reference range for Equinix, as compared to the estimated equity percentage ownership of current holders of our common stock in the combined company after giving effect to the transactions assuming payment in kind of interest accruing through maturity on all outstanding Series A-1 convertible secured notes:
 
Estimated Implied Percentage Contribution
Reference Range for Equinix

  
Estimated Pro Forma Equity Percentage Ownership
of Holders of Equinix Common Stock

13.7% to 24.5%
  
18.7%

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Other Factors
 
In rendering its opinion, Salomon Smith Barney also reviewed and considered other factors, including:
 
 
 
historical trading prices and trading volumes for our common stock during the 12-month period ended September 27, 2002;
 
 
 
a comparison of selected operational metrics of Equinix and the following selected companies in the web hosting industry—Digex, Incorporated, Genuity Inc., Internap Network Services Corporation, NaviSite, Inc. and SAVVIS Communications Corporation;
 
 
 
Equinix’s estimated monthly cash balance during the period beginning March 2002 and ending December 2004, and Equinix’s projected monthly operating free cash flow relative to its cash obligations for debt servicing during the period beginning March 2003 and ending December 2004, in each case before and after giving effect to the transactions based on internal estimates of our management; and
 
 
 
a comparison of Equinix’s capital structure before and after giving effect to the transactions.
 
Miscellaneous
 
In addition to acting as our financial advisor in connection with the proposed combination, Salomon Smith Barney also has provided services to us in connection with the proposed financing. Under the terms of its engagement, we have agreed to pay Salomon Smith Barney for its services upon completion of the combination and the financing an aggregate fee that is currently estimated to be approximately $3.5 million. We also have agreed to reimburse Salomon Smith Barney for reasonable travel and other expenses incurred by Salomon Smith Barney in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Salomon Smith Barney and related persons against liabilities, including liabilities under the federal securities laws, arising out if its engagement.
 
In the ordinary course of business, Salomon Smith Barney and its affiliates may actively trade or hold the securities of Equinix and affiliates of STT Communications for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in those securities. One of Salomon Smith Barney’s affiliates engaged in the commercial lending business is a significant creditor under our credit facility which is proposed to be amended in connection with the transactions, for which amendment its affiliate will receive an amendment fee. Salomon Smith Barney also acted as joint book-running lead arranger, and one of Salomon Smith Barney’s affiliates is the administrative agent, for the credit facility, for which services Salomon Smith Barney and its affiliate received, and will receive, customary fees. Salomon Smith Barney and its affiliates in the past have provided services to us unrelated to the proposed transactions, including having acted as lead initial purchaser for the $200.0 million offering of our senior notes in December 1999 and as co-lead managing underwriter for the initial public offering of Equinix common stock in August 2000, for which services Salomon Smith Barney and its affiliates received compensation. Salomon Smith Barney and its affiliates also provided services to affiliates of STT Communications unrelated to the proposed transactions, for which services Salomon Smith Barney and its affiliates have received compensation. In addition, Salomon Smith Barney and its affiliates, including Citigroup Inc. and its affiliates, may maintain relationships with Equinix, Pihana, STT Communications and their respective affiliates.
 
Salomon Smith Barney is an internationally recognized investment banking firm and was selected by us based on its reputation, experience and familiarity with us and our businesses. Salomon Smith Barney regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

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Interests of Our Directors and Executive Officers
 
When considering the recommendation of our board of directors that stockholders approve the issuance of shares of common stock in the combination, you should be aware that some of our directors and executive officers have interests in these transactions that are different from, or are in addition to, your interests. Our board of directors was aware of these potential conflicts and considered them. These include:
 
Stock Options.    Immediately following the closing, the combined company will issue options to its employees (including two directors who are employees) which represent in the aggregate approximately 5-8% of our capitalization following the closing, including significant grants to the combined company’s management team, most of whom are members of our current management team.
 
Directors.    Up to five of our current directors may remain on our board of directors following the closing. See “Governance of the Combined Company” beginning on page 89.
 
Indemnification of Directors and Officers.    Our executive officers and directors have customary rights to indemnification against losses incurred as a result of action or omission occurring prior to the closing. In addition, our executive officers and directors have customary indemnification agreements that provide for additional indemnification.
 
As a result, these directors and executive officers could be more likely to vote in favor of recommending the issuance of shares of common stock in the combination, the financing and the senior note exchange than if they did not hold these interests.

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THE COMBINATION
 
General
 
The combination is the purchase by one of our indirect wholly-owned subsidiaries of all of the outstanding stock of i-STT from STT Communications and the merger of one of our subsidiaries with Pihana. Both of these transactions are described in more detail below. The combination agreement governs the terms of both the i-STT stock purchase and the Pihana merger.
 
The Pihana Merger
 
In the acquisition of Pihana, Eagle Panther Acquisition Corp., a Delaware corporation and our indirect wholly-owned subsidiary will merge with and into Pihana through a merger. Following the Pihana merger, Pihana will become a wholly-owned indirect subsidiary of us. See “The Combination—The Pihana Merger—Determination of the Pihana Merger Consideration” beginning on page 55.
 
Determination of the Pihana Merger Consideration
 
In General.    At the closing of the combination, we will issue to Pihana’s preferred stockholders and certain members of Pihana’s senior management shares of our common stock representing up to 22.5% (subject to adjustment as described below) of our modified fully diluted share amount (as described below) and $10,000 in exchange for all of the outstanding preferred shares of Pihana. Pihana’s common stock has no right, under Pihana’s organization documents, to any of the merger consideration.
 
Pihana’s warrants will be converted into warrants to purchase our common stock. However, we will not assume any outstanding options to purchase Pihana stock.
 
Modified Fully Diluted Share Amount for Consideration Calculation.    For the purpose of determining the combination consideration, our modified fully diluted share amount means all shares of our common stock outstanding, including shares of our common stock to be issued in the senior note exchange and the combination, and all outstanding warrants and options to purchase our common stock with an exercise price equal to or less than $2.00 (after giving effect to any anti-dilution adjustments triggered by the combination and as adjusted for the assumed cashless exercise of those options and warrants).
 
Adjustment to Merger Consideration.    The aggregate number of shares to be issued in the Pihana merger is subject to adjustment based upon the cash balance of Pihana at the opening of business, without giving effect to the combination, on the day of the closing of the combination. For this purpose, the Pihana cash balance includes not only Pihana and its subsidiaries’ cash and cash equivalents, but also includes collectible tax receivables, prepaid restructuring costs and expenses and a pre-determined amount of employment-related payments and advisors’ fees. Deducted from the Pihana cash balance will be any non-payment of a pre-determined amount of capital expenditures, liabilities to be incurred after the closing of the combination in connection with arrangements to terminate or amend Pihana’s office lease in Singapore, its office lease in Honolulu, Hawaii and part of its data center lease in Los Angeles, California, a decrease in Pihana working capital from Pihana’s $5.06 million deficit at June 30, 2002 and any cash received pursuant to the exercise of Pihana options or warrants.
 
The maximum percentage of our modified fully diluted share amount that is issuable in the Pihana merger is 22.5% of our modified fully diluted share amount (as described above) if the Pihana cash balance at the closing of the combination is $28.0 million or greater (assuming the closing of the combination occurs on or before December 31, 2002, that dollar amount will be adjusted if the closing of the combination occurs at a later date). The minimum percentage of our modified fully diluted share amount that is issuable in the Pihana merger is 16% of our modified fully diluted share amount if the Pihana cash balance at the closing of the combination is $23.0 million (assuming the closing of the combination occurs on or before December 31, 2002, that dollar

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amount will be adjusted if the closing of the combination occurs at a later date). The number of shares to be issued in the Pihana merger will be based upon a sliding scale between 16% and 22.5% of our modified fully diluted share amount based on a Pihana closing cash balance of between $23.0 million and $28.0 million, respectively. In addition, a downward adjustment to the Pihana merger consideration will result in a corresponding increase in the percentage of shares in the combined company held by our existing stockholders and STT Communications following the combination. Our stockholders will receive the exclusive benefit of a downward Pihana merger consideration adjustment that results from a Pihana closing cash balance of less than $28.0 million but equal to or greater than $26.0 million. If the Pihana closing cash balance is less than $26.0 million but greater than or equal to $23.0 million the benefit of the adjustment will be shared pro rata by our stockholders and STT Communications. The following table sets forth the respective percentage ownership of our pre-closing stockholders, STT Communications and the former Pihana stockholders based on the Pihana closing cash balance.
 
Pihana Cash Balance
(in millions)

    
Pihana Aggregate
Merger
Consideration*

    
i-STT Stock
Purchase Consideration*

    
Our Post-
Combination
Shares*

$23.0
    
16.00%
    
28.88%
    
55.13%
$24.0
    
17.33%
    
28.42%
    
54.25%
$25.0
    
18.67%
    
27.96%
    
53.38%
$26.0
    
20.00%
    
27.50%
    
52.50%
$27.0
    
21.25%
    
27.50%
    
51.25%
$28.0 or greater
    
22.50%
    
27.50%
    
50.00%

*
 
Percentages correspond to a percentage of our modified fully diluted share amount as of the closing of the combination without taking into account shares issuable pursuant to securities issued in the financing.
 
A Pihana cash balance of less than $23.0 million represents the failure of a closing condition, but is waivable at our option and at the option of STT Communications. See “Summary of the Combination Agreement—Closing Conditions” beginning on page 68.
 
In addition to the potential downward adjustment to the merger consideration based on the Pihana cash balance at the closing of the combination, the Pihana merger consideration may also be upwardly adjusted based on our working capital balance and i-STT’s working capital balance at the opening of business, without giving effect to the combination, on the day of the closing of the combination. For this purpose, our working capital is defined as our and our subsidiaries’ consolidated current assets (including cash, cash equivalents and short-term investments, but not including any cash received pursuant to the exercise of our options or warrants) minus our current liabilities (not including the current portion of long-term liabilities, short-term indebtedness or accrued interest). See “The i-STT Stock Purchase—Determination of the i-STT Stock Purchase Consideration—Adjustment to Stock Purchase Consideration” beginning on page 58.

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Our target working capital balance at the closing is $644,000 or greater (assuming the closing of the combination occurs on or before December 31, 2002, that amount will be adjusted if the closing of the combination occurs at a later date). If our working capital balance at the opening of business, without giving effect to the combination, on the day of the closing of the combination of less than $644,000 but no greater than a working capital deficit of ($2,688,000) will be a downward adjustment of our post-combination shares and a corresponding upward adjustment of the Pihana merger consideration and the i-STT stock purchase consideration. The amount of this downward adjustment will be determined by dividing (a) the difference of (1) $644,000 and (2) our working capital balance at the closing of the combination, to the extent the working capital balance at the opening of business, without giving affect to the combination, on the day of the closing of the combination is less than $644,000, by (b) $1.53. For example, assuming a Pihana cash balance of $28.0 million, the Pihana merger consideration and the i-STT stock purchase consideration will adjust as follows based on our following illustrative working capital balances:
 
Assuming $28.0 Million in Cash from Pihana

      
Percent Ownership upon closing of Combination*

Our Working Capital/(Deficit)
(in thousands)

    
Pihana Aggregate Merger Consideration

    
i-STT Stock Purchase Consideration

    
Our Post-
Combination Shares

     $644
    
22.50%
    
27.50%
    
50.00%
     $144
    
22.52%
    
27.53%
    
49.95%
   ($356)
    
22.54%
    
27.55%
    
49.90%
   ($856)
    
22.57%
    
27.58%
    
49.86%
($1,356)
    
22.59%
    
27.61%
    
49.81%
($1,856)
    
22.61%
    
27.63%
    
49.76%
($2,356)
    
22.63%
    
27.66%
    
49.71%
($2,688)
    
22.64%
    
27.68%
    
49.68%

*
 
Percentages correspond to a percentage of our modified fully diluted share amount as of the closing of the combination without taking into account shares issuable pursuant to securities issued in the financing.
 
Assuming a Pihana cash balance of $23.0 million, the Pihana merger consideration and the stock purchase consideration will adjust as follows based on our following illustrative working capital balances:
 
Assuming $23.0 Million in Cash from Pihana

      
Percent Ownership upon closing of Combination*

Our Working Capital/(Deficit)
(in thousands)

    
Pihana Aggregate Merger Consideration

    
i-STT Stock Purchase Consideration

    
Our Post-
Combination Shares

     $644
    
16.00%
    
28.88%
    
55.13%
     $144
    
16.02%
    
28.91%
    
55.08%
    ($356)
    
16.03%
    
28.94%
    
55.03%
    ($856)
    
16.05%
    
28.97%
    
54.98%
($1,356)
    
16.07%
    
29.00%
    
54.93%
($1,856)
    
16.09%
    
29.03%
    
54.88%
($2,356)
    
16.11%
    
29.07%
    
54.83%
($2,688)
    
16.12%
    
29.09%
    
54.80%

*
 
Percentages correspond to a percentage of our modified fully diluted share amount as of the closing of the combination without taking into account shares issuable pursuant to securities issued in the financing.
 
An Equinix working capital deficit greater than ($2,688,000) represents the failure of a closing condition, but is waivable at the option of Pihana and at the option of STT Communications. Please see “Summary of the Combination Agreement—Closing Conditions” beginning on page 68.

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The i-STT Stock Purchase
 
In the i-STT stock purchase, Eagle Jaguar Acquisition Corp., a Delaware corporation and our indirect wholly-owned subsidiary, will purchase all of i-STT’s issued and outstanding stock from STT Communications. Immediately following the stock purchase, i-STT will be a wholly-owned subsidiary of Eagle Jaguar Acquisition Corp. and our indirect wholly-owned subsidiary. See “The Combination—The i-STT Stock Purchase—Determination of the i-STT Stock Purchase Consideration” beginning on page 58.
 
Determination of the i-STT Stock Purchase Consideration
 
In General.    At the closing of the combination, we will issue to STT Communications a number of shares representing up to 27.5% (subject to adjustment as described below) of our modified fully diluted share amount and $10,000 in exchange for all of the outstanding shares of i-STT. The shares issued will be a combination of our common stock and our Series A preferred stock. The number of shares of our common stock issued will be equal to 10.1% of our modified fully diluted share amount. The remaining shares of our capital stock to be issued to STT Communications will be shares of our Series A preferred stock. We will not assume any options or warrants to purchase i-STT stock.
 
Adjustment to Stock Purchase Consideration.    The number of shares to be issued to STT Communications is subject to adjustment based upon the working capital balance of i-STT at the time of the closing of the combination. For this purpose, i-STT’s working capital is defined as i-STT and i-STT’s subsidiaries’ consolidated current assets (including cash, cash equivalents and short-term investments) minus their current liabilities (not including the current portion of long-term liabilities, short-term indebtedness or accrued interest).

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The maximum number of shares issuable to STT Communications is 27.5% of our modified fully diluted share amount if the i-STT working capital deficit at the opening of business, without giving effect to the combination, on the day of the closing of the combination is ($2,206,000) or less (assuming the closing of the combination occurs on or before December 31, 2002, that dollar amount will be adjusted if the closing of the combination occurs at a later date). The minimum number of shares issuable to i-STT is 27.2% of our modified fully diluted share amount if the i-STT working capital deficit balance at closing is ($4,206,000) (assuming the closing of the combination occurs on or before December 31, 2002, the dollar amount will be adjusted if the closing of the combination occurs at a later date). An i-STT working capital deficit balance at the closing of the combination of less than ($2,206,000) but greater than ($4,206,000) will result in a downward adjustment of the stock purchase consideration and a corresponding upward adjustment of the Pihana merger consideration and the percentage of shares held by our current stockholders. The amount of the i-STT downward adjustment will be determined by dividing (a) the difference of (1) ($2,206,000) and (2) the i-STT working capital balance at the closing of the combination, to the extent the working capital deficit balance at the closing of the combination is less than ($2,206,000), by (b) $1.53. For example, assuming a Pihana cash balance of $28.0 million, the Pihana merger consideration and our post-combination shares will adjust as follows based on the following illustrative i-STT working capital balances:
 
Assuming $28.0 Million in Cash from Pihana

      
Percent Ownership upon closing of Combination*

i-STT Working Capital/(Deficit)
(in thousands)

    
Pihana Aggregate Merger Consideration

    
i-STT Stock Purchase Consideration

    
Our Post-
Combination Shares

($2,206)
    
22.50%
    
27.50%
    
50.00%
($2,406)
    
22.51%
    
27.47%
    
50.02%
($2,606)
    
22.52%
    
27.44%
    
50.04%
($2,806)
    
22.53%
    
27.42%
    
50.06%
($3,006)
    
22.53%
    
27.39%
    
50.08%
($3,206)
    
22.54%
    
27.36%
    
50.10%
($3,406)
    
22.55%
    
27.33%
    
50.12%
($3,606)
    
22.56%
    
27.30%
    
50.13%
($3,806)
    
22.57%
    
27.28%
    
50.15%
($4,006)
    
22.58%
    
27.25%
    
50.17%
($4,206)
    
22.59%
    
27.22%
    
50.19%

*
 
Percentages correspond to a percentage of our modified fully diluted share amount as of the closing of the combination without taking into account shares issuable pursuant to securities issued in the financing.

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Assuming a Pihana cash balance of $23.0 million, the Pihana merger consideration and our post-combination shares will adjust as follows based on the following illustrative i-STT working capital balances:
 
Assuming $23.0 Million in Cash from Pihana

      
Percent Ownership upon closing of the Combination*

i-STT Working Capital/(Deficit)
(in thousands)

    
Pihana Aggregate Merger Consideration

    
i-STT Stock Purchase Consideration

    
Our Post-
Combination Shares

($2,206)
    
16.00%
    
28.87%
    
55.13%
($2,406)
    
16.01%
    
28.84%
    
55.15%
($2,606)
    
16.01%
    
28.81%
    
55.17%
($2,806)
    
16.02%
    
28.78%
    
55.20%
($3,006)
    
16.03%
    
28.75%
    
55.22%
($3,206)
    
16.03%
    
28.72%
    
55.25%
($3,406)
    
16.04%
    
28.69%
    
55.27%
($3,606)
    
16.05%
    
28.66%
    
55.29%
($3,806)
    
16.06%
    
28.63%
    
55.32%
($4,006)
    
16.06%
    
28.59%
    
55.34%
($4,206)
    
16.07%
    
28.56%
    
55.37%

*
 
Percentages correspond to a percentage of our modified fully diluted share amount as of the closing of the combination without taking into account shares issuable pursuant to securities issued in the financing.
 
An i-STT working capital deficit balance of less than ($4,206,000) is the failure of a condition to the closing of the combination, but is waivable at the option of Pihana and at our option. Please see “Summary of the Combination Agreement—Closing Conditions” beginning on page 68.
 
In addition to the potential downward adjustment to the i-STT stock purchase consideration based on the i-STT working capital balance at the closing of the combination, the stock purchase consideration may also be upwardly adjusted based on our working capital balance at the closing of the combination and Pihana’s cash balance at the closing of the combination. See “The Combination” beginning on page 55.
 
Completion and Effective Time of the Combination
 
The combination will close when all of the closing conditions in the combination agreement are satisfied or waived, including approval of the issuance of shares in connection with combination agreement, the financing and the senior note exchange. The combination will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware. Concurrent with the filing of the certificate of merger, STT Communications will sell to Eagle i-STT Acquisition Corp. and Eagle i-STT Acquisition Corp. will purchase, all outstanding shares of the capital stock of i-STT in exchange for shares of our common stock.
 
Material United States Federal Income Tax Considerations
 
We do not expect to recognize any taxable income or loss as a result of consummating the combination. It is likely, however, that the issuances of shares of our common stock and shares of our preferred stock in connection with the combination as well as in connection with the senior note exchange and the financing, each as described in this proxy statement, will cause us to experience an ownership change. See “The Senior Note Exchange—Material Federal and State Income Tax Consequences of the Senior Note Exchange” beginning on page 84, for a discussion of the material federal income tax consequences of such an ownership change.

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SUMMARY OF THE COMBINATION AGREEMENT
 
The following briefly summarizes the material provisions of the combination agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference into this summary. The following is not a complete description of all provisions of the combination agreement and is qualified in its entirety by reference to the combination agreement. You are encouraged to read the combination agreement in its entirety for a more complete description of the terms and conditions of the combination.
 
Representations and Warranties
 
The combination agreement contains representations and warranties of Pihana, STT Communications, i-STT, us, Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp. The most significant of these relate to:
 
 
 
due organization, valid existence, qualification to do business and good standing;
 
 
 
organizational documents;
 
 
 
subsidiaries;
 
 
 
capitalization;
 
 
 
authority relative to the merger and the combination agreement;
 
 
 
required consents, approvals and government filings;
 
 
 
possession of and compliance with permits required to conduct their businesses;
 
 
 
the accuracy and completeness of their financial statements and the absence of undisclosed liabilities in their businesses;
 
 
 
the absence of changes in their respective businesses;
 
 
 
litigation, arbitration, or judgments pending or threatened against them or to which they are a party;
 
 
 
employee benefit plans, labor agreements, employee compensation and compliance with the Employee Retirement Income Security Act of 1974, or ERISA;
 
 
 
the validity, binding nature and absence of material defaults with respect to their respective material contracts;
 
 
 
compliance with laws related to environmental matters;
 
 
 
the right to use, and the absence of infringement of, intellectual property;
 
 
 
compliance with laws related to taxes;
 
 
 
title to property and absence of liens and encumbrances;
 
 
 
no owned real property;
 
 
 
transactions with their respective affiliates;
 
 
 
insurance;
 
 
 
restrictions on certain business activities;
 
 
 
broker’s fees;
 
 
 
state takeover statutes;
 
 
 
customers and suppliers;
 
 
 
the validity of current accounts receivable;

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no powers of attorney;
 
 
 
suspension of negotiation of acquisitions; and
 
 
 
no misstatements.
 
Pihana, STT Communications and i-STT have also made representations and warranties relating to:
 
 
 
bank accounts; and
 
 
 
customer warranties.
 
STT Communications, i-STT and we have also made representations and warranties relating to:
 
 
 
stockholder votes required to approve the transactions.
 
STT Communications and i-STT have also made representations and warranties relating to:
 
 
 
inter-company obligations.
 
Us, Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp. have also made representations and warranties relating to:
 
 
 
the accuracy and completeness of documents and reports that we filed with the SEC;
 
 
 
corporate books and records;
 
 
 
the absence of operations of Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp.;
 
 
 
the valid issuance of the shares of common stock and preferred stock; and
 
 
 
our obligations and our subsidiaries’ obligations in Europe.
 
The representations and warranties in the combination agreement are lengthy and detailed and not easily summarized. You are urged to read carefully Article III-A of the combination agreement entitled “Representations and Warranties of Pihana,” Article III-B of the combination agreement entitled “Representations and Warranties of STT Communications and i-STT” and Article IV of the combination agreement entitled “Representations and Warranties of Equinix, Merger Sub and SP Sub.”
 
The representations and warranties made by of Pihana, STT Communications, i-STT, us, Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp. contained in the combination agreement will survive for one year after the completion of the merger.
 
Conduct of Business Pending the Merger
 
We, i-STT and Pihana are subject to restrictions on our respective conduct and operations until the combination is completed. In the combination agreement, i-STT and Pihana agreed that, prior to the effective time, each will:
 
 
 
carry on its business only in the regular and ordinary course and in substantially the same manner as previously conducted;
 
 
 
pay its debts and taxes when due;
 
 
 
perform other obligations when due; and
 
 
 
preserve its present business organization, keep available the services of its present officers and key employees and consultants and preserve its business relationships with all third parties.

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Restrictions on Pihana
 
Pihana also agreed that, unless both we and STT Communications consent in writing, it will not do any of the following until the completion of the combination:
 
 
 
amend or change its certificate of incorporation or bylaws;
 
 
 
issue any shares of capital stock or any other rights to acquire shares of such capital stock except for agreements to sell such stock outstanding on the date of the combination agreement;
 
 
 
sell or otherwise dispose of any of its properties or assets, except in the ordinary course of business;
 
 
 
declare or pay any dividend or other distribution with respect to any capital stock;
 
 
 
split or reclassify any capital stock, issue other securities in substitution for shares of any capital stock, or purchase any shares of capital stock except from former employees, directors and consultants that have agreements providing for the repurchase of shares in the case of any termination of service;
 
 
 
merge with or acquire the stock or assets of any corporation, partnership, or other business organization;
 
 
 
initiate or settle any legal proceeding;
 
 
 
incur any debt, issue any debt securities or otherwise become responsible for the obligations of any person, or make any loans or advances;
 
 
 
authorize any capital expenditure which causes Pihana’s aggregate capital expenditures between July 1, 2002 and December 31, 2002 to exceed $1.75 million and after December 31, 2002, authorize any capital expenditure out of the ordinary course of business;
 
 
 
enter into any lease or contract for the purchase or sale of any real property;
 
 
 
waive or release any material right or claim;
 
 
 
increase the compensation to officers or employees, grant any severance or enter into any severance agreement with any directors, officers or employees, or enter into or amend any benefit plan other than those amendments required under ERISA;
 
 
 
extend any offers of employment to any potential employees, consultants or independent contractors or voluntarily terminate any existing key employee or executive officer;
 
 
 
amend or terminate any material contract, or enter into any material contract;
 
 
 
enter into any agreement that, if fully performed, would not be permitted by the foregoing;
 
 
 
other than in the ordinary course of business consistent with past practice, enter into any agreements that may not be cancelled without penalties upon notice of 30 days or less;
 
 
 
pay any liability, except in the ordinary course of business;
 
 
 
change any accounting policies, except as required by a governmental entity or a change in GAAP;
 
 
 
make or change any tax or accounting election, or take any other action that would increase the tax liability of Pihana, any subsidiary of Pihana or the combined company;
 
 
 
sell or otherwise dispose of any material intellectual property of Pihana; grant any license with respect to any material intellectual property of Pihana, other than a license of software granted to customers of Pihana; develop any intellectual property jointly with any third party; or disclose any confidential Pihana intellectual property without the protection of a confidentiality or non-disclosure covenant;
 
 
 
make any bonus or severance payments to any officers or employees other than pursuant to Pihana employee benefit plans;
 
 
 
fail to maintain equipment and other assets in good working condition and repair, subject only to ordinary wear and tear;

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permit any insurance policy naming Pihana as a beneficiary to be terminated without notice to the other parties;
 
 
 
take any action outside the ordinary course of business that would result in a material change to Pihana’s working capital;
 
 
 
grant any retention bonuses to any employee payable after December 31, 2002; or
 
 
 
take any actions which would reasonably be expected to cause a material adverse effect to Pihana. A material adverse effect is any event, change, circumstance or effect that is, or would be reasonably likely to have, a material adverse effect on the business of Pihana and is subsidiaries except for (i) any changes in general economic or business conditions of the markets in which Pihana and its subsidiaries operate that do not disproportionately impact Pihana and its subsidiaries, or (ii) any changes or events affecting the industry in which Pihana operates that do not disproportionately impact Pihana and its subsidiaries.
 
Restrictions on i-STT
 
i-STT also agreed that, unless both we and Pihana consent in writing, it will not do any of the following until the completion of the combination:
 
 
 
amend or change its articles of association or memorandum of association;
 
 
 
issue any shares of capital stock or any other rights to acquire shares of such capital stock, except for the conversion of an outstanding loan from STT Communications;
 
 
 
sell or otherwise dispose of any of its properties or assets, except in the ordinary course of business;
 
 
 
declare or pay any dividend or other distribution with respect to any capital stock;
 
 
 
split or reclassify any capital stock, issue other securities in substitution for shares of any capital stock, or purchase any shares of capital stock except from former employees, directors and consultants that have agreements providing for the repurchase of shares in the case of any termination of service;
 
 
 
merge with or acquire the stock or assets of any corporation, partnership, or other business organization;
 
 
 
incur any debt, issue any debt securities or otherwise become responsible for the obligations of any person, or make any loans or advances;
 
 
 
authorize any capital expenditure not included in i-STT’s capital budget;
 
 
 
enter into any lease or contract for the purchase or sale of any real property;
 
 
 
increase the compensation to officers, grant any severance or enter into any severance agreement with any directors or officers, or enter into or amend any benefit plan other than those amendments required by law;
 
 
 
extend any offers of employment to any potential executive officers or voluntarily terminate any existing key employee or executive officer;
 
 
 
amend or terminate any material contract, or enter into any contract that would be a material contract;
 
 
 
enter into any agreement that, if fully performed, would not be permitted by the foregoing;
 
 
 
change any i-STT accounting policies, except for any necessary reconciliation with GAAP, and except as required by a governmental entity or a change in GAAP;
 
 
 
make or change any tax or accounting election, or change any material tax related policy;
 
 
 
sell or otherwise dispose of any material intellectual property of i-STT; grant any license with respect to any material intellectual property of i-STT, other than a license of software granted to customers of i-STT; develop any intellectual property jointly with any third party; or disclose any confidential i-STT intellectual property without the protection of a confidentiality or non-disclosure covenant;

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make any bonus or severance payments to any executive officers other than pursuant to i-STT employee benefit plans;
 
 
 
fail to maintain equipment and other assets in good working condition and repair, subject only to ordinary wear and tear;
 
 
 
permit any insurance policy naming i-STT as a beneficiary to be terminated without notice to Equinix;
 
 
 
take any action outside the ordinary course of business that would result in a material change to i-STT’s working capital; or
 
 
 
take any actions which would reasonably be expected to cause a material adverse effect to i-STT. A material adverse effect is any event, change, circumstance or effect that is, or would be reasonably likely to have, a material adverse effect on the business of i-STT and its subsidiaries, except for (i) any changes in general economic or business conditions of the markets in which i-STT and its subsidiaries operate that do not disproportionately impact i-STT and its subsidiaries, or (ii) any changes or events affecting the industry in which i-STT operates that do not disproportionately impact i-STT and its subsidiaries.
 
Restrictions on Us
 
We also agreed that, unless both Pihana and i-STT consent in writing, we will not do any of the following until the completion of the combination:
 
 
 
declare or pay any dividend or other distribution with respect to any capital stock;
 
 
 
allow any amendments to its certificate of incorporation or bylaws, except as contemplated by the combination agreement;
 
 
 
issue any shares of capital stock or any other rights to acquire shares of such capital stock except for agreements to sell such stock outstanding on the date of the combination agreement;
 
 
 
change any of our accounting policies, except as required by a governmental entity or a change in GAAP;
 
 
 
sell or otherwise dispose of any of our properties or assets, except in the ordinary course of business;
 
 
 
except as contemplated by the combination agreement, split or reclassify any capital stock, issue other securities in substitution for shares of any capital stock, or purchase any shares of capital stock except from former employees, directors and consultants that have agreements providing for the repurchase of shares in the case of any termination of service;
 
 
 
merge with or acquire the stock or assets of any corporation, partnership, or other business organization;
 
 
 
incur any debt, issue any debt securities or otherwise become responsible for the obligations of any person, or make any loans or advances;
 
 
 
enter into any lease or contract for the purchase or sale of any real property;
 
 
 
increase the compensation to officers, grant any severance or enter into any severance agreement with any directors or officers, or enter into or amend any benefit plan other than those amendments required by ERISA;
 
 
 
extend any offers of employment to any potential executive officers or voluntarily terminate any existing key employee or executive officer, except pursuant to our employee benefit plans;
 
 
 
enter into any agreement that, if fully performed, would not be permitted by the foregoing;
 
 
 
make any bonus or severance payments to any executive officers other than as required by our employee benefit plans;

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authorize any capital expenditure not included in our capital budget;
 
 
 
take any action outside the ordinary course of business that would result in a material change to our working capital; or
 
 
 
take any actions which would reasonably be expected to cause a material adverse effect to Equinix. A material adverse effect is any event, change, circumstance or effect that is, or would be reasonably likely to have, a material adverse effect on our subsidiaries’ business, except for (a) any changes in general economic or business conditions of the markets in which we and our subsidiaries operate that do not disproportionately impact us and our subsidiaries, (b) any changes or events affecting the industry in which we and our subsidiaries operate that do not disproportionately impact us and our subsidiaries, (c) in and of itself, any decline in the trading price of our common stock, (d) in and of itself, any adverse change in the United States securities markets, or (e) in and of itself, our failure to meet the revenue or earnings predictions of equity analysts as reflected in the estimates prepared by an independent equity analyst, or any other revenue or earnings estimate by an independent person, or any other revenue or earnings prediction or expectation prepared by any independent equity analyst, for any period ending (or for which earnings are released) on or after the date of the combination agreement and prior to closing, except to the extent such predictions, estimates or expectations were derived from guidance we provided.
 
Each of the parties has agreed to give prompt written notice to each other party after learning of any claim initiated by or against that party, including claims initiated against that party’s officers, directors, employees or stockholders.
 
Each of the parties has also agreed to give prompt notice to each other party when (a) an event occurs that would cause a representation or warranty contained in the combination agreement to be untrue or inaccurate, and (b) a party fails or is unable to comply with a covenant, condition or other agreement contained in the combination agreement.
 
Limitations on Considering Other Takeover Proposals
 
Until the combination is completed, we, Pihana, i-STT and STT Communications have agreed not to:
 
 
 
directly or indirectly solicit, initiate or encourage the making of a proposal likely to lead to a competing transaction, as defined below;
 
 
 
enter into or maintain discussions or negotiations regarding a competing transaction;
 
 
 
agree to endorse a competing transaction; or
 
 
 
authorize or permit any representative to take any such action.
 
A “competing transaction” means any of the following involving us, Pihana or i-STT:
 
 
 
a merger, consolidation, share exchange, business combination or other similar transaction;
 
 
 
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 15% or more of the assets of our company and our subsidiaries, Pihana and its subsidiaries or i-STT and its subsidiaries;
 
 
 
a tender offer or exchange offer for, or any offer to purchase directly from us, Pihana or i-STT, 15% or more of the outstanding voting securities of our company, Pihana or i-STT;
 
 
 
any solicitation to oppose the approval of the combination agreement by our stockholders; or
 
 
 
any liquidation, dissolution, recapitalization or other significant corporate reorganization of our company, Pihana or i-STT.

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We, Pihana, i-STT and STT Communications must immediately notify the other parties upon receipt of any competing transaction or offer or any inquiry or contact with any person with respect to any competing transaction or offer and promptly deliver to the other party a copy of the competing transaction, offer, inquiry or contact and any other related written material that contains the principal terms of the competing transaction.
 
Despite the restrictions described above, we may furnish information to and enter into discussions or negotiations with any person who has made an unsolicited, written, bona fide proposal or offer regarding a competing transaction if our board of directors has:
 
 
 
reasonably concluded after consultation with its financial advisor and outside legal counsel that the proposal or offer constitutes a superior proposal, as defined below;
 
 
 
reasonably concluded, after consultation with its outside legal counsel, that failing to furnish the information or enter into discussions would be inconsistent with its fiduciary obligations to its stockholders under applicable law;
 
 
 
provided written notice to STT Communication’s and Pihana of its intent to furnish information or enter into discussions with the person making the superior proposal; and
 
 
 
obtained from the person making the superior proposal an executed confidentiality agreement on terms no less favorable to us than those contained in the non-disclosure agreement between these parties.
 
In the combination agreement, a “superior proposal” means an unsolicited written bona fide offer made by a third party to consummate a competing transaction (changing the 15% threshold above to 50%) on terms that our board of directors determines in good faith to be more favorable to our stockholders and/or debt holders, from a financial point of view, than the terms of the combination.
 
Additional Agreements
 
Market Standoff.    Holders of our common stock received in the combination have agreed not to transfer their shares of our common stock for a period of six months following the combination, except for transfers to their affiliates who agree to be bound by similar restrictions.
 
Equinix’s Board of Directors.    Our board of directors has agreed to take all actions necessary such that our board of directors will be constituted as set forth in the governance agreement.
 
Employee Benefits.    We agreed to take such reasonable actions as are necessary to allow all employees of Pihana, i-STT and their respective subsidiaries to participate in our benefit programs or alternative benefit programs available to our employees.
 
Indemnification of Pihana Officers and Directors.    We and the corporation surviving the Pihana merger have agreed to indemnify the officers and directors of Pihana for six years after the combination to the same extent that those officers and directors are presently indemnified through Pihana’s certificate of incorporation, bylaws or agreements with those officers and directors.
 
Indemnification of i-STT Officers and Directors.    We and i-STT have agreed to indemnify the officers and directors of i-STT for six years after the combination to the same extent that those officers and directors are presently indemnified through i-STT’s certificate of incorporation, bylaws or agreements with those officers and directors.
 
i-STT Name and Marks.    Following the combination, i-STT has agreed to assign all rights associated with the “i-STT” trademark and trade name to STT Communications but STT Communications will grant us a license to the mark for a reasonable transition period, not to exceed one year.

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Nasdaq Listing.    We agreed to use all commercially reasonable efforts to ensure that our common stock remains listed on The Nasdaq National Market or The Nasdaq SmallCap Market.
 
United States Real Property Interests.    We agreed to use all commercially reasonable efforts to ensure that our securities of received by STT Communications do not constitute “United States real property interests” within the meaning of section 897 of the Code.
 
Release of Guarantees.    We have agreed to cooperate with STT Communications and use reasonable best efforts to obtain the release of STT Communications from guarantees of i-STT’s obligations under i-STT’s leases.
 
Other Agreements.    The combination agreement contains other agreements of each party. The most significant are agreements by each party to:
 
 
 
provide to the other parties and their employees, officers, directors and other representatives, access to its books and records;
 
 
 
comply with respective obligations under confidentiality agreements between the parties;
 
 
 
refrain from issuing any press release or otherwise making any public statement regarding the combination or the combination agreement prior to obtaining the written consent of the other parties unless otherwise required under applicable law or the requirements of The Nadsaq National Market;
 
 
 
notify the other parties of any claim, suit, or other action initiated seeking to prohibit the consummation of the combination agreement; and
 
 
 
take all actions reasonably necessary to comply with legal requirements and obtain all consents and approvals necessary to complete the combination.
 
Closing Conditions
 
Conditions to the Obligations of Each Party.    The respective obligations of each party to consummate the combination are subject to the satisfaction or waiver of the following conditions:
 
 
 
the approval of the combination agreement by the affirmative vote of (a) Pihana’s stockholders and (b) our stockholders;
 
 
 
no governmental entity or court will have acted to prohibit the merger, stock purchase or combination;
 
 
 
there will not be pending any proceeding with a governmental entity (a) seeking to restrain or prohibit the consummation of any of the agreements related to the combination or seeking to obtain from us or Pihana any material damages or (b) seeking to prohibit or limit the ownership or operation by the combined company of any portion of i-STT’s or Pihana businesses or assets;
 
 
 
we will have taken all corporate action such that our board of directors immediately after the closing will be constituted in accordance with the governance agreement and our bylaws, and senior management (including the head of the combined company’s Asia/Pacific Region) will be constituted with the persons mutually agreed to by us and STT Communications;
 
 
 
no party will have voluntarily or involuntarily commenced any proceeding seeking bankruptcy protection;
 
 
 
our board of directors will have taken all necessary steps to effect the waiver of any anti-takeover restrictions applicable to the combination or to any transactions that may be undertaken at any time or from time to time following the close by STT Communications or its affiliates;
 
 
 
the following will be set to occur simultaneously with the closing of the combination: (a) the senior note exchange, (b) execution of an amendment to our credit facility, (c) the financing;

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the governance agreement will (a) have been executed by each party to that agreement and (b) be in full force and effect;
 
 
 
we, i-STT and Pihana’s stockholders’ representative will have entered into the escrow agreement;
 
 
 
shares of our common stock will be listed on either The Nasdaq National Market or The Nasdaq SmallCap Market; and
 
 
 
we and STT Communications will have agreed upon the terms of a mutually acceptable strategic plan related to the post-closing financial model and management structure of the combined company.
 
Conditions to the Obligations of Us, Eagle Jaguar Acquisition Corp., Eagle Panther Acquisition Corp. and STT Communications to Consummate the Merger.    Our, Eagle Jaguar Acquisition Corp.’s, Eagle Panther Acquisition Corp.’s and STT Communications’ obligations to consummate the merger with Pihana are subject to the satisfaction or waiver of the following additional conditions:
 
 
 
each of the representations and warranties made by Pihana in the combination agreement will be true and correct with the same force and effect as if made on the closing of the combination;
 
 
 
no events will have occurred which have a material adverse effect on the business of Pihana;
 
 
 
Pihana will have performed or complied in all material respects with all agreements and covenants required by the combination agreement;
 
 
 
Pihana will have provided written confirmation of termination of its office lease in San Francisco;
 
 
 
Pihana will have received all authorizations, consents, orders and approvals (a) required by any governmental entity, (b) set forth in the combination agreement, or (c) that would prevent a material adverse effect on the business of Pihana;
 
 
 
no more than 3% of Pihana’s stockholders, measured by voting power, will have exercised appraisal rights;
 
 
 
Pihana will have terminated employee benefit plans as we requested;
 
 
 
we and STT Communications will have received a certificate executed by the secretary of Pihana certifying: (a) Pihana’s certificate of incorporation, (b) Pihana’s bylaws, (c) the resolutions of Pihana’s board of directors and (d) the action by Pihana’s stockholders approving the combination agreement;
 
 
 
we and STT Communications will have received an estoppel certificate executed by the lessors of Pihana’s data centers;
 
 
 
Pihana will provide us with a properly executed Foreign Investment in Real Property Tax Act notification letter;
 
 
 
Pihana will have provided evidence that all agreements relating to co-sale, voting, registration, first refusal, first offer, preemptive, board observation or information or operational rights covenants will have no substantive effect;
 
 
 
Pihana will have received resignations from each of its current directors;
 
 
 
Pihana’s cash balance will equal or exceed the applicable amount set in the combination agreement;
 
 
 
Pihana’s working capital will equal or exceed the applicable amount set in the combination agreement;
 
 
 
Pihana’s total other liabilities will be less then the applicable amount set in the combination agreement;
 
 
 
Pihana’s stock option plan will be terminated, and each outstanding Pihana option will have been exercised immediately prior to the closing of the combination or will have been terminated as a result of the combination;

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Pihana will provide evidence that it has properly withheld all applicable withholding taxes for any payments, forgiveness of indebtedness and any other value accruing to any employee who received, on or prior to the closing of the combination, and any amount that may be deemed a parachute payment;
 
 
 
Pihana will have divested itself of its Korean operations;
 
 
 
with respect to its Hawaiian operations, Pihana will have (a) effected a reduction in force, (b) terminated its headquarters lease on or prior to the 180th day following the closing of the combination, and (c) deducted from its cash and working capital balances all liabilities associated with that reduction in force and any net liabilities that will exist on or after the 181st day following the closing of the combination;
 
 
 
with respect to its Los Angeles operations, Pihana will have (a) effected a reduction in force, (b) terminated the lease for the second floor of its Los Angeles data center and (c) deducted from its cash and working capital balances all net liabilities associated with that reduction in force and lease option and termination; and
 
 
 
with respect to its Singapore operations, Pihana will have (a) effected a reduction in force, and (b) deducted from its cash and working capital balances all net liabilities associated with that reduction in force and sales office lease termination.
 
Conditions to the Obligations of us, Eagle Jaguar Acquisition Corp., Eagle Panther Acquisition Corp. and Pihana to Consummate Stock Purchase.    Our, Eagle Jaguar Acquisition Corp.’s, Eagle Panther Acquisition Corp.’s and Pihana’s obligations to consummate the stock purchase with STT Communications is subject to the satisfaction or waiver of the following additional conditions:
 
 
 
each of the representations and warranties made by STT Communication and i-STT in the combination agreement will be true and correct as if made on the closing of the combination;
 
 
 
no events will have occurred which have a material adverse effect on the business of i-STT;
 
 
 
i-STT will have performed or complied in all material respects with all agreements and covenants required by the combination agreement;
 
 
 
i-STT will have received all authorizations, consents, orders and approval (a) required by any governmental entity, (b) set forth in the combination agreement, or (c) that would prevent a material adverse effect on the business of i-STT;
 
 
 
We and STT Communications will have executed a mutually satisfactory transition services agreement under which, for a period of at least 180 days following the closing, STT Communications will provide to i-STT certain administrative services, and i-STT will provide STT Communications with administrative services, with all of the services to be reimbursed at cost plus 5%;
 
 
 
We and Pihana will have received a certificate executed by the secretary of i-STT certifying:  (a) i-STT’s articles of association, (b) i-STT’s memorandum of association, (c) the resolutions of  i-STT’s board of directors and (d) the action by i-STT’s shareholders approving the combination agreement;
 
 
 
i-STT will have received resignations from each of its current director;
 
 
 
i-STT’s working capital will equal or exceed the applicable amount set in the combination agreement; and
 
 
 
i-STT’s total other liabilities will be less then the applicable amount set in the combination agreement.
 
Conditions to the Obligations of Pihana, i-STT and STT Communications.    The obligation of Pihana, i-STT and STT Communications to consummate the combination is subject to the satisfaction or waiver of the following additional conditions:
 
 
 
each of the representations and warranties made by us, Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp. in the combination agreement will be true and correct as if made on the closing of the combination;

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no events will have occurred which have a material adverse effect on our business;
 
 
 
we, Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp. will each have performed or complied in all material respects with all agreements and covenants required by the combination agreement on or prior to the closing of the combination;
 
 
 
we will have received all authorizations, consents, orders and approval (a) required by any governmental entity, (b) set forth in the combination agreement, or (c) that would prevent a material adverse effect on our business;
 
 
 
STT Communications and Pihana will have received a certificate executed by our secretary certifying: (a) our certificate of incorporation, (b) our bylaws, (c) the resolutions of our board of directors and (d) the action by Equinix’s stockholders approving the combination agreement;
 
 
 
our working capital will equal or exceed the applicable amount set in the combination agreement;
 
 
 
our total other liabilities will be less then the applicable amount set in the combination agreement;
 
 
 
we will have modified the terms of its ground lease in San Jose, California;
 
 
 
neither we nor any of our subsidiaries will have (a) failed to pay when due any principal of or interest on or any other amount payable any outstanding debt in an individual principal amount of $250,000 or more or with an aggregate principal amount of $1.0 million or more, or (b) breached or defaulted with respect to any other material term of one or more items of outstanding debt in the individual or aggregate principal amounts referred to in above or any loan agreement, mortgage, indenture or other agreement relating to outstanding debt; and
 
 
 
we will have obtained and delivered to STT Communications a valuation of (a) all real property owned by us or our subsidiaries and (b) United States real property owned by Pihana and its subsidiaries, and the valuation will support a conclusion that as of the closing of the combination, after giving effect to the combination, the combined company will not be a United States real property holding corporation within the meaning of Section 897 of the Internal Revenue Code.
 
Operation of Closing Conditions.    The closing conditions will operate as follows:
 
 
 
any party may waive one or more closing conditions, provided however that the minimum dollar amount of notes tendered in the senior note exchange may be waived on behalf of all parties only by two of the following three parties: (a) us, (b) STT Communications, and (c) Pihana;
 
 
 
the failure of any party to satisfy a closing condition will not relieve such party from its obligation to consummate the combination if the other parties have satisfied their closing conditions;
 
 
 
if one party elects not to consummate the combination because one or more of the closing conditions is not satisfied, the other parties may (but neither will be required to) consummate the combination, or any other transaction as they may mutually agree; and
 
 
 
if the closing conditions of any party or parties are not satisfied because of the failure of another party to satisfy their closing conditions, the other parties may elect to consummate the combination, or any other transaction as they may mutually agree.
 
Termination
 
The combination agreement may be terminated by one or more parties as follows:
 
 
 
by mutual written consent duly authorized by the boards of directors of each party;
 
 
 
by any party if the closing has not occurred on or before January 31, 2003; but if the closing of the combination has not occurred on or before January 31, 2003 because of the failure to obtain all regulatory approvals required to consummate the combination, the closing date will be extended for two

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successive 30 calendar day periods. The right to terminate the combination agreement on or after January 31, 2003 will not be available to any party whose failure to fulfill any obligation under the combination agreement has been the cause of the failure of the closing of the combination to occur on or before January 31, 2003;
 
 
 
by any party upon the issuance of any order which would (a) prevent such party from consummating the merger, the stock purchase or the combination, (b) prohibit the combined company’s ownership or operation of any portion of the business of Pihana or i-STT or (c) compel the combined company following the closing of the combination to dispose of or hold separate any portion of our, i-STT’s or Pihana’s business or assets;
 
 
 
by us if:
 
 
 
Pihana, STT Communications or i-STT breaches any material representation, warranty, covenant or agreement, or if any representation or warranty has become untrue, however, if the breach is curable, Pihana or STT Communications and i-STT will have the opportunity to cure the breach within 30 days; or
 
 
 
we enter into one or more agreements with a third party with respect to a superior proposal, as defined above.
 
 
 
by i-STT, if Pihana, us, Eagle Jaguar Acquisition Corp. or Eagle Panther Acquisition Corp. breaches any material representation, warranty, covenant or agreement, or if any representation or warranty has become untrue, however, if the breach is curable, we or Pihana will have the opportunity to cure the breach within 30 days;
 
 
 
by STT Communications and Pihana if:
 
 
 
(a) our board of directors withdraws or modifies it recommendation to vote in favor of the combination agreement, (b) our board of directors recommends to our stockholders a competing transaction, or (c) a tender offer or exchange offer for 15% or more of the outstanding shares of our stock is commenced and our board of directors fails to oppose that offer within 5 business days; or
 
 
 
we enter into one or more agreements with a third party with respect to a superior proposal, as defined above.
 
 
 
by Pihana if:
 
 
 
we, STT Communications or i-STT breaches any material representation, warranty, covenant or agreement, or if any representation or warranty has become untrue, however, if the breach is curable, we or STT Communications and i-STT will have the opportunity to cure the breach within 30 days; or
 
 
 
we enter into one or more agreements with a third party with respect to a superior proposal, as defined above.
 
 
 
the combination agreement will terminate automatically if it fails to receive the requisite vote for approval by our stockholders.
 
Liquidated Damages and Expense Reimbursement
 
If the combination agreement is terminated, all fees and expenses will be paid by the party incurring them, except as described below.
 
We will pay all expenses incurred in connection with preparing, printing, filing and mailing this proxy statement, including all reasonable out-of-pocket expenses for services provided by counsel, accountants, investment bankers, experts and consultants.

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In addition, we will pay liquidated damages to each of STT Communications and Pihana in the amount of $1.3 million if:
 
 
 
(a) our board of directors withdraws or modifies it recommendation to vote in favor of the combination agreement, (b) our board of directors recommends to our stockholders a competing transaction, or (c) a tender offer or exchange offer for 15% or more of the outstanding shares of our stock is commenced and our board of directors fails to oppose such offer within 5 business days; or
 
 
 
we enter into one or more agreements with a third party with respect to a superior proposal, as defined above.
 
Further, we will pay each of STT Communications and Pihana up to $750,000 to cover reasonable expenses if the combination agreement is not approved by our stockholders. If within 12 months of that termination of the combination agreement we consummate or agree to consummate a competing transaction, we will pay each of STT Communications and Pihana $1.3 million less any expenses previously paid.
 
Indemnification of the Combined Company by Escrow Fund
 
To secure the indemnification obligations of Pihana’s stockholders in the combination, 10% of the shares of our common stock that would otherwise be issuable at the closing of the combination will be held in escrow. Pursuant to the combination agreement, Jane Dietze has been designated as the agent of Pihana’s stockholders with respect to indemnification matters. The escrow will terminate one year after the effective time, but shares necessary to satisfy any unsettled claims made prior to termination of the escrow period will remain in escrow until those claims have been finally resolved.
 
We will be indemnified by the escrow fund as described below for any and all damages we may suffer as a result of any of the following:
 
 
 
any inaccuracy or breach of any representation or warranty made by Pihana in the combination agreement;
 
 
 
the breach of any covenant or agreement made by Pihana in the combination agreement;
 
 
 
if any Pihana stockholder exercises appraisal rights, the amount by which the fair market value of the shares exceeds the amount such Pihana stockholder was otherwise entitled to receive pursuant to the combination agreement;
 
 
 
any cost, loss or other expense as a result of golden parachute payments;
 
 
 
any cost, loss or other expense related to reduction in force in Pihana’s Honolulu, Los Angeles and Singapore operations and lease terminations in Los Angeles, Honolulu and Singapore;
 
 
 
Pihana’s divestiture of its Korean operations;
 
 
 
any cost, loss or other expense incurred by us related to the indemnity provided for Pihana’s directors and officers in the combination agreement and not related to the transactions contemplated by the combination agreement; or
 
 
 
any cost, loss or other expense related to the termination of Pihana’s amended and restated voting agreement.
 
Except for indemnification claims based on fraud, willful misrepresentation or misconduct, the total liability for indemnification obligations will not exceed the shares of our common stock held in escrow. Further, except for indemnification claims based on fraud, willful misrepresentation or misconduct, no indemnification payment by the escrow fund will be payable for indemnification obligations arising from inaccuracies or breaches of Pihana representations and warranties until the total claims for damages exceed $400,000.

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Indemnification of the Combined Company by i-STT
 
The combination agreement provides that, subject to the limitations described below, the combined company will be indemnified by i-STT for any and all damages the combined company may suffer as a result of any of the following:
 
 
 
any inaccuracy or breach of any representation or warranty made by i-STT in the combination agreement;
 
 
 
the breach of any covenant or agreement made by i-STT in the combination agreement;
 
 
 
any cost, loss or other expense incurred by the combined company related to the indemnity provided for in the combination agreement and not related to the transactions contemplated by the combination agreement; or
 
 
 
any cost, loss or other expense incurred by the combined company in excess of $25,000 relating to i-STT’s subsidiary in China, but the combined company must use reasonable efforts to mitigate those expenses, including liquidating the subsidiary on or prior to March 1, 2004.
 
To secure the indemnification obligations of i-STT in the combination, 50% of the shares of our capital stock that would otherwise be issuable at the closing of the combination will be legended and subject to claims for indemnity by the combined company.
 
Except for indemnification claims based on fraud, willful misrepresentation or misconduct, the total liability for indemnification obligations will not exceed the shares of our common stock legended as described above. Further, except for indemnification claims based on fraud, willful misrepresentation or misconduct, no indemnification payment by the escrow fund will be payable for indemnification obligations arising from inaccuracies or breaches of i-STT representations and warranties until the total claims for damages exceed $400,000.
 
Indemnification of STT Communications and Pihana Stockholders by the Combined Company
 
The combination agreement provides that STT Communications and Pihana’s stockholders will be indemnified by the combined company for any and all damages they may suffer as a result of any of the following:
 
 
 
any inaccuracy or breach of any of our representations or warranties in the combination agreement; or
 
 
 
the breach of any of our covenants or agreements in the combination agreement.
 
Except for indemnification claims based on fraud, willful misrepresentation or misconduct, the total liability for indemnification obligations will not exceed (a) with respect to Pihana, the number of shares of our common stock held in the escrow fund and (b) with respect to STT Communications, one-half of the shares issued to STT Communications in the i-STT stock purchase. Further, except for indemnification claims based on fraud, willful misrepresentation or misconduct, no indemnification payment by the escrow fund will be payable for indemnification obligations arising from inaccuracies or breaches of our representations and warranties until the total claims for damages exceed $400,000.
 
Amendment and Waiver
 
We, STT Communications, i-STT and Pihana may amend the combination agreement at any time with a written statement executed by each of the parties and in accordance with applicable law.
 
At any time prior to the effective time, we, STT Communications, i-STT or Pihana may each unilaterally:
 
 
 
extend the time for the performance of any obligation or other act of any other party;

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waive any inaccuracy in the representations and warranties contained in the combination agreement or in any document delivered pursuant to the combination agreement; and
 
 
 
waive compliance with any agreement or condition contained in the combination agreement;
 
but an extension or waiver will not bind any other party to whom the obligation is owed or for whose benefit the representations, warranties, agreements or conditions have been made or given.
 
Disputes
 
All disputes will be settled by arbitration to take place in London, England.

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AGREEMENTS RELATED TO THE COMBINATION
 
The following is a summary of the material provisions of our voting agreements and provisions contained in the governance agreement. The following is not a complete description of all the provisions of these agreements, and we encourage you to read these agreements in their entirety. This summary is qualified in its entirety by reference to the full text of these agreements which have been filed with the SEC on Form 8-K on October 9, 2002.
 
Voting Agreements
 
As of September 30, 2002, holders of approximately 20% of our outstanding common stock executed voting agreements requiring them to vote in favor of the combination and any matter that could reasonably be expected to facilitate the combination and against any competing transaction or any other action that could reasonably be expected to delay or interfere with approval of the combination.
 
Each of those stockholders agreed to not do the following prior to the earlier of the termination of the combination or the closing of the combination: (a) sell or otherwise dispose of our common stock; (b) enter into a voting trust or a voting arrangement; and (c) enter into any contract, commitment, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, pledge, encumbrance, transfer or other disposition of any shares of our common stock.
 
Governance Agreement
 
The governance agreement contains the following provisions (in addition to the voting and other provisions described under “Governance of the Combined Company”):
 
Right of First Offer.    STT Communications or its assignees will have a right of first offer with respect to future sales of capital stock or convertible securities by the combined company and will be entitled to purchase its pro-rata portion, based on its equity ownership of the combined company, of securities offered by the combined company. There will be exceptions for employee issuances, business acquisitions and other strategic transactions.
 
Registration Rights.    In order to provide for the resale of our common stock to be issued in the combination (or issuable upon conversion of the Series A preferred stock issued in the combination) into the public market, we will register those shares with the SEC. The governance agreement requires us to file a registration statement with the SEC within 90 days of the closing and cause that registration statement to be effective within six months of the closing. We will use commercially reasonable efforts to cause the registration statement to remain effective until all shares of common stock to be issued in the combination have been sold, subject to our ability to impose blackout periods. We also granted the right to participate in other registration statements filed by Equinix (other than employee stock and acquisition related offerings) and the right to register on Form S-3 (or Form S-1 if Form S-3 is not available) shares of our common stock to be issued in the combination. The governance agreement also includes our obligation to indemnify or contribute to losses suffered by the holders of securities registered pursuant to that agreement. These losses may include losses incurred under federal securities laws.

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OTHER MATTERS RELATED TO THE COMBINATION
 
Securities Law Matters
 
The shares of our common stock and preferred stock to be issued in the combination and the notes and warrants to be issued in connection with the financing will be issued in a transaction exempt from registration under the Securities Act of 1933, by reason of Section 4(2) of the Securities Act or regulations promulgated by the SEC thereunder.
 
Accounting Treatment of the Combination
 
The combination will be accounted for as a “purchase” transaction for accounting and financial reporting purposes, in accordance with accounting principles generally accepted in the United States. After the merger, the results of operations of Pihana and i-STT will be included in our consolidated financial statements. The purchase price will be allocated based on the fair values of the assets acquired and the liabilities assumed. Pursuant to Statements of Financial Accounting Standards No. 141, “Business Combinations,” and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill will be subject to at least annual assessment for impairment based on a fair value test. Identified intangible assets with finite lives will be amortized over those lives. A final determination of the intangible asset values and required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective fair values, has not yet been made. We will determine the fair value of assets and liabilities and will make appropriate business combination accounting adjustments. However, for purposes of disclosing unaudited pro forma information in this proxy statement, we have made a preliminary determination of the purchase price allocation, based upon current estimates and assumptions, which is subject to revision upon consummation of the combination based on our and i-STT’s respective working capital balances of each of us and i-STT and the Pihana cash balance.
 
Completion of the combination will result in total pre-tax costs of approximately $17.0 to $20.0 million, primarily relating to costs associated with combining the businesses of the companies, including integration and restructuring costs, and legal, accounting and financial advisory fees. Although we do not believe the combination costs will significantly exceed our estimate, our estimate may not be correct and unanticipated events could occur that would substantially increase the costs of combining the companies. The extent of these additional costs is not yet determined. In any event, any costs associated with the combination would negatively affect our results of operations in the quarter in which the combination is completed. In addition, costs consisting primarily of legal, accounting and financial advisory fees and expenses, will be a component of the purchase price and capitalized as an element of goodwill.

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THE FINANCING
 
General
 
Securities to be Issued.    At the same time we entered into the combination agreement, we entered into a securities purchase agreement with STT Communications. To provide funding for (a) operations, (b) the senior note exchange and (c) payment of a portion of the principal amount outstanding under the credit facility. The terms of the securities purchase agreement and the securities that may be issued under the securities purchase agreement were determined in arms-length negotiation between us, STT Communications and representatives of the Pihana stockholders. The following securities may be issued under the securities purchase agreement:
 
 
 
14% Series A-1 convertible secured notes due November 1, 2007;
 
 
 
10% Series A-2 convertible secured notes due November 1, 2007;
 
 
 
warrants to purchase shares of our preferred stock;
 
 
 
warrants to purchase shares of our common stock;
 
 
 
warrants to purchase shares of our common stock upon a change of control; and
 
 
 
warrants to purchase shares of our common stock upon defaults under our credit facility.
 
Closing Conditions.    The issuance and sale of securities under the securities purchase agreement is subject to customary closing conditions, including:
 
 
 
the documents effecting the security of the convertible secured notes must be executed and delivered;
 
 
 
the guarantees by all of our subsidiaries as of the issuance and sale of the securities must be executed; and delivered
 
 
 
the conditions in the combination agreement relating to the senior note exchange and the amendment to our credit facility must be satisfied or waived; and
 
 
 
the combination must close concurrently with the issuance and sale of the securities under the securities purchase agreement.
 
Representations and Warranties; Indemnities and Expenses.    The securities purchase agreement incorporates the representations and warranties in the combination agreement, incorporates the affirmative and negative covenants in our credit facility and contains events of default corresponding to the events of default under our credit facility. We may, or the prospective purchasers may, terminate the securities purchase agreement if the combination agreement is terminated. We will indemnify the holders of the convertible secured notes from specific liabilities, such as environmental liabilities. In addition, we will reimburse $200,000 of fees of counsel to the purchasers under the securities purchase agreement.
 
Registration Rights.    We will also grant rights to three demand registrations, the right to participate in other registration statements filed by us (other than employee stock and acquisition related offerings) and the right to register shares on Form S-3 (or Form S-1 if Form S-3 is not available) shares of our common stock issued, directly or indirectly, upon conversion of the notes or exercise of any of the warrants issued under the securities purchase agreement. The registration rights agreement will include our obligation to indemnify or contribute to losses suffered by the holders of securities registered pursuant to that agreement. These losses may include losses incurred under federal securities laws.
 
The Convertible Secured Notes
 
Principal Amount.    The Series A-1 convertible secured notes may be issued in an original principal amount of not less than $30.0 million and up to $40.0 million. Under the securities purchase agreement, STT

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Communications has committed to purchase at least $30.0 million of Series A-1 convertible secured notes. Up to $10.0 million of Series A-2 convertible secured notes may be issued under the securities purchase agreement but the total principal amount of the Series A-1 and Series A-2 convertible secured notes will not exceed $40.0 million.
 
Security.    The Series A-1 convertible secured notes will be secured by (a) a first priority security interest in i-STT’s assets and the assets of Pihana’s subsidiary which owns and operates Pihana’s data center in Singapore and by a pledge of the stock of i-STT’s subsidiaries and (b) by a second priority security interest in all of the collateral securing our and our subsidiaries’ obligations under our credit facility (which excludes the i-STT assets and Pihana’s Singapore assets).
 
The Series A-2 convertible secured notes share with the Series A-1 convertible secured notes a second priority security interest in all of the collateral securing our and our subsidiaries’ obligations under the credit facility (which excludes the i-STT assets and Pihana’s Singapore assets).
 
The convertible secured notes will be guaranteed by all of our existing subsidiaries, by all of the subsidiaries of ours acquired in the combination (except that the Singapore subsidiaries will guarantee only the Series A-1 convertible secured notes) and by all of our future domestic subsidiaries.
 
Interest.    Interest on the convertible secured notes will be payable in arrears in additional notes of the same series, on May 1 and November 1 of each year, beginning on May 1, 2003 until maturity. Interest will accrue at the rate of 14% per year on the Series A-1 convertible secured notes and 10% per year on the Series A-2 convertible secured notes.
 
Conversion of Notes.    The principal amount of, and accrued interest on, the convertible secured notes are convertible into shares of our capital stock at a price of $0.3366 per underlying share of our common stock at any time at the option of the holder of such notes. The Series A-1 convertible secured notes are convertible into shares of our Series A preferred stock, Series A-1 preferred stock or common stock. The Series A-2 convertible secured notes are convertible into shares of our common stock. See “Governance of the Combined Company” beginning on page 89.
 
The conversion price will be adjusted to mitigate or prevent dilution if fundamental changes occur to our common stock, dividends are declared on our common stock or we issue, or contract to issue, shares of our common stock at a price per share below $0.3366 per share.
 
Forced Conversion of Notes.    Until the third anniversary of the closing, we may convert 95% of the convertible secured notes and after third anniversary of the closing, we may convert 100% of the convertible secured notes, if
 
 
 
the closing price of our common stock exceeds $1.1781 for thirty consecutive trading days;
 
 
 
the average daily trading volume of our common stock during that 30-day trading period exceeds 550,000; and
 
 
 
We have caused a registration statement to become effective under the Securities Act which provides for the resale by the noteholders of the shares of our common stock issued or issuable upon conversion.
 
Change in Control.    We must offer to purchase all outstanding convertible secured notes at their principal amount together with accrued and unpaid interest if we experience a change of control.
 
Common and Preferred Stock Warrants
 
We will issue to the purchasers of convertible secured notes, warrants to purchase shares of our capital stock. The warrants issued to purchasers of Series A-1 convertible secured note will be exercisable for shares of

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our Series A preferred stock, Series A-1 preferred stock or common stock, subject to the restrictions as described under “Governance of the Combined Company.” The warrants issued to Series A-2 convertible secured note purchasers will be exercisable for shares of our common stock. The warrants will initially have an exercise price of $0.01 per underlying share of our common stock and may be exercised on a cashless basis.
 
If $30.0 million of original principal amount of our convertible secured notes is issued, the warrants will represent the right to purchase approximately 8.25% of our capitalization after the combination and the issuance of the warrants (but before the conversion of convertible secured notes). The number of shares initially issuable in connection with the convertible secured notes will equal a percentage of our capitalization equal to 0.0000275% per $1.0 million original principal amount of convertible secured notes. The exercise price of the warrants will be adjusted to mitigate or prevent dilution if fundamental changes occur to our common stock, dividends are declared on our common stock or we issue, or contract to issue, shares of our common stock at a price per share below $0.3366 per share. The warrants will expire five years after the closing.
 
Change in Control Warrants
 
If we experience a change in control, the change of control warrants will become exerciseable for shares of our common stock with a total current market value of up to 20% of:
 
 
 
the principal amount of notes for which that warrant originally issued, plus
 
 
 
the principal amount of all convertible secured notes issued in payment of interest on those original notes, minus
 
 
 
the principal amount of those notes which have been converted into shares of our capital stock or repaid in cash, plus
 
 
 
accrued and unpaid interest on any then outstanding notes.
 
For purposes of the convertible secured notes and the change in control warrants, a change of control is defined as:
 
 
 
the direct or indirect sale or transfer of all or substantially all of our assets;
 
 
 
any business combination which results in the holders of our capital stock prior to the business combination beneficially owning less than 50% of the voting securities of the resulting parent entity in such business combination; or
 
 
 
if more than 50% of our board of directors becomes controlled by directors who were neither (a) on our board of directors two years before the date of the change in control, nor (b) elected or nominated by such directors or their successors who were nominated as required by this sentence.
 
The acquisition by STT Communications or its affiliates and associates of up to 66 2/3% of our voting securities will not be a change in control.
 
Cash Trigger Warrants
 
To provide a mechanism to allow STT Communications and other purchasers of convertible secured notes to ensure our compliance with covenants under the senior secured credit facility, the holders of a series of our warrants will have the right, but not the obligation, to exercise their warrants on the terms described below. The cash trigger warrants will be exercisable for shares of our common or preferred stock valued at up to $30.0 million. $10.0 million of Series A cash trigger warrants will be issued to STT Communications and those warrants will have an exercise price which is the lesser of (a) $0.306 or (b) 90% of the then current market value of shares of our common stock. $20.0 million of Series B cash trigger warrants will have an exercise price of 90% of the then current market value of shares of our common stock. The $0.306 per share exercise price of

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Series A cash trigger warrants will be adjusted to mitigate or prevent dilution if fundamental changes occur to our common stock, dividends are declared on our common stock or we issue, or contract to issue, shares of our common stock at a price per share below $0.306.
 
The Series A cash trigger warrants will be issued to STT Communications and in STT Communications’ discretion, purchasers of Series A-2 convertible secured notes and former holders of Pihana’s preferred stock may be issued Series B cash trigger warrants.
 
The cash trigger warrants will be exercisable if we (a) do not have sufficient funds to pay, and fail to pay when due, any principal, interest, fee or other amount under our credit facility, or (b) breach our obligations to maintain certain minimum cash balances under our credit facility agreement. The holders of the cash trigger warrants have no obligation to exercise their warrants. If a default occurs under our credit facility, we cannot assure you that we will have adequate financial resources to prevent our lenders from foreclosing on our assets. See “Risk Factors” beginning on page 24.
 
If the cash trigger warrants are exercised based on the condition described in (a) above, the cash trigger warrants will be exercisable not less than $5.0 million and not more than $5.0 million plus the amount of the missed payment.
 
If the cash trigger warrants are exercised on the condition in (b) above, the cash trigger warrants will be exercisable for not less than $5.0 million and not more than $5.0 million plus any shortfall in our minimum cash balance requirements.
 
Material Federal Income Tax Considerations of the Financing
 
Federal tax law contains various limitations and restrictions on the deductibility of interest and/or original issue discount. Some of these limitations and restrictions may be applicable to the interest and/or the original issue discount associated with the Series A-1 convertible secured notes. In such event, some or all of the interest or original issue discount associated with such notes may not be deductible by us.

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THE SENIOR NOTE EXCHANGE
 
The following is a summary of the material provisions of the senior note exchange. The shares of our common stock issued in senior note exchange will be exempt from registration under the Securities Act of 1933 pursuant to Section 3(a)(9) of the Securities Act.
 
General
 
We currently have a series of 13% Senior Notes due 2007 outstanding in principal amount of approximately $147.2 million, which we call senior notes. Our stockholders are being asked at the special meeting to approve the issuance of common stock as part of the senior note exchange. Our board of directors has approved the senior note exchange as a means to reduce our total outstanding indebtedness.
 
Reasons for the Senior Note Exchange
 
The senior note exchange is intended to improve our existing capital structure by reducing our outstanding debt. The exchanges of our common stock and cash for the senior notes will result in significant interest expense savings and will reduce the aggregate principal payment otherwise due in December 2007. For example, if we exchange $125.0 million in principal amount of our senior notes for cash and common stock, we would save $16.3 million per year in interest expense, or nearly $89.4 million over the remaining term of the senior notes. We would also reduce the amount of principal payments that would otherwise come due in December 2007 by $125.0 million. This would result in a net reduction in our payments on the exchanged senior notes of nearly $198.2 million.
 
After full and careful deliberation and consideration of the senior note exchange, our board of directors determined that the terms of the senior note exchange are advisable to, and in the best interests of, our stockholders.
 
In recommending the senior note exchange, our board of directors considered a number of factors (many of which are set forth below) that it believed supported its recommendation. Factors the board of directors considered include:
 
 
 
the combination agreement requires that no more than $22.3 million of principal amount of senior notes remain outstanding as of closing;
 
 
 
we would be required to pay all unpaid principal plus accrued interest on each of the notes by December 31, 2007 and there is a high likelihood that we would not be able to obtain sufficient funds to pay the notes when they became due; and
 
 
 
the current unfavorable economic environment and general recessionary economy, and the resulting low likelihood of restructuring the senior notes on terms reasonably favorable to our stockholders.
 
The above discussion of information and factors considered by our board of directors is not intended to be exhaustive but is believed to include all material factors considered by our board of directors. In view of the wide variety of factors considered by our board of directors, our board of directors did not find it practicable to quantify or otherwise assign relative weight to the specific factors considered. In addition, the board of directors did not reach any specific conclusion on each factor considered, or any aspect of any particular factor, but conducted an overall analysis of these factors. Individual members of our board of directors may have given different weight to different factors. However, after taking into account all of the factors described above, our board of directors determined that the senior note exchange is fair to, and in the best interest of, our stockholders.

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Principal Terms of the Senior Note Exchange
 
As a condition to closing the combination and financing, we are required to substantially reduce the outstanding amount of our senior notes so that no more than $22.3 million is outstanding under the notes. This condition requires us to retire at least $124.9 million of our outstanding senior notes unless two of the three combining companies agree to waive the condition. Prior to signing the combination agreement, we received offers to exchange outstanding senior notes from the holders of $101.2 million of our senior notes, leaving more than $23.7 million additional senior notes that we are required to exchange in the senior note exchange in order to close the combination and the financing. In connection with the combination and financing, we have made an offer to exchange cash and shares of our common stock for all of our outstanding senior notes. Holders of our senior notes will receive an amount of cash and shares of our common stock based on the aggregate principal amounts of senior notes exchanged as described in the following table. The table below describes the amount we will pay for every $1.00 of principal of senior notes exchanged.
 
Consideration Information per $1 Principal Amount of Notes Exchanged
 
Participation
Level:

  
Principal Amount Exchanged*
($ in millions)

  
Cash
Consideration

  
Stock
Consideration

  
Value of Stock Consideration**

  
Aggregate Stock Consideration (% of Fully-Diluted Capitalization)***

  
Total Consideration per $1.00 Note Exchanged

  
Equal to or greater than:

  
but less than:

              
1
  
$    0.0
  
$115.0
  
$0.13
  
.513
  
$0.15
  
11%
  
$0.28
2
  
$115.0
  
$117.0
  
$0.13
  
.509
  
$0.15
  
11%
  
$0.28
3
  
$117.0
  
$119.0
  
$0.13
  
.500
  
$0.15
  
11%
  
$0.28
4
  
$119.0
  
$121.0
  
$0.13
  
.492
  
$0.14
  
11%
  
$0.27
5
  
$121.0
  
$123.0
  
$0.13
  
.484
  
$0.14
  
11%
  
$0.27
6
  
$123.0
  
$125.0
  
$0.13
  
.476
  
$0.14
  
11%
  
$0.27
7
  
$125.0
  
$127.0
  
$0.14
  
.414
  
$0.12
  
10%
  
$0.26
8
  
$127.0
  
$129.0
  
$0.14
  
.408
  
$0.12
  
10%
  
$0.26
9
  
$129.0
  
$131.0
  
$0.14
  
.401
  
$0.12
  
10%
  
$0.26
10
  
$131.0
  
$132.5
  
$0.14
  
.396
  
$0.11
  
10%
  
$0.25
11
  
$132.5
  
$135.0
  
$0.15
  
.342
  
$0.10
  
  9%
  
$0.25
12
  
$135.0
  
$137.0
  
$0.15
  
.336
  
$0.10
  
  9%
  
$0.25
13
  
$137.0
  
$140.0
  
$0.15
  
.330
  
$0.10
  
  9%
  
$0.25
14
  
$140.0
  
$147.2
  
$0.16
  
.275
  
$0.08
  
  8%
  
$0.24
15
  
$147.2
  
NA
  
$0.17
  
.229
  
$0.07
  
  7%
  
$0.24

*
 
The consummation of the senior note exchange is conditioned upon, among other things, the closing of the sale of $30.0 million of convertible notes to STT and the closing of the combination. The closing of these transactions is conditioned upon a minimum of $125.0 million of senior notes being tendered and accepted for exchange. Therefore, although levels below $125.0 million are presented on the table, consent of two of the three principal partners (the Company, STT and Pihana) is required to waive this requirement.
**
 
Share value based on Equinix closing price on December 10, 2002 of $0.29.
***
 
Approximate minimum aggregate percentage of our stock to be issued at the closing to holders who participate in the senior note exchange, calculated on a fully-diluted, treasury stock basis after giving effect to the maximum number of shares that could be issued in connection with the senior note exchange, the proposed combination, the shares issuable upon conversion of $30.0 million of convertible notes, and the paid-in-kind securities issuable through 2007 and warrants issued in connection with such convertible notes. Amounts are based on our share price as of December 10, 2002 of $0.29 and fully-diluted shares outstanding as of September 30, 2002.

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We have commenced an exchange offer for all of our outstanding senior notes, and the holders of the senior notes currently have until December 27, 2002 to tender their senior notes to us in exchange for the consideration described above. The expiration of the exchange offer may be extended at our option and the closing of the senior note exchange is conditioned upon our stockholders approving Proposal 1 to authorize the issuance of the shares in the senior note exchange.
 
Consent Solicitation.    As part of the senior note exchange, we are requesting the holders of the senior notes to consent to the adoption of the proposed amendment of the indenture governing the senior notes, which will materially reduce our obligations under the indenture. If adopted, the proposed amendment will remove restrictions on our ability to, among other things, incur indebtedness or liens, make dividend payments, enter into transactions with our stockholders and affiliates, sell assets, and consolidate or merge.
 
Conditions to Closing.    The senior note exchange is conditioned upon the occurrence of a number of events, including:
 
 
 
the closing;
 
 
 
our receipt of cash proceeds of at least $30.0 million in the financing;
 
 
 
approval of the proposed restated certificate of incorporation by our stockholders; and
 
 
 
the senior note exchange must not violate any applicable law, regulation, injunction, or other order of any court or governmental agency.
 
Principal Effects of the Issuance of Common Stock
 
The senior note exchange will have a dilutive effect on our existing stockholders. The senior note exchange will occur immediately before the closing.
 
Material Federal and State Income Tax Consequences of the Senior Note Exchange
 
Cancellation of Indebtedness Income
 
We will realize cancellation of indebtedness, which we call COD, income as a result of the payment of the cash and shares of our common stock issued in the senior note exchange if, and to the extent that, the sum of the cash and the fair market value of the shares is less than the adjusted issue price of the senior notes surrendered in connection with the senior note exchange. The adjusted issue price of each senior note is generally equal to the issue price of each such note (which we have reported as $918.97 for each note), increased by the amount of original issue discount previously includable in the gross income of the holder thereof, and decreased by the amount of any payments (other than payments of qualified stated interest) we previously made on such senior notes.
 
As of December 31, 2001 we had federal net operating loss carryforwards (which we call NOL carryforwards) from prior tax years in the approximate amount of $202.4 million. For purposes of computing our federal alternative minimum tax for any tax year ending in 2003 or thereafter, our NOL carryforwards may be used to offset only 90% of our alternative minimum taxable income. However, even after considering such 90% alternative minimum tax limitation, we expect the combination of our NOL carryforwards and the losses incurred by us in the tax year in which the senior note exchange occurs to offset substantially all of the COD income recognized by us by reason of the senior note exchange. (For a discussion regarding the availability of our NOL carryforwards and the impact of the senior note exchanges on our ability to use our NOL carryforwards to reduce our future federal income tax liability, see “Ability to Utilize NOL Carryforwards and Recognized Built-in Losses” immediately below.)

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It is important to note, however, that in addition to the federal tax considerations set forth above, a number of states in which we are subject to tax, including California and New Jersey, have adopted legislation suspending the ability to utilize NOL carryforwards for state law purposes. Thus to the extent that we are required to rely on NOL carryforwards (as opposed to current year tax losses) to offset the COD income generated by the senior note exchange, we may incur a material state tax liability by reason of the senior note exchange. Because the amount of such liability will depend upon the amount of COD income generated, the allocation of such income among the various states in which we are subject to tax, the taxable year in which the senior note exchange occurs, and the amount of losses, if any, generated by us in the future in the various states in which we are subject to tax, the exact amount of such potential state tax liability cannot be determined at this time.
 
Ability to Utilize NOL Carryforwards and Recognized Built-in Losses
 
As of December 31, 2001 we had federal NOL carryforwards from prior tax years in the amount of approximately $202.4 million. Based upon available records of stock ownership, we do not believe that we have experienced an “ownership change,” as defined in Section 382 of the Code and the regulations promulgated thereunder, since the date of our initial public offering on August 10, 2000. Accordingly, as discussed above under the heading “Cancellation of Indebtedness Income,” we believe that these federal NOL carryforwards will generally be available to offset the COD income generated by reason of the senior note exchange. If, notwithstanding such analysis, an ownership change under Code Section 382 has occurred, then our ability to use our NOL carryforwards will be limited, and we could incur a significant amount of tax with respect to the COD income generated by the senior note exchange.
 
Regardless of whether an ownership change under Code Section 382 has occurred in the past, it is likely that the issuance of our common stock in connection with the senior note exchange as well as in connection with the financing and the combination, each as described in this proxy, will cause us to experience an ownership change as of the consummation of such transactions. After such ownership change, we will generally be limited to using an amount of pre-ownership-change NOLs for any tax year that is equal to the product of (1) the value of our equity (determined immediately prior to the ownership change and generally ignoring any capital contributions made within two years of the ownership change) and (2) a floating percentage determined by the Internal Revenue Service from time to time (which for ownership changes occurring in November 2002 is 4.63%). Applying these rules based on our current equity value, an ownership change would result in limitations on utilization that are so severe that almost all of our NOLs would expire unused. In addition to the limitations on NOL carryforward utilization described above, to the extent we have a “net unrealized built-in loss” in our assets as of the date of an ownership change, a portion of the depreciation and amortization on our assets, as well as certain losses on the sale of our assets, will generally be subject to the foregoing limitations on use as if they constituted a pre-ownership-change NOL carryforward.
 
Consequences of Proposed Amendment to Senior Notes Indenture
 
We intend to take the position that the proposed amendment to the indenture governing the senior notes, if effected, will not cause those senior notes that are not tendered by the holders thereof pursuant to the senior note exchange to be deemed exchanged for new senior notes for federal income tax purposes. Whether a senior note will be deemed to be exchanged for a new senior note for federal income tax purposes will depend upon whether the proposed amendment to the indenture governing the senior notes, if effected, will result in a “significant modification” of the senior notes, as such term is defined in the regulations promulgated under the Code. Under the regulations promulgated under the Code, the modification of a debt instrument is a significant modification if the legal rights or obligations that are altered and the degree to which they are altered are “economically significant.” Whether or not such a change exists is based on all of the facts and circumstances surrounding the change. However the regulations promulgated under the Code provide that a modification to a debt instrument that adds, deletes, or alters customary accounting or financial covenants is not a significant modification.

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There can be no assurance that the Internal Revenue Service will not assert a contrary position regarding whether the effectiveness of the proposed amendment will give rise to a deemed exchange of the untendered senior notes, or whether, if asserted, such position will prevail. In the event that the untendered senior notes were deemed to be exchanged for new senior notes for federal income tax purposes, we would recognize COD income with respect to each such senior note upon such deemed exchange (i.e., upon the effective date of the proposed amendment) in an amount equal to the excess of the adjusted issue price of such senior note (as of the effective date of the proposed amendment) over the fair market value of such senior note (measured as of the effective date of the proposed amendment). The adjusted issue price of each senior note is generally equal to the issue price of such note (which we have reported as $918.97 for each senior note), increased by the amount of original issue discount previously includible in the gross income of the holder of such note, and decreased by the amount of any payments (other than payments of qualified stated interest) previously made by us on such note.
 
Interests of Certain Persons
 
None of our directors or executive officers or nominees for the directors or associates of the foregoing has any interest, direct or indirect, in the matters contemplated by the senior note exchange.

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THE CREDIT FACILITY
 
General
 
As a condition to the combination, the financing and senior note exchange, we are in discussions with our syndicate of lenders to revise our credit facility to, among other things, reset the financial covenants for future periods to levels that we believe are more consistent with market conditions. The lenders have agreed on the principal terms of this amendment and have agreed to recommend the terms to their credit committees. The terms of the proposed amendment to our credit facility are further described below.
 
Background of the Amendment to Our Credit Facility
 
In December 2000, we entered into a credit facility with a syndicate of lenders under which, subject to our compliance with a number of financial ratios and covenants, we were permitted to borrow up to $150.0 million. As of September 30, 2001, we had borrowed the entire $150.0 million under the credit facility. In October 2001, in conjunction with the repayment of $50.0 million, we amended our credit facility to decrease total borrowing allowed to $125.0 million and to reset certain financial covenants to more accurately reflect market conditions. As of September 30, 2002, a total of $100.0 million was outstanding under our credit facility. Our credit facility requires us to maintain specific financial ratios and comply with quarterly, and in some circumstances, monthly covenants requiring us to, among other things, achieve specific revenue targets at levels significantly above historical revenues, maintain certain minimum cash balances and limit our EBITDA losses.
 
As of June 30, 2002, we were not in compliance with our covenants, including the revenue covenant, of our credit facility. In August 2002, the lenders provided us with a waiver and further amended our credit facility. Under the August amendment to our credit facility, we agreed to prepay $5.0 million of debt outstanding at the time of that amendment and agreed to a reduction in the total borrowing allowed under our credit facility to $100.0 million (permanently eliminating $20.0 million previously available for borrowing). In addition, the August amendment reset the minimum revenue and maximum EBITDA loss covenants through September 30, 2002 and reset the minimum cash balance covenant for the term of the loan. Further, the August amendment added a new covenant requiring us to convert at least $100.0 million of our senior notes into common stock or convertible debt on or before November 8, 2002.
 
In November 2002, the lenders agreed to further amend the credit facility as follows:
 
 
 
We were granted a waiver of the covenant requiring us to convert $100.0 million of senior notes by November 8, 2002.
 
 
 
We were granted a waiver to reset the minimum revenue and maximum EBITDA loss covenants through December 31, 2002 and the minimum cash balance covenant through March 31, 2003.
 
 
 
We were granted a waiver, subject to certain conditions, of an event of default created by a minimum cash covenant default and a payment default, if any, in existence pursuant to the Wells Fargo loan.
 
 
 
We were granted a waiver, subject to certain conditions, of a default or an event of default created by our failure to make the interest payment due on the senior notes in December 2002.
 
Principal Terms of the Proposed Amendment to Our Credit Facility
 
In connection with the proposed combination we have entered into discussions with our senior lenders on the principal terms for another amendment to our credit facility and the lenders have agreed to recommend the terms of such amendment to their credit committees. The most significant terms and conditions of the proposed amendment are:
 
 
 
we will be granted a full waiver of previous covenant breaches and will be granted consent to use a minimum of $15.0 million to retire our senior notes;

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future revenue and EBITDA covenants will be eliminated and the remaining covenants and ratios will be reset consistent with the anticipated performance of the combined company for the remaining term of the loan;
 
 
 
we will repay $7.5 million of the currently outstanding $100.0 million; and
 
 
 
the amortization schedule for our credit facility will be amended so that the minimum amortization due in the years 2002 through 2004 will be significantly reduced and some amortization will be extended to 2006.
 
We currently anticipate that a final amendment will be put in place prior to the closing. This amendment will be subject to the closing.
 
We do not currently have sufficient cash reserves or alternate financing available to repay the amount outstanding under our credit facility. If we are unable to complete the combination, we will again be in breach of the covenants in our credit facility.

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GOVERNANCE OF THE COMBINED COMPANY
 
At the closing, the combined company will implement new governance provisions, including director nominating rights and procedures with respect to the election of directors. We will implement these governance provisions by means of an amendment of our bylaws, the adoption of a certificate of designation to create the Series A preferred stock with rights to elect directors, and the execution of a governance agreement with STT Communications and former preferred stockholders of Pihana.
 
Nomination of Directors.    Under these governance provisions, the number of our directors will be fixed at nine. Initially, three directors will be elected by STT Communications as the holder of a majority of the Series A preferred stock outstanding. STT Communications as the holder of the Series A preferred stock will continue to have the right to elect directors until the governance provisions terminate. The number of directors to be elected by the holder or holders of the Series A preferred stock may be reduced as follows:
 
 
 
If the holders cease to own at least 30% of our outstanding voting shares, the number of directors they may elect will be reduced to two;
 
 
 
If the holders cease to own at least 15% of our outstanding voting shares, the number of directors they may elect will be reduced to one; and
 
 
 
If the holders cease to own at least 100 shares of the Series A preferred stock, they may no longer elect any directors.
 
The remaining six members of our board of directors will be nominated for election as follows:
 
 
 
Three directors will be nominated by our board of directors prior to closing the combination, and one of them must be “independent” within the meaning of applicable Nasdaq or other stock exchange rules. Any vacancies among those three seats will be filled based on the nomination of the remaining directors holding those seats, or if there are none remaining, by our nominating committee;
 
 
 
One director will be nominated by the former Pihana stockholders who sign the governance agreement as long as they own at least 11% of our voting stock, but their nominee must be reasonably acceptable to a majority of the other directors; and
 
 
 
Two directors (or more, to the extent the holders of the Series A preferred stock or the former Pihana stockholders lose their rights to elect or nominate directors) will be selected for nomination by our nominating committee, and all directors so selected must be independent.
 
Agreement to Vote.    STT Communications will agree to vote its shares of us in favor of the election of all directors nominated as described above, and will give us a voting proxy to this effect.
 
Independent Directors.    We anticipate that The Nasdaq National Market will adopt rules in the near future requiring our board of directors to be comprised of a majority of independent directors. As a result, five of our nine directors will need to be independent. Therefore, in addition to the three directors who must be independent upon t