Exhibit 10.74

 

THIRD MODIFICATION TO GROUND LEASE

 

THIS THIRD MODIFICATION TO GROUND LEASE (this “Modification”) is made as of
September 30, 2002 by and between ISTAR SAN JOSE, LLC, a Delaware limited
liability company (“Lessor”), and EQUINIX, INC., a Delaware corporation
(“Lessee”).

 

RECITALS

 

A. Lessor and Lessee entered into that certain Ground Lease dated as of June 21,
2000 (the “Original Lease”), as amended by that certain First Modification to
Ground Lease dated as of September 26, 2001, that certain Second Modification to
Ground Lease dated as of March 20, 2002 (the “Second Amendment”), and that
certain letter agreement (the “Letter Agreement”) dated September 24, 2002
(collectively, the “Lease”), which Lease covers approximately 78.446 acres of
unimproved real property, located in the City of San Jose, County of Santa
Clara, State of California, as more particularly described in the Lease.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Lease.

 

B. Concurrently with the execution of the Original Lease, Lessor and Lessee
executed a Memorandum of Lease and Purchase Option, dated as of June 21, 2000
(the “Original Memorandum”), which Original Memorandum was recorded on June 21,
2000, as Document No. 15286834 in the Official Records of Santa Clara County,
California (the “Official Records”). The Original Memorandum was amended and
restated by that certain Amended and Restated Memorandum of Lease and Purchase
Option dated as of October 1, 2001 and recorded on                     , 2001 as
Document No.                      in the Official Records.

 

C. Lessee, by an Option Exercise Notice dated September 24, 2002, has exercised
its option to reduce the size of the Premises as of October 1, 2002 (the
“Premises Reduction Date”) pursuant to the Second Amendment and the Letter
Agreement and now wishes to make certain modifications to the Lease necessary to
reflect this reduction of the Premises as contemplated by Section 7(a) of the
Second Amendment, and certain other modifications to the Lease.

 

D. Lessor is willing to agree to such changes to the Lease on the terms and
conditions set forth herein.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the agreements of Lessor and Lessee herein
contained and other valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Lessor and Lessee hereby agree to modify the Lease as
follows:

 

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1. DEFINITIONS

 

From and after the Premises Reduction Date, the following terms are added as
defined terms under the Lease and to the extent that any of the following terms
are duplicative of existing defined terms in the Lease, the following terms
shall replace in their entirety such existing defined terms:

 

(a) “Aggregate Permitted Square Footage” shall mean five hundred fifty-nine
thousand eight hundred (559,800) gross square feet;

 

(b) “Base Amount” shall mean One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00).

 

(c) “Excluded Premises” shall mean the Proposed Excluded Premises set forth in
the Letter Agreement;

 

(d) “Initial Improvements” shall mean all of the Improvements constituting the
Project to be developed, designed, constructed, planted or installed pursuant to
the Project Development Rider, including, without limitation, Buildings
containing approximately five hundred fifty-nine thousand eight hundred
(559,800) gross square feet;

 

(e) “Initial Investment Amount” shall mean Forty-Seven Million and 00/100
Dollars ($47,000,000.00);

 

(f) “Projected Building Density” shall mean approximately five hundred
fifty-nine thousand eight hundred (559,800) gross square feet of Building Area;

 

(g) “Premises” except as otherwise specifically provided in this Modification,
the Second Amendment or the Letter Agreement, all references to the Premises
shall be deemed to apply to the Retained Premises only; and

 

(h) “Retained Premises” shall be deemed to be as shown on Exhibit A attached
hereto.

 

2. RENT MODIFICATION

 

Notwithstanding anything to the Contrary in the Lease, as of the Premises
Reduction Date, Article 9 of the Original Lease shall be deemed deleted in its
entirety, and Section 4.1 of the Original Lease (as amended by Section 1(c)(i)
of the Second Amendment) shall be deemed deleted and replaced with the
following:

 

“(a) During the period commencing on the Premises Reduction Date and continuing
thereafter until the Expiration Date, Lessee shall pay Lessor annual base rent
of Four Million Seven Hundred Ninety-One Thousand Nine Hundred Sixty-Seven and
31/100 Dollars ($4,791,967.31), adjusted in the manner provided in Section
4.1(b) and (c) below (“Annual Base Rent”). Lessee shall pay Annual Base Rent in
advance in equal monthly installments commencing on the Premises Reduction Date
(representing initial monthly

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payments of $399,330.61); provided, however, that Annual Base Rent for any
partial month during the period between the Premises Reduction Date and the
Expiration Date shall be prorated on the basis of a thirty (30) day month.

 

(b) Notwithstanding anything to the contrary set forth herein:

 

(1) Lessor acknowledges that Lessee has prepaid all Annual Base Rent owing for
the period from October 1, 2002 through December 31, 2003 and Lessee shall have
no further obligation for Annual Base Rent due hereunder for such period.

 

(2) During the period from January 1, 2004 through June 30, 2004, Lessee shall
only be obligated to pay on a current basis one-half of the monthly Annual Base
Rent specified pursuant to Section 4.1(a) above (representing a monthly payment
of $199,665.30, subject to adjustment in the manner provided in Section 4.1(c)
below), and during the period from July 1, 2004 through December 31, 2004 Lessee
shall only be obligated to pay on a current basis three-quarters of the monthly
Annual Base Rent specified pursuant to Section 4.1(a) above (representing a
monthly payment of $299,497.96, subject to adjustment in the manner provided in
Section 4.1(c) below). Any portion of the Annual Base Rent that is not paid on a
current basis pursuant to the provisions of this Section 2.(b)(2) shall be
deferred, shall be referred to herein as “Deferred Annual Base Rent” and shall
be paid as provided in Sections 2.(b)(3) and (4) below.

 

(3) For each quarter of 2004 (e.g. January-March (“Q1”), April-June (“Q2”),
July-September (“Q3”) and October-December (“Q4”)), Lessee shall pay to Lessor
within thirty (30) days after the end of such quarter an additional sum (the
“Cash Flow Reimbursement”) equal to the lesser of (x) the cumulative accrued but
unpaid amount of Deferred Annual Base Rent, and (y) an amount equal to 15% of
Lessee’s Aggregate Excess Cash, as defined below, for the applicable quarter.
The Cash Flow Reimbursement shall be considered part of the Annual Base Rent for
the purposes of this Lease. Aggregate Excess Cash for each applicable quarter
shall mean the aggregate amount of “Cash” and “Cash Equivalents” in excess of
$20,000,000 as set forth in the certified, consolidated financial statements of
Lessee and its “Restricted Subsidiaries,” as defined in the Credit Agreement
described below, that Lessee is required to provide under the Credit Agreement.
“Credit Agreement: shall mean that certain Amended and Restated Credit and
Guaranty Agreement dated as of September 30, 2001, between Lessee and
                    , as further amended on or about the date of the
Recapitalization (as defined below).

 

(4) Notwithstanding anything to the contrary in this subparagraph (b), each
monthly payment of the Annual Base Rent beginning with the monthly payment of
Annual Base Rent due on October 21, 2005 through the monthly payment due on June
20, 2015 shall be increased by the quotient obtained by dividing the unpaid
Deferred Annual Base Rent as of December 31, 2004 by one hundred and sixteen
(116).

 

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(c) Annual Base Rent shall be adjusted on the third (3rd) anniversary of the
Premises Reduction Date and every five (5) years thereafter during the Term
(each, an “Adjustment Date”), by multiplying the then-current Annual Base Rent
by the Annual Base Rent Adjustment Percentage. For example, if the then-current
Annual Base Rent were Four Million Seven Hundred Ninety-One Thousand Nine
Hundred Sixty-Seven and 31/100 Dollars ($4,791,967.31) and the Annual Base Rent
Adjustment Percentage were one hundred twelve and one-half percent (112.5%), the
new Annual Base Rent would be Five Million Three Hundred Ninety Thousand Nine
Hundred Sixty-Three and 22/100 Dollars ($5,390,963.22). For purposes of this
Section 4.1(b), the following terms shall have the following meanings:

 

(i) The “Annual Base Rent Adjustment Percentage” shall be the sum of one hundred
percent (100%) plus the increase in the Ending Index over the Beginning Index,
expressed as a percentage; provided, however, that in no event shall the
cumulative increase on any Adjustment Date in the Annual Base Rent payable
hereunder be less than two percent (2%) per annum, compounded on an annual
basis, or exceed three and one-half percent (3.5%) per annum, compounded on an
annual basis. Lessee expressly understands and agrees that the Annual Base Rent
payable hereunder shall not be subject to reduction if on any Adjustment Date
(including, without limitation, any Adjustment Date occurring during a Renewal
Term) the Ending Index is lower than the Beginning Index.

 

(ii) The “Ending Index” shall be the CPI for the second calendar month preceding
the Adjustment Date. For example, if the Adjustment Date were October 1, 2010,
the Ending Index would be the CPI for August, 2010.

 

(iii) The “Beginning Index” shall be the same as the Ending Index used to
calculate the previous adjustment (for example, if the Adjustment Date were
October 1, 2010, the Beginning Index would be the CPI for August, 2005); except
that, for purposes of calculating the first adjustment to the Annual Base Rent,
the Beginning Index shall be the CPI for the month of April, 2000.”

 

3. IMPOSITIONS AND OTHER COSTS

 

Article 5 of the Lease and Subparagraph 1(c)(i) of the Second Amendment are
hereby amended such that Lessee shall continue to pay all Impositions and other
amounts to be paid by Lessee under the Lease with respect to the Retained
Premises; however, regardless of whether Impositions are imposed upon the
Original Premises as a whole, Lessee shall pay or fund when due the greater of:
(i) fifty (50%) percent of the Impositions allocable to the Original Premises;
or (ii) the portion of such Impositions attributable to the Retained Premises
(if ascertainable). Lessee expressly acknowledges and agrees that Impositions
include the City of San Jose Community Facilities District #6 (Great Oaks-Route
85) Special Tax Bonds.

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4. OTHER MODIFICATIONS

 

(a) Clause (ii)(C) in the definition of “Material Default” in Section 1 is
hereby deleted.

 

(b) Section 7.1(d) of the Lease is hereby deleted in its entirety along with the
corresponding references to said Section 7.1(d) or the defined term Minimum
Initial Improvements in any other section of the Lease. Lessee shall have no
obligation to build any Improvements on the Premises.

 

(c) Section 7.2(a) of the Lease is hereby deleted and replaced with the
following: “The Project shall be comprised of one or more buildings containing
approximately five hundred fifty-nine thousand eight hundred (559,800) gross
square feet.”

 

(d) Notwithstanding any contrary provision in Section 7.3(b) of the Lease, from
and after the Premises Reduction Date, Lessee shall have no obligation to
perform any of the obligations that may exist under the Purchase Agreement as
they apply to the Excluded Premises, except that Lessee shall continue to have
the obligation, if any, (whether or not such obligations involve or relate to
the Excluded Premises) to comply with the following provisions of the Purchase
Agreement, and Lessor shall have no responsibility therefor: (i) Article 9; (ii)
Section 6.6; (iii) Section 6.8; (iv) subsection (2) of Section 6.9; and (v)
subsection (d) of Section 6.2. Notwithstanding the foregoing, with respect to
subsection 6.2(d) of the Purchase Agreement: (i) in the event that any of the
costs, expenses, liabilities or obligations which are the responsibility of the
Buyer under such subsection arise solely from the development or improvement of
the Excluded Premises, and Lessee derives no benefit from such development or
improvement, Lessor shall bear sole responsibility for compliance with
subsection 6.2(d) in connection with such costs, expenses, liabilities or
obligations; and (ii) to the extent that the costs, expenses, liabilities or
obligations of Buyer under such subsection arise as a result of development or
improvements undertaken by Lessor or Lessee pursuant to a cost-sharing
arrangement set forth in the Related Agreements, Lessor and Lessee shall
allocate such costs, expenses, liabilities and obligations as set forth in in
the Related Agreements (and neither party shall be entitled to waive
responsibility therefor as a result of this subparagraph 4(d)).

 

(e) Section 14.1(d) of the Lease is hereby deleted in its entirety.

 

(f) Section 22.(a) of the Lease is hereby deleted in its entirety along with the
definition of “Available Cash” in Section 1 of the Lease and all corresponding
references to such sections or terms elsewhere in the Lease.

 

5. REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Lessee hereby represents, warrants and covenants to Lessor as follows:

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(a) Lessee is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly qualified to
transact business in the State of California.

 

(b) Except as described in Section 7(b) below, Lessee has taken all necessary
action to authorize the execution, delivery and performance of this
Modification. This Modification constitutes the legal, valid and binding
obligation of Lessee.

 

(c) Lessee has the right, power, legal capacity and authority to enter into and
perform its obligations under this Modification, and, except as provided in
Section 7(b) below, no approval or consent of any Person is required in
connection with Lessee’s execution and performance of this Modification that has
not been obtained. The execution and performance of this Modification will not
result in or constitute any default or event that would be, or with notice or
lapse of time or both would be, a default, breach or violation of the
organizational instruments governing Lessee or any agreement or any deed
restriction or order or decree of any court or other governmental authority to
which Lessee is a party or to which it is subject.

 

(d) Lessee is the sole owner and holder of the leasehold estate and leasehold
interest created by the Lease, and Lessee has not made or agreed to make any
assignment, sublease, transfer, conveyance, encumbrance, or other disposition of
the Lease, Lessee’s leasehold estate or any other right, title or interest under
or arising by virtue of the Lease.

 

(e) Lessee has not (i) made a general assignment for the benefit of creditors,
(ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by its creditors, (iii) suffered the appointment of a
receiver to take possession of all or substantially all of its assets, (iv)
suffered the attachment or other judicial seizure of all or substantially all of
its assets, (v) admitted in writing its inability to pay its debts as they
become due, or (vi) made an offer of settlement, extension or composition to its
creditors generally (each, a “Bankruptcy Event”).

 

(f) At the time of the execution of this Agreement, Lessee is generally paying
its debts as they become due, and the aggregate value of Lessee’s assets at fair
value exceeds the aggregate value of Lessee’s liabilities.

 

Lessee shall take all actions necessary to ensure that each of the
representations, warranties and covenants contained in this Paragraph 5 remain
true and correct in all material respects at all times during the period between
the date hereof and the date on which the conditions described in Section 7
below have been satisfied.

 

6. BROKERS

 

Lessor and Lessee each represents and warrants to the other that neither it nor
its officers or agents nor anyone acting on its behalf has dealt with any real
estate broker in the negotiating or making of this Modification, and each party
agrees to indemnify and

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hold harmless the other from any claim or claims, and costs and expenses,
including attorneys’ fees, incurred by the indemnified party in conjunction with
any such claim or claims of any other broker or brokers to a commission in
connection with this Modification as a result of the actions of the indemnifying
party.

 

7. EFFECTIVENESS OF THIS AMENDMENT

 

The effectiveness of this Amendment is expressly conditioned upon the following:

 

(a) Completion and closing of the acquisition and financing transactions
described in Lessee’s proxy statement dated December 10, 2002 (the
“Recapitalization”) on or before March 31, 2003 (the “Outside Recapitalization
Date”). In connection with the requirements under the Lease for approval by
Lessor of certain Transfers or Changes of Board Control, Lessor specifically
approves the transactions contemplated by the Recapitalization.

 

(b) The approval on or before the date of the Recapitalization (the “Outside
Lender Approval Date”) of this Modification by Lessee’s senior lenders. Lessee
agrees to use its best efforts to obtain such approval, and to send written
notice of same to Lessor immediately following receipt thereof by Lessee.

 

If, for any reason whatsoever, either (i) the Recapitalization does not close by
the Outside Recapitalization Date, (ii) Lessee’s senior lenders do not approve
this Modification by the Outside Lender Approval Date, or (iii) Lessee has a
Bankruptcy Event prior to the completion of the Recapitalization, then this
Amendment shall be deemed null and void ab initio and the Premises Reduction
Date shall be deemed not to have occurred.

 

8. MISCELLANEOUS

 

A. As amended hereby, the Lease is hereby ratified and confirmed in all respects
and each party acknowledges that it does not know of a default thereunder by
either party as of December __, 2002. In particular, Lessor and Lessee reaffirm
their intention to prepare and execute the Related Agreements, and to make such
further mutually acceptable reasonable changes to the Lease as necessary to
implement and accomplish the intent of this Modification and the Second
Amendment. Lessor and Lessee acknowledge and agree that from and after the date
hereof, Lessee shall have no rights or obligations under the Lease with respect
to the Excluded Premises, except for: (i) any obligations that, under the terms
of the Lease, would survive the Termination Date; (ii) Lessee’s obligations
under the Second Amendment to approve, execute (if necessary) and be bound by
the Related Agreements; and (iii) any other obligations of Lessee with respect
to the Exclusion Conditions. In the event of any inconsistencies between the
terms of this Modification and the Lease, the terms of this Modification shall
prevail. This Modification shall bind and inure to the benefit of Lessor and
Lessee and their respective legal representatives and successors and assigns

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B. This Modification may be executed in counterparts each of which counterparts
when taken together shall constitute one and the same agreement.

 

C. Except as set forth in this Modification, all terms and conditions of the
Lease shall remain in full force and effect.

 

D. This Modification, with exhibits, is a fully-integrated agreement which,
together with the Lease, contains all of the parties’ representations,
warranties, agreements and understandings with respect to the subject matter
hereof.

 

IN WITNESS WHEREOF, Lessor and Lessee have executed this Modification as of the
date first above written.

 

LESSOR:

 

iSTAR SAN JOSE, LLC,

a Delaware limited liability company

By:

 

TriNet Corporate Realty Trust, Inc.,

a Maryland corporation,

Its: Sole Member

   

By:

 

/s/ JAY SUGARMAN

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Name:

 

Jay Sugarman

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Title:

 

 

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LESSEE:

 

EQUINIX, INC.,

a Delaware corporation

By:

 

/s/ PHILIP J. KOEN

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Name:

 

Philip J. Koen

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Title:

 

President and COO

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By:

 

 

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Name:

 

 

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Title:

 

 

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Exhibit A

 

Premises

[to be attached]

 

A-1