x	Preliminary Proxy Statement

¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨	Definitive Proxy Statement

¨	Definitive Additional Materials

¨	Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12

¨	No Fee required.

x	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:

(2)

Aggregate number of securities to which transaction applies:

(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):

(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:

(5)

Total fee paid:

(e)

Calculated as $92.00 per $1,000,000 of the proposed maximum aggregate value of the transaction.

¨

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:

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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.

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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:

, 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.

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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 19.

Q:

What are the material terms of the combination?

A:

In the 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.

Q:

What are the material terms of the convertible secured notes that will be issued in the financing?

A:

Each convertible secured note issued to STT Communications will be convertible into shares of our Series A preferred stock or non-voting shares of 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 will be paid in the form of additional convertible secured notes. All of the convertible secured notes will mature in November 2007.

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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 our remaining assets.

Q:

What are the terms of the senior note exchange?

A:

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. 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 will make an offer to exchange cash and shares of our common stock for all of our outstanding senior notes. For each $1,000 in principal amount of senior notes exchanged, a holder of our senior notes will receive cash and shares of our common stock based on the following schedule of principal amounts of senior notes exchanged:

*

The number of shares issued per $1,000 in principal amount of senior notes is dependent on the principal amount of senior notes exchanged within each range.

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Q:

What will be the relative ownership among our existing stockholders, the holders of senior notes who exchange their senior notes, STT Communications and the former stockholders of Pihana following the closing?

A:

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 closing based on closing conditions in the transaction documents. See “The Combination” beginning on page 48.

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*

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 “Goverance of the Combined Company” beginning on page 78.

***

This assumes $124.9 million of our senior notes are exchanged.

Q:

How will the combined company be governed?

A:

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.

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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.

Q:

Who will be the officers of the combined company?

A:

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.

Q:

Are there risks I should consider in deciding whether to vote for the issuance of common stock and preferred stock in the combination, the financing and the senior note exchange?

A:

Yes. 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 20.

Q:

What votes are required to approve the proposals?

A:

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.

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

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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 any 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 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:

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•

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.

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*

The number of shares issued per $1,000 in principal amount of senior notes is dependent on the principal amount of senior notes exchanged within each range.

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•

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 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.

•

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.

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Increase in Authorized Shares.    We need to increase the number of authorized shares of our common stock and preferred stock to allow for the issuance of shares of stock in connection with the combination, the financing and the senior note exchange.

•

The Reverse Stock Split.    In order to maintain our listing on The Nasdaq National Market our common stock must not close below $1.00 for 30 consecutive trading days. For the last several months our common stock has traded substantially below $1.00. To bring the trading price of our common stock back above $1.00 and into compliance with the rules of The Nasdaq National Market, 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 the percentage of our outstanding stock owned by each stockholder.

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(1)

Adjusted EBITDA consists of net loss excluding interest, income taxes, depreciation and amortization of capital assets, amortization of deferred stock-based compensation and restructuring charges. Adjusted EBITDA is presented to enhance an understanding of our operating results, it is not intended to represent cash flow or results of operation in accordance with generally accepted accounting principles for the periods indicated and may be calculated differently than Adjusted EBITDA for other companies. Adjusted EBITDA is not a measure determined under generally accepted accounting principles nor is it a measure of liquidity. The following represents how we calculated Adjusted EBITDA.

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(1)

Includes non-recurring charge of $77.0 million for the impairment of long-lived assets in the six months ended June 30, 2002.

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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 historical share data by the pro forma exchange ratio for Pihana and i-STT, which is 0.6388 and 1.7343, respectively.

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•

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.

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•

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.

•

changes in general economic conditions and specific market conditions in the telecommunications and Internet industries;

•

conditions related to international operations;

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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;

•

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.

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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.

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costs of customizing IBX hubs for foreign countries;

•

protectionist laws and business practices favoring local competition;

•

greater difficulty or delay in accounts receivable collection;

•

difficulties in staffing and managing foreign operations;

•

political and economic instability;

•

ability to obtain, transfer, or maintain licenses required by governmental entities with respect to the combined business; and

•

compliance with governmental regulation with which we have little experience.

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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 $10.7 million of other outstanding debt facilities and capital lease obligations.

•

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.

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general economic and capital markets conditions generally, and in particular the non-investment grade debt market;

•

conditions in the Internet infrastructure market;

•

credit availability from banks or other lenders;

•

investor confidence in the telecommunications industry generally and our company specifically;

•

the success of our IBX hubs; and

•

provisions of tax and securities laws that are conducive to raising capital.

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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.

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human error;

•

physical or electronic security breaches;

•

fire, earthquake, flood and other natural disasters;

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water damage;

•

power loss;

•

sabotage and vandalism; and

•

failure of business partners who provide the combined company’s resale products.

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“Summary”;

•

“Risk Factors”;

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“The Combination”;

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“The Financing”;

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“The Senior Note Exchange”;

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“Unaudited Pro Forma Combined Consolidated Condensed Financial Statements”;

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations of Equinix”;

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“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.”

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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.

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•

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.

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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. 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.

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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.

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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 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.”

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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.

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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;

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the challenges of integrating the management teams, cultures, and organizations of the three companies;

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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.

•

reviewed the combination agreement and related documents;

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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

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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.

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historical trading prices and trading volumes for our common stock during the 12-month period ended September 27, 2002;

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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.

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*

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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*

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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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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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 $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	%

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*

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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•

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;

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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;

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compliance with laws related to taxes;

•

title to property and absence of liens and encumbrances;

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no owned real property;

•

transactions with their respective affiliates;

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insurance;

•

restrictions on certain business activities;

•

broker’s fees;

•

state takeover statutes;

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customers and suppliers;

•

the validity of current accounts receivable;

•

no powers of attorney;

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suspension of negotiation of acquisitions; and

•

no misstatements.

•

bank accounts; and

•

customer warranties.

•

stockholder votes required to approve the transactions.

•

inter-company obligations.

•

the accuracy and completeness of documents and reports that we filed with the SEC;

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corporate books and records;

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the absence of operations of Eagle Jaguar Acquisition Corp. and Eagle Panther Acquisition Corp.;

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the valid issuance of the shares of common stock and preferred stock; and

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our obligations and our subsidiaries’ obligations in Europe.

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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.

•

amend or change its certificate of incorporation or bylaws;

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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;

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merge with or acquire the stock or assets of any corporation, partnership, or other business organization;

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initiate or settle any legal proceeding;

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incur any debt, issue any debt securities or otherwise become responsible for the obligations of any person, or make any loans or advances;

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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;

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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;

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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;

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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;

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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;

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make any bonus or severance payments to any officers or employees other than pursuant to Pihana employee benefit plans;

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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;

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grant any retention bonuses to any employee payable after December 31, 2002; or

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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.

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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;

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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;

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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 i-STT as a beneficiary to be terminated without notice to Equinix;

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take any action outside the ordinary course of business that would result in a material change to i-STT’s working capital; or

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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.

•

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;

•

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

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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.

•

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;

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agree to endorse a competing transaction; or

•

authorize or permit any representative to take any such action.

•

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;

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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

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any liquidation, dissolution, recapitalization or other significant corporate reorganization of our company, Pihana or i-STT.

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reasonably concluded after consultation with its financial advisor and outside legal counsel that the proposal or offer constitutes a superior proposal, as defined below;

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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;

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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

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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.

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Provide to the other parties and their employees, officers, directors and other representatives, access to its books and records;

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Comply with respective obligations under confidentiality agreements between the parties;

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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

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Take all actions reasonably necessary to comply with legal requirements and obtain all consents and approvals necessary to complete the combination.

•

the approval of the combination agreement by the affirmative vote of (a) Pihana’s stockholders and (b) our stockholders;

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no governmental entity or court will have acted to prohibit the merger, stock purchase or combination;

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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;

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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;

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the following will be set to occur simultaneous with the closing: (a) the combination, (b) the senior note exchange, (c) execution of an amendment to our credit facility, (d) 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;

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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.

•

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;

•

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;

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Pihana will have provided written confirmation of termination of its office lease in San Francisco;

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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;

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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;

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Pihana will provide us with a properly executed Foreign Investment in Real Property Tax Act notification letter;

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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;

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Pihana will have received resignations from each of its current directors;

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Pihana’s cash balance will equal or exceed the applicable amount set in the combination agreement;

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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 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, and any amount that may be deemed a parachute payment;

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Pihana will have divested itself of its Korean operations;

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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, 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;

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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.

•

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;

•

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;

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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%;

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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;

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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.

•

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;

•

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;

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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, 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.

•

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.

•

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 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 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 to occur on or before January 31, 2003;

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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 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.

•

(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

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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.

•

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.

•

any inaccuracy or breach of any representation or warranty made by i-STT in the combination agreement;

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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.

•

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.

•

extend the time for the performance of any obligation or other act of any other party;

•

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;

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14% Series A-1 convertible secured notes due November 1, 2007

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10% Series A-2 convertible secured notes due November 1, 2007

•

Warrants to purchase shares of our preferred stock

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Warrants to purchase shares of our common stock

•

Warrants to purchase shares of our common stock upon a change of control

•

Warrants to purchase shares of our common stock upon defaults under our credit facility

•

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

•

The combination must close concurrently with the issuance and sale of the securities under the securities purchase agreement

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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.

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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.

•

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.

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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.

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The number of shares issued per $1,000 in principal amount of senior notes is dependent on the principal amount of senior notes exchanged within each range.

•

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.

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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.

•

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.

•

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.

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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.

•

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.

•

STT Communications ceases to own at least 100 shares of the Series A preferred stock and at least 10% of our common stock, on a fully-diluted basis;

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STT Communications makes a tender offer for all our outstanding shares, and such offer meets certain financing and other conditions and is accepted by holders of a majority of our then outstanding capital stock (other than STT Communications);

•

We commence a bankruptcy or similar proceeding, or one is commenced against us;

•

A third party acquires, or signs a letter of intent to acquire, 15% or more of our voting stock;

•

We sell, or agree to sell, substantially all of our assets;

•

A third party (other than STT Communications) commences a fully-financed tender offer for our shares;

•

We breach certain material provisions of the combination agreement, the securities purchase agreement, or ancillary documents; or

•

The cash trigger warrants are exercised, in whole or in part.

•

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 HSR Act with respect to a conversion that would cause it to hold voting stock valued in excess of $50.0 million.

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the market price per new share of our common stock after the reverse stock split will rise in proportion to the reduction in the number of old shares of our common stock outstanding before the reverse stock split;

•

the reverse stock split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks; or

•

the reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers.

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each ten shares of our common stock owned by a stockholder prior to the reverse stock split would be combined into one (1) share of common stock after the reverse stock split;

•

based on the number of shares of common stock outstanding on September 30, 2002, the number of shares of our common stock issued and outstanding will be reduced from approximately 98.9 million shares to approximately 9.9 million shares after the reverse stock split; and

•

all outstanding but unexercised options and warrants entitling the holders thereof to purchase shares of our common stock will enable each such holder to purchase, upon exercise of his or her options or warrants one-tenth of the number of shares of our common stock (rounded down to the nearest whole share) that such holder would have been able to purchase upon exercise of his or her options or warrants immediately preceding the reverse stock split at an exercise price (rounded up to the nearest penny) equal to ten times the exercise price specified before the reverse stock split, resulting in approximately the same aggregate exercise price being required to be paid upon exercise thereof as immediately preceding the reverse stock split.

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Bandwidth providers (telecommunications carriers) and internet service providers, or ISPs;

•

Enterprises, content providers and e-commerce companies supplying information, education or entertainment content and conducting the sale of goods and services; and

•

Site management and hosting companies that integrate and manage a customer’s end-to-end web presence and performance.

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Internet data centers operated by established communications carriers such as AT&T, Level 3, and Qwest.    Unlike the major network providers, which constructed data centers primarily to help sell bandwidth, we have aggregated multiple networks in one location, providing superior diversity, pricing and performance. Carrier data centers only provide one choice of carriers and require capacity minimums as part of their pricing structures. Locating in our IBX hubs provides access to all the top tier networks and allows customers to negotiate the best prices with a number of carriers resulting in better economics and redundancy.

•

Network access points (“NAPs”) such as Palo Alto Internet Exchange and carrier operated NAPs.     NAPs, generally operated by carriers, are typically older facilities and lack the incentive to upgrade the infrastructure or technologies. Due to their small size and lack of geographic diversity, the NAPs are limited to basic traffic exchange services and are unable to expand to colocation services, content peering or enterprise grade network services. In contrast, we provide state-of-the-art, secure facilities and geographic diversity with round the clock support and a full range of network and enterprise service offerings.

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Vertically integrated web site hosting, colocation and ISP companies such as AboveNet/MFN, Digex/WorldCom and Exodus/Cable&Wireless.    Most managed service providers require that customers purchase their entire network and managed services directly from them. We are a network and service provider aggregator and because we do not offer web hosting services ourselves, we allow customers the ability to contract directly with the networks and web hosting partner best for their business. By locating in an IBX center, hosting companies add more value to our business proposition—by bringing in more partners and customers and thus creating a network effect.

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We will be granted a full waiver of previous covenant breaches and will be granted consent to use a minimum of $15.0 million cash to retire our senior notes.

•

Future revenue and EBITDA covenants will be eliminated and the remaining covenants and ratios will be reset consistent with the future performance of the combined company for the remaining term of the loan.

•

We will permanently repay $7.5 million of the currently outstanding $100.0 million.

•

The amortization schedule for our credit facility will be amended such that the minimum amortization due in 2002-2004 will be significantly reduced and some amortization will be extended to 2006.

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Revenue recognition and allowance for doubtful accounts;

•

Stock-based compensation

•

Restructuring charges;

•

Accounting for income taxes;

•

Contingent liabilities; and

•

Accounting for property and equipment.

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We will be granted a full waiver of previous covenant breaches and will be granted consent to use a minimum of $15.0 million of cash to retire our senior notes.

•

Future revenue and EBITDA covenants will be eliminated and the remaining covenants and ratios will be reset consistent with future performance of the combined company for the remaining term of the loan.

•

We will permanently repay $7.5 million of the currently outstanding $100.0 million balance.

•

The amortization schedule for the credit facility will be amended such that the minimum amortization due in 2002-2004 will be significantly reduced and some amortization will be extended to 2006.

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the continuing challenges seen in the managed service sector and the impact this has had on a number of targeted customers, such as Global Crossing, MFN, Worldcom and Level 3;

•

the impact of the current economic outlook on management’s forecasted results for these assets and the ability to achieve their original forecasted results;

•

the appointment of an investment banker in April 2002 to assist with the exploration of possible sale transactions for Pihana;

•

the status of discussions in progress with certain suitors with regard to the potential sale of assets to a third party; and

•

the expected resale value of Pihana’s fixed assets being significantly below their book value given current market conditions.

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•

made payments of approximately $810,000 on its capital lease obligations;

•

expended approximately $3.4 million on property and equipment;

•

increased its deposits with landlords by approximately $1.2 million;

•

reduced its accounts payable and accrued liabilities by approximately $2.7 million; and

•

recognized a net loss of approximately $103.7 million, including a non-recurring, non-cash charge of $77.0 million due to the impairment of long-lived assets.

•

expended approximately $69.5 million on property and equipment;

•

reduced its accounts payable by approximately $2.3 million;

•

recorded net proceeds of approximately $2.5 million from the sale of additional shares of its Series B preferred stock; and

•

recognized a net loss of approximately $19.4 million.

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recorded net proceeds of approximately $2.5 million from the sale of additional shares of its Series B preferred stock;

•

expended approximately $88.8 million on leasehold interests, computer equipment and software primarily for the build-out of Pihana’s data centers in Hawaii, Los Angeles, Singapore, Tokyo, Seoul, Hong Kong and Sydney; and

•

recognized a net loss of approximately $43.9 million.

•

recorded net proceeds of $9.0 million from the sale of shares of its Series A preferred stock;

•

recorded net proceeds of approximately $220.3 million from the sale of shares of its Series B preferred stock (including the approximately $15.2 million of which were issued upon cancellation of bridge notes);

•

expended approximately $23.7 million on leasehold interests, computer equipment and software primarily for the build-out of Pihana’s data centers in Honolulu, Hawaii, Los Angeles, California, Singapore, Tokyo, Japan, Seoul, South Korea, Hong Kong and Sydney, Australia; and

•

recognized a net loss of approximately $15.9 million.

•

recorded net proceeds of $3.0 million from the sale of shares of its Series A preferred stock;

•

expended approximately $914,000 on leasehold interests, computer equipment and software primarily for the build-out of Pihana’s data centers in Honolulu, Hawaii, Los Angeles, California, Singapore, Hong Kong, Tokyo, Japan, Seoul, South Korea, and Sydney, Australia; and

•

recognized a net loss of approximately $989,000.

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three directors for so long as the holders of Series A preferred stock collectively beneficially own at least 30% of our outstanding voting stock;

•

two directors for so long as the holders of Series A preferred stock collectively beneficially own at least 15% of our outstanding voting stock;

•

one director for so long as the holders of Series A preferred stock collectively beneficially own at least 100 shares of our outstanding voting stock; and

•

no directors at such time as the holders of Series A preferred stock collectively beneficially own less than 100 of our outstanding voting stock.

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STT Communications makes a fully financed tender offer for all of our outstanding stock and at least 50% of the outstanding shares not held by STT Communications are tendered;

•

we commence bankruptcy or reorganization proceedings;

•

a third party obtains a 15% interest in us;

•

we agree to sell a 15% or greater interest in us to a third party;

•

we sell all or substantially all of our assets, or enter into an agreement to sell all or substantially all of our assets;

•

a third party commences a bona fide, fully financed tender offer;

•

STT Communications’ nominees are not elected to our board of directors despite STT Communications voting in favor of such nominees;

•

we breach certain material agreements with STT Communications contained in the securities purchase agreement and combination agreement;

•

STT Communications’ interest in us falls below 10%; or

•

the cash trigger warrant is exercised.

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*

Less than 1%.

(1)

Includes 4,229,991 shares subject to options that are exercisable within 60 days of September 30, 2002.

(2)

Includes 118,499 shares subject to options that are exercisable within 60 days of September 30, 2002.

(3)

Includes 933,740 shares subject to options that are exercisable within 60 days of September 30, 2002. Also includes 15,000 shares held as custodian for children; Mr. Koen disclaims beneficial ownership of these shares.

(4)

Represents 8,535,000 shares of common stock held by Benchmark Capital Partners II, L.P., as nominee for Benchmark Capital Partners II, L.P., Benchmark Founders’ Fund II, L.P., Benchmark Founders’ Fund II-A, L.P. and Benchmark Members’ Fund II, L.P., and 118,523 shares of common stock held by Benchmark Capital Partners IV, L.P., as nominee for Benchmark Capital Partners, IV, L.P., Benchmark Founders’ Fund IV, L.P., Benchmark Founders’ Fund IV-A, L.P. and related individuals. Mr. Rachleff is a managing member of Benchmark Capital Management Co. II, LLC, the general partner of Benchmark

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Capital Partners, II, L.P., Benchmark Founders’ Fund II, L.P. Benchmark Founders’ Fund II-A, L.P. and Benchmark Members’ Fund II, L.P. Mr. Rachleff is also a managing member of Benchmark Capital Management Co., IV, LLC, the general partner of Benchmark Capital Partners, IV, L.P., Benchmark Founders’ Fund IV, L.P. and Benchmark Founders’ Fund IV-A, L.P. Mr. Rachleff disclaims beneficial ownership of these shares, except with respect to 3,984 shares of common stock and to the extent of his pecuniary interest in the Benchmark funds. In addition, includes 6,250 shares of common stock and 10,000 shares subject to options that are exercisable within 60 days of September 30, 2002. Mr. Rachleff’s address is the same as the address provided for Benchmark Capital.

(5)

Mr. Volpi is senior vice president of Cisco Systems, Inc., which beneficially holds 6,790,939 shares of common stock.

(6)

Includes 30,000 shares subject to options that are exercisable within 60 days of September 30, 2002.

(7)

Includes 672,143 shares subject to options that are exercisable within 60 days of September 30, 2002.

(8)

Includes 334,643 shares subject to options that are exercisable within 60 days of September 30, 2002.

(9)

Includes 8,535,000 shares of common stock held by Benchmark Capital Partners II, L.P., Benchmark Founders’ Fund II, L.P., Benchmark Founders’ Fund II-A, L.P. and Benchmark Members’ Fund II, L.P. and 132,625 shares of common stock held by Benchmark Capital Partners, IV, L.P., Benchmark Founders’ Fund IV, L.P., Benchmark Founders’ Fund IV-A, L.P. and related individuals.

(10)

Includes the shares described in Notes 1 through 9, plus shares held by or subject to options exercisable within 60 days of September 30, 2002 held by executive officers not named above.

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February

12, 2002, except for Note 12,

going

concern discussion in Note 1,

which

is as of June 12, 2002

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Term loan facility in the amount of $50,000,000. The outstanding term loan amount is required to be paid in quarterly installments beginning in March 2003 and ending in December 2005. The Company drew this down in January 2001.

•

Delayed draw term loan facility in the amount of $75,000,000. The Company was required to borrow the entire facility on or before December 20, 2001. The outstanding delayed draw term loan amount is required to be paid in quarterly installments beginning in March 2003 and ending in December 2005. The Company drew this down in March 2001.

•

Revolving credit facility in an amount up to $25,000,000. The outstanding revolving credit facility is required to be paid in full on or before December 15, 2005. The Company drew this down in June 2001.

•

Term loan facility, redesignated as tranche A, in the amount of $100,000,000, which represents the remaining $100,000,000 outstanding after repayment of the $50,000,000 in October 2001.

•

Term loan facility, redesignated as tranche B, in the amount of $25,000,000, of which $5,000,000 was immediately drawn with the remaining $20,000,000 available for future draw. The remaining $20,000,000 is only available for drawdown commencing September 30, 2002 and only if the Company remains in full compliance with all covenants as outlined in the Amended and Restated Senior Secured Credit Facility, and meets an additional EBITDA test. The ability to draw on the remaining $20,000,000 expires on December 31, 2002.

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The fair market value per share of common stock on the date immediately before the first day of the applicable offering period (which lasts 24 months); or

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The fair market value per share of common stock on the purchase date.

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The Company was granted a full waiver for the covenants that were not in compliance as of June 30, 2002. In addition, the amendment reset the minimum revenue and cash balance and maximum EBITDA loss covenants through September 30, 2002

•

The Company agreed to repay $5,000,000 of the then outstanding balance of $105,000,000 as of June 30, 2002, which was designated as a tranche B term loan. This amount was repaid in August 2002. In addition, the remaining $20,000,000 available for borrowing under the Amended and Restated Senior Secured Credit Facility, also designated as a tranche B term loan, was permanently eliminated. As a result, the First Amendment to the Amended and Restated Senior Secured Credit Facility reduces the credit facility to a $100,000,000 credit facility, which was designated a tranche A term loan, and which remains fully outstanding as of the date of this filing.

•

The Company must convert at least $100,000,000 of Senior Notes (see Note 4) into common stock or convertible debt on or before November 8, 2002 (the “Senior Note Conversion”). As of June 30, 2002, a total of $147,249,000 of Senior Note principal remains outstanding.

•

The Company will be granted a full waiver of previous covenant breaches and will be granted consent to use a certain amount of cash to retire its Senior Notes.

•

Future revenue and EBITDA covenants will be eliminated and the remaining covenants and ratios will be reset consistent with the performance of the combined Company for the remaining term of the loan.

•

The Company will permanently repay $7.5 million of the currently outstanding $100.0 million.

•

The amortization schedule for the Senior Credit Facility will be amended such that the minimum amortization due in 2002-2004 will be significantly reduced and some amortization will be extended to 2006.

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The number of shares issued per $1,000 in principal amount of senior notes is dependent on the principal amount of senior notes exchanged within each range. For instance, if $115.0 million of the senior notes are exchanged, approximately 513 shares of common stock will be issued per $1,000 in principal amount of senior notes. If $125.0 million of the senior notes are exchanged, approximately 472 shares of common stock will be issued per $1,000 in principal amount of senior notes. Amounts exchanged between $115.0 million and $125.0 million will result in a sliding scale of common shares issued of between 513 and 472 shares. The shares shown assume we issue $30.0 million of convertible secured notes and related warrants in the financing. The stock consideration received in the exchange will be calculated in terms of percentage of outstanding shares; accordingly, the share amounts set forth above are for illustrative purposes only.

Prior

to closing, we will commence an exchange offer for all of our outstanding senior notes, and the holders of the senior notes will have 20 business days to tender their senior notes to us in exchange for the consideration described above. See “The Senior Note Exchange” beginning on page 76.

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On September 13, 2001, i-STT Hong Kong commenced liquidation proceedings. i-STT Hong Kong and its subsidiaries were deconsolidated at that date.

27.

Summary of Differences between Singapore and United States of America Generally Accepted Accounting Principles

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the continuing challenges seen in the managed service sector and the impact this has had on a number of targeted customers, such as Global Crossing, MFN, Worldcom and Level 3;

•

the impact of the current economic outlook on management’s forecasted results for these assets and the ability to achieve their original forecasted results;

•

the appointment of an investment banker in April 2002 to assist with the exploration of possible sale transactions for the Company;

•

the status of discussions in progress at that time with certain suitors with regard to the potential sale of the assets to a third party; and

•

the expected resale value of the Company’s fixed assets being significantly below their book value given current market conditions.

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Corporate launch fee of $1 million, payable in six monthly installments commencing March 2001; and

•

Additional minimum service fees of $1 million, payable by March 30, 2002 and $3 million, payable by March 30, 2003.

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The Company will be granted a full waiver of previous covenant breaches and will be granted consent to use a minimum of $15.0 million of cash to retire its Senior Notes.

•

Future revenue and EBITDA covenants will be eliminated and the remaining covenants and ratios will be reset consistent with the performance of the combined Company for the remaining term of the loan.

•

The Company will permanently repay $7.5 million of the amount currently outstanding ($105.0 million as of June 30, 2002; $100.0 million as of the date of this filing). In August 2002, the Company permanently repaid $5.0 million as part of the First Amendment to the Amended and Restated Senior Secured Credit Facility.

•

The amortization schedule for the Senior Secured Credit Facility will be amended such that the minimum amortization due in 2002-2004 will be significantly reduced and some amortization will be extended to 2006.

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The number of shares issued per $1,000 in principal amount of Senior Notes is dependent on the principal amount of Senior Notes exchanged within each range.

If $115.0 million of the Senior Notes are exchanged, approximately 513 shares of common stock will be issued per $1,000 in principal amount of Senior Notes.

If $125.0 million of the Senior Notes are exchanged, approximately 472 shares of common stock will be issued per $1,000 in principal amount of Senior Notes. Amounts exchanged between $115.0 million and less than $125.0 million will result in a sliding scale of common shares issued of between 513 and 472 shares. The share amounts shown assume we issue $30.0 million of Convertible Secured Notes and Convertible Secured Note Warrants in the financing.

The stock consideration received in the exchange will be calculated in terms of percentage of outstanding shares; accordingly, the share amounts shown above are for illustrative purposes only.

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(a)

Represents the following adjustments to cash and cash equivalents (in thousands):

(b)

Represents an adjustment for assets excluded from the acquisition of Pihana ($108,000) and i-STT ($154,000).

(c)

Represents an adjustment for assets excluded from the Pihana acquisition ($5,651,000) and the write-off of Pihana’s remaining property and equipment ($23,212,000) due to the negative goodwill created in the Pihana acquisition.

(d)

Represents a $1,096,000 fair value adjustment to i-STT’s existing intangible assets and the addition of the customer contract intangible asset of $4,200,000, the tradename intangible asset of $1,050,000 and goodwill of $15,751,000 created in the acquisition of i-STT.

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(e)

Represents the $2,935,000 write-off of debt issuance costs in conjunction with the retirement of Senior Notes, offset by the $1,000,000 of new debt issuance costs in conjunction with the further amendment of the Senior Secured Credit Facility.

(f)

Represents an adjustment for assets excluded in the Pihana acquisition.

(g)

Represents the following adjustments to accounts payable and accrued expenses (in thousands):

(h)

Represents the write-off of accrued but unpaid interest on Senior Notes being retired.

(i)

Represents the reclassification of the Senior Secured Credit Facility to non-current as a result of the proposed amendment, offset by the permanent repayments of and $5,000,000 in August 2002 and $7,500,000 in connection with this transaction.

(j)

Represents an adjustment for i) intercompany liabilities due to STT Communications and other related parties excluded in the i-STT acquisition ($19,677,000) and ii) the $618,000 write-off of i-STT’s deferred revenue as no legal performance obligations exist post-closing, including amounts deferred under Staff Accounting Bulletin 101 (“SAB 101”).

(k)

Represents the issuance of the Convertible Secured Notes offset by the amounts attributable to the Convertible Secured Note Warrants and the Beneficial Conversion Feature.

(l)

Represents the $124,950,000 retirement of Senior Notes, offset by the $7,060,000 write-off of unamortized Senior Note discount. No tax effects are provided due to the Company’s pre-transaction net operating loss carryforwards, which should be adequate to offset the tax liability on any cancellation of indebtedness income.

(m)

Represents the $527,000 write-off of Pihana’s deferred revenue as no legal performance obligations exist post-closing, including amounts deferred under SAB 101, and the $2,245,000 write-off of Pihana’s deferred rent as no legal performance obligations exist post-closing related to this liability. The Company will straightline rent expense for all leaseholds acquired in the combination commencing upon closing.

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(n)

Represents the following adjustments to stockholders’ equity (in thousands):

(1)

To eliminate the historical stockholders’ equity of Pihana.

(2)

To eliminate the historical shareholders’ equity of i-STT.

(3)

Represents the estimated value of the Company’s common stock to be issued in the acquisition of Pihana.

(4)

Represents the estimated one-time gain on acquisition of subsidiary attributed to the negative goodwill created in the Pihana acquisition.

(5)

Represents the estimated value of the Company’s common and preferred stock to be issued in the acquisition of i-STT.

(6)

Represents the value attributable to the Convertible Secured Note Warrants and the Beneficial Conversion Feature arising from the financing transaction.

(7)

Represents the estimated value of the Company’s common stock to be issued in conjunction with the exchange of additional Senior Notes and the resulting one-time gain on debt extinguishment.

(o)

Represents the reversal of revenues related to Pihana’s Korean subsidiary excluded from the Pihana acquisition.

(p)

Represents (i) the reversal of Pihana depreciation as its historical property and equipment was prescribed no value in the acquisition, (ii) the reversal of depreciation and operating expenses related to Pihana’s Korean subsidiary excluded from the Pihana acquisition and (iii) the reversal of rent expense associated with an excess Pihana leasehold that must be exited as a condition in the Combination Agreement.

(q)

Represents (i) the amortization of the i-STT customer contract intangible resulting from the proposed acquisition, over an estimated useful life of 24 months (ii) the amortization of the i-STT tradename intangible resulting from the proposed acquisition, over an estimated useful life of 12 months partially offset by (iii) the reversal of rent expense associated with Pihana’s excess sales office leaseholds and the savings resulting from the related reduction in workforce as a condition in the Combination Agreement.

(r)

Represents the reversal of rent expense associated with the excess Pihana headquarter leasehold and the savings resulting from the related reduction in workforce as a condition in the Combination Agreement.

(s)

Represents the reversal of interest income generated by cash held by Pihana’s Korean subsidiary excluded in the Pihana acquisition.

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(t)

Represents (i) the additional interest expense associated with the Convertible Secured Notes issued in the financing transaction, (ii) the reversal of interest expense associated with the retirement of Senior Notes under the Senior Note exchange transaction and (iii) the reversal of interest expense associated with the repayments of the Senior Secured Credit Facility as follows (in thousands):

(u)

Represents the reversal of other income and expense related to Pihana’s Korean subsidiary excluded in the Pihana acquisition.

(v)

Represents the reversal of the gain on debt extinguishments associated with the historical Senior Note debt exchanges during the six months ended June 30, 2002 as these unaudited pro forma financial statements assume that these retirements took place as of January 1, 2001.

(w)

Represents the reversal of Pihana’s $77,000,000 one-time impairment charge for long-lived assets as these assets would have been written-off in conjunction with closing due to the negative goodwill created in the Pihana acquisition.

(x)

Represents the shares of common stock associated with the combination and Senior Note exchange and the penny warrants associated with the STT Communication investment as described above as if they were outstanding as of January 1, 2001 as follows (in thousands):

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TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE COMBINATION AGREEMENT DATED AS OF OCTOBER 2, 2002, BETWEEN THE ISSUER, THE STOCKHOLDER AND THE OTHER PARTIES THERETO, AS SUCH AGREEMENT MAY BE AMENDED, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.

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shall deposit one or more certificates in the name of the Escrow Agent representing the Pihana Escrow Shares into an escrow account, which account is to be managed by the Escrow Agent (the “Escrow Account”) to serve as security for the Pihana Stockholders’ indemnity obligations hereunder. Any Pihana Escrow Shares in the Escrow Account are referred to herein as the “Escrow Fund.” In connection with such deposit of the Pihana Escrow Shares with the Escrow Agent and as of the Effective Time, each holder of Pihana Stock will be deemed to have received and deposited with the Escrow Agent each stockholder’s (other than holders of Dissenting Shares) pro rata interest in the Escrow Fund as determined as of Closing by reference to such stockholder’s ownership of shares of Pihana Stock (plus any additional shares as may be issued upon any stock split, stock dividend or recapitalization effected by Parent after the Effective Time with respect to shares constituting the Escrow Fund), without any act of the stockholders of Pihana (the “Pihana Stockholders”). Distributions of any Pihana Escrow Shares from the Escrow Account shall be governed by the terms and conditions of the Escrow Agreement. The adoption of this Agreement by Pihana Stockholders shall constitute approval of the Escrow Agreement and of all the arrangements relating thereto, including, without limitation, the placement of the Pihana Escrow Shares in escrow and the appointment of the Pihana Stockholders’ Representative.

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their right to appraisal of such shares of Pihana Stock under the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the applicable Parent Merger Shares, without any interest thereon, upon the surrender, in the manner provided in Section 2A.03 (including the provision for the Pihana Escrow Shares pursuant to Section 2A.03(b)), of the corresponding Pihana Share Certificate.

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Agent for deposit into the Escrow Account, calculated and allocated in accordance with the i-STT Consideration Adjustment Schedule, an aggregate number of i-STT Escrow Shares equal to the quotient obtained by dividing (i) i-STT Working Capital Deficiency by (ii) $1.53 within five days of such notice. In addition, if and to the extent that (i) the lesser of (a) the i-STT Working Capital Objective and (b) the i-STT Adjusted Calculation exceeds (ii) i-STT Working Capital as shown in the Final i-STT Certificate, (the “i-STT Working Capital Excess”), then Parent shall deliver written notice to STT Communications, the Pihana Stockholders’ Representative and the Transfer Agent specifying the amount of i-STT Working Capital Excess, and instructing the Transfer Agent (on behalf of Parent) and the Escrow Agent (on behalf of the Pihana Stockholders) to deliver an aggregate number of shares of Parent Common Stock to STT Communications equal to the quotient obtained by dividing (x) i-STT Working Capital Excess, by (y) $1.53, calculated (and allocated from Parent and the Pihana Stockholders) in accordance with the i-STT Consideration Adjustment Schedule within five days of such notice.

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SECTION

2C.02    Determination of Parent Working Capital and Parent Net Liabilities.

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Any Parent Working Capital Shortfall shall be reflected in the calculation of the Aggregate Merger Consideration deliverable pursuant to Section 2A.03 and the Aggregate Stock Purchase Consideration deliverable at Closing pursuant to Section 2B.01, and any Parent Working Capital Deficiency (which shall not duplicate any adjustments already accounted for as a result of a Parent Working Capital Shortfall) shall be given effect pursuant to the deliveries set forth in Section 2C.02(e).

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document Pihana Options. Except as disclosed on Section 3A.11(a) of the Pihana Disclosure Letter, there are no other employee benefit plans, programs, arrangements or agreements, whether formal or informal, whether in writing or not, to which Pihana or any Pihana Subsidiary is a party, with respect to which Pihana or any Pihana Subsidiary has any obligation or which are maintained, contributed to or sponsored by Pihana or any Pihana Subsidiary for the benefit of any current or former employee, officer or director of Pihana or any Pihana Subsidiary that provide a material level of benefits. Neither Pihana nor any Pihana Subsidiary has an express or implied commitment, whether legally enforceable or not, (x) to create, incur liability with respect to, or cause to exist, any other employee benefit plan, program or arrangement, (y) to enter into any contract or agreement to provide compensation or benefits to any individual, or (z) to modify, change or terminate any Pihana Plan in a way that would materially increase the cost of providing benefits under the Pihana Plan, other than with respect to a modification, change or termination required by ERISA, the Code or other applicable Law.

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expenses, and the expenses associated with terminating the plan), other than contractual rights held by employees pursuant to employment agreements and option agreements each of which affirms an at will employment relationship. Neither Pihana nor any affiliate has, prior to the Effective Time and in any material respect, violated in any material respect any of the health care continuation requirements of COBRA, the requirements of the Family Medical Leave Act of 1993, the requirements of the Health Insurance Portability and Accountability Act of 1996, the requirements of the Women’s Health and Cancer Rights Act of 1998, the requirements of the Newborns’ and Mothers’ Health Protection Act of 1996, or any amendment to each such act, or any similar provisions of state Law applicable to its employees.

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will, or would be reasonably be expected to, (i) result in a material breach or material violation of, or material default under, any Pihana Material Contract, (ii) give any entity the right to declare a default, seek damages or exercise any other remedy under any Pihana Material Contract, (iii) give any entity the right to accelerate the maturity or performance of any Pihana Material Contract or (iv) give any entity the right to cancel, terminate or modify any Pihana Material Contract.

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pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions, events or accounting methods employed prior to the Merger.

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that the ownership of securities representing no more than 1% of the outstanding voting power of any creditor, competitor, supplier manufacturer, agent, representative, distributor or customer, and which are listed on any national securities exchange or traded actively in the national over-the-counter market, shall not be deemed to be a “financial interest” as long as the person owning such securities has no other connection or relationship with such creditor, competitor, supplier, manufacturer, agent, representative, distributor or customer;

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acceleration of the time of payment, vesting or funding of any benefits, or (iii) affect in any material adverse respects any i-STT Plan’s current treatment under any Laws including any Tax or social contribution Law. Except as provided in Section 3B.11(c) of the i-STT Disclosure letter, no i-STT Plan provides, or reflects or represents any material liability to provide health, disability, or life insurance benefits to any person following termination of employment for any reason, except as may be required by applicable Law, and  i-STT is not obligated to provide to any employee (either individually or to employees as a group) health, disability, or life insurance benefits following termination of employment, except to the extent required by Law.

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authorizations and papers necessary to work in his place of work in accordance with applicable Law, except in cases of clause (iii), (v) or (vi), for actions or inactions that would not reasonably be expected, individually or in the aggregate, to have a i-STT Material Adverse Effect.

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this Agreement is the result of the exercise of outstanding Parent Options), and (ii) 23,123,998 shares of Parent Common Stock were reserved for future issuance pursuant to outstanding, unexercised options to purchase Parent Common Stock. As of the date of this Agreement, (i) no shares of Preferred Stock were issued and outstanding and no shares of Preferred Stock were issued and held in the treasury of the Parent, and (ii) 4,389,189 shares of Parent Common Stock were reserved for issuance pursuant to outstanding, unexercised warrants to purchase Parent Common Stock (each, a “Parent Warrant” and collectively, the “Parent Warrants”).

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remediation, removal or cleanup of Hazardous Materials and, to the knowledge of Parent, no investigation, litigation or other proceeding is pending or threatened in writing with respect thereto.

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disclosed, any confidential Pihana intellectual property, unless such Pihana intellectual property is subject to a confidentiality or non-disclosure covenant protecting against disclosure thereof;

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employees, directors and consultants in accordance with agreements providing for the repurchase of shares in connection with any termination of service by such party;

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of its directors, or officers, or establish, adopt, enter into or amend any material collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other Parent Plan (as defined in Section 6.04(b)), agreement, trust, fund, policy or arrangement for the benefit of any director or officer; provided, however, that the foregoing provisions of this subsection shall not apply to any amendments to employee benefit plans described in Section 3(3) of ERISA that may be required by law;

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preparation of the Proxy Statement. As promptly as practicable after the Proxy Statement shall have been cleared for mailing, Parent shall mail or cause to be mailed the Proxy Statement to its stockholders.

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directors, officers, employees, agents, properties, offices and other facilities of such Party and such Party’s subsidiaries and to the books and records thereof and (ii) furnish promptly such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such Party and such Party’s subsidiaries as the requesting Party or its Representatives may reasonably request.

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reasonably satisfactory to Parent, executed by the parties listed in Section 7.02(i) of the Pihana Disclosure Letter.

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to be mutually agreed upon by the Parties, in each case effective at the Effective Time, if and as contemplated by the strategic plan exchanged by the Parties on the date of this Agreement.

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$1.0 million or more, in each case beyond the grace period, if any, provided therefor or (B) breached or defaulted with respect to any other material term of one or more items of Indebtedness in the individual or aggregate principal amounts referred to in clause (A) above or any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness.

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be extended beyond March 31, 2003); provided, further however, that the right to terminate this Agreement under this Section 8.01(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Termination Date;

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Competing Transaction, Parent shall pay each of STT Communications and Pihana $1,300,000, less any Expenses previously paid to STT Communications or Pihana, as the case may be, pursuant to this Section 8.05(c).

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the Management Stockholders, the Series A Investors, the Series B Investors, the Other Stockholders and the Class B Common Holders (as such terms are defined therein).

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(ii) shall not include any portion of any Loss for which an adjustment is made in the i-STT Closing Balance Sheet, as finally adjusted.

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Parent Losses incurred by a Parent Indemnified Party seeking indemnification shall aggregate to more than $400,000, after which time Parent shall be liable to such Parent Indemnified Party in full for all indemnifiable Parent Losses (including the first $400,000) to such Parent Indemnified Party.

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release from all liability with respect to such suit, claim, action, or proceeding; (ii) unless there is no finding or admission of (A) any violation of Law by the Indemnified Party (or any affiliate thereof), (B) any liability on the part of the Indemnified Party (or any affiliate thereof) or (C) any violation of the rights of any person and no effect on any other claims of a similar nature that may be made by the same third party against the Indemnified Party (or any affiliate thereof); or (iii) which exceeds the then current Indemnity Stock Price of the Pihana Escrow Shares remaining in the Escrow Fund or the i-STT Escrow Shares, as applicable.

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decision relates to an i-STT Loss described in Section 9.03(a)(iv), STT Communications shall promptly remit to Parent the dollar amount specified in such written agreement or arbitration decision, as the case may be.

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any error of judgment, or any action taken, suffered or omitted to be taken under this Agreement or the Escrow Agreement, except in the case of losses arising primarily from his bad faith or willful misconduct. The Pihana Stockholders’ Representative may consult with legal counsel, independent public accountants and other experts selected by him or her. The Pihana Stockholders’ Representative shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Escrow Agreement. As to any matters not expressly provided for in this Agreement or the Escrow Agreement, the Pihana Stockholders’ Representative shall not exercise any discretion or take any action.

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