Employment Agreement - Exodus Communications Inc. and William M. Austin


[EXODUS LOGO]
Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, CA 95054-1838
408-346-2200


July 12, 2001

Mr. William M. Austin
1 Brompton Court
Houston, TX 77024


Dear Bill:

I am pleased to extend to you an offer as Executive Vice President, Finance and
Chief Financial Officer of Exodus Communications, Inc. (the "Company"). The
terms of your employment that we discussed on the phone are set forth in this
letter and Attachment A to this letter. You will also be eligible to participate
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in our health and dental insurance, 401K, employee stock purchase plan and other
employee benefits established by the Company.

As an employee of the Company, you will have access to certain Company
confidential information and you may, during the course of your employment,
development certain information or inventions, which will become the property of
the Company. You will need to sign the attached "Employee Invention Assignment
and Confidentiality Agreement" and "Procedures and Guidelines Governing
Securities Trades by Company Personnel" as conditions of your employment. We
wish to impress upon you that we do not wish you to bring any confidential or
proprietary material of any former employer or to violate any other obligation
to your former employers. Also, you represent that you are not subject to any
restrictions that prevent you from working for the Company.

Your employment is conditioned upon you passing our background investigation
and providing verification of your eligibility for employment in the U.S., which
meets the requirements of the U.S. Department of Justice.

We look forward to your becoming a part of the Exodus team. Please confirm your
acceptance of this offer at the earliest possible date, but in any event no
later than Wednesday, July 18, 2001. Also, please fax a copy of your signed
offer letter (both


Exodus Confidential Information



                                                                  William Austin
                                                                    Offer Letter
                                                                   July 12, 2001
                                                                          Page 2


[EXODUS LOGO]
Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, CA 95054-1838
408-346-2200


pages) and the two attachments to my attention at (408) 884-6400 (confidential
fax number). You should keep the originals for your records. This offer expires
at 5:00 Pacific time on July 18, 2001.

Your signature will acknowledge that you have read, understood and agreed to the
terms and conditions set forth in this letter and Attachment A.

Sincerely,

/s/ Grace de Latour
Grade de Latour
Executive Vice President, Human Resources

I HAVE READ AND I UNDERSTAND THE TERMS OF THE OFFER SET FORTH ABOVE AND IN
ATTACHMENT A. AS INDICATED BY MY SIGNATURE BELOW, I ACCEPT THE OFFER AS STATED
HEREIN. NO FURTHER COMMITMENTS WERE MADE TO ME AS A CONDITION OF EMPLOYMENT.

/s/ William M. Austin
-------------------------------
William M. Austin

Date:    7/15/01
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Exodus Confidential Information



                                  Attachment A
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Employee:               William M. Austin
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Title:                  Executive Vice President, Finance and Chief Financial
                        Officer of Exodus Communications, Inc. (the "Company"),
                        reporting to the Company's CEO.
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Primary                 Employee's primary working office shall initially be
Office:                 an office established by him in the Houston, Texas
                        area. Following the date on which Employee relocates his
                        residence to California, which shall be no later than
                        January 15, 2002, his primary working office shall be
                        the Company's headquarters in Santa Clara, California.
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Annual                  Base Salary: Employee's initial base salary will be
Compensation:           $33,333.33 per month, payable bi-weekly, which is
                        equivalent to $400,000 per year.
                        Initial Bonus: $400,000 guaranteed and paid quarterly
                        during the first year of employment. Thereafter,
                        Employee shall be eligible to receive an annual target
                        bonus equal to 100% of Employee's base salary, subject
                        to the Company meeting certain business objectives.
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Equity                  Options to purchase two million (2,000,000) shares of
Compensation:           the Company's common stock (the "Stock Options"). The
                        Stock Options will be issued at an exercise price equal
                        to the fair market value of Exodus common stock on the
                        first day of Employee's employment with the Company. The
                        Stock Options will become vested with respect to two
                        percent (2%) of the number of shares granted per month
                        starting on Employee's first date of employment until
                        such time as the Stock Options become fully vested as to
                        all of the shares. The vested Stock Options will become
                        exercisable starting six (6) months after the Employee's
                        first day of employment. The Stock Options shall be
                        issued pursuant to the Company's 1998 Equity Incentive
                        Plan and form of stock option agreement that
                        incorporates the terms set forth above.

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Real Estate             The Company will loan to Employee an amount up to
and Relocation          $3.5 million to assist Employee with the purchase of a
Assistance:             new residence in the San Francisco Bay Area (the "New
                        Residence"). The loan amount shall not exceed the
                        purchase price of the New Residence. The loan will be
                        issued pursuant to the terms of a full recourse
                        promissory note (the "Note") and will be secured by the
                        Employee's real property in California (including
                        principal residence) and Company securities held by
                        Employee. The Note will have a term of four (4) years
                        and a single balloon payment at the end of the term.
                        There will be no interest charged on the Note and the
                        Company will draft the Note documentation so as to
                        permit these arrangements to qualify as an "employee
                        relocation loan" under Treas. Reg. 1.7872-5(c)(i). In
                        the event the Note cannot qualify at the time it is
                        issued as an "employee relocation loan," then, for so
                        long as Employee is employed by the Company, the Company
                        will reimburse Employee for interest expense on the
                        Note. The Company will also reimburse Employee for
                        actual reasonable closing costs on the purchase of the
                        New Residence. The Company will not gross up the closing
                        costs or, if applicable, interest expense. The Note will
                        become due and payable within 45 days of the last day of
                        Employee's employment if Employee's employment with the
                        Company is terminated by Employee (other than an
                        "Involuntary Termination" as defined below) or
                        terminated by the Company for Cause (as defined below).

                        The Company will engage and pay for a third party
                        company to provide Employee with assistance with the
                        sale and purchase of his residences. This company will
                        also provide relocation assistance, including packing
                        and unpacking of personal possessions and moving of
                        possessions.

                        Employee may decide to delay the relocation of his
                        family to California until his high school aged child
                        can be enrolled in a school reasonably acceptable to
                        Employee. In the event of such delay, the Company will
                        cover for Employee the reasonable costs of an apartment
                        or condominium and a leased automobile for up to six (6)
                        months.
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Austin Terms of Offer of Employment (071301 v3)
Exodus Confidential Information

                                                                          1 of 3



                                  Attachment A

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Change in               In the event Employee's employment with the Company is
Control;                terminated by Employee due to an Involuntary
Termination of          Termination or by the Company other than for Cause,
Employment;             Employee shall be entitled to receive his base salary,
Continued               100% of annual target bonus, and benefits for a period
Benefits:               of twenty-four (24) months from the date of
                        termination. In addition, in the event Employee's
                        employment with the Company is terminated by the Company
                        without Cause during the first six months of his
                        employment, he shall be entitled to exercise the number
                        of shares that are vested as of his last day of
                        employment.

                        In the event of a Change in Control (as defined below)
                        and Employee's employment with the Company is terminated
                        by Employee due to an Involuntary Termination or by the
                        Company other than for Cause within twelve (12) months
                        of the effective date of such Change in Control,
                        Employee shall be entitled to the following benefits:

                        1. Base salary, 100% of annual target bonus and benefits
                        for a period of twenty-four (24) months from the date of
                        termination;
                        2. Employee's Stock Options that have not vested as of
                        the date of employment termination shall become fully
                        vested as of such date; and
                        3. A cash bonus in the approximate amount of the Note
                        principal.

                        The Company's obligation to pay any of the continued
                        compensation or benefits described in this section shall
                        be subject to Employee signing a full settlement and
                        release and non-competition agreement with the Company.

                        In the event Employee's employment with the Company is
                        terminated by Employee other than under circumstances
                        that qualify as an Involuntary Termination, or is
                        terminated by Company for Cause, Employee shall not be
                        entitled the receive from the Company any compensation
                        or benefits following such termination.
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Definitions:            The term "Change in Control" means the occurrence of
                        any of the following events: (i) a merger or
                        consolidation involving the Company in which the
                        shareholders of the company immediately prior to such
                        merger or consolidation own less than fifty percent of
                        the voting power of the surviving corporation; (ii) the
                        sale of all or substantially all, of the assets of the
                        Company; or (iii) any person or group (as defined in the
                        Securities Exchange Act of 1934, as amended) becoming
                        the beneficial owner (within the meaning of Rule 13d-3
                        of the Securities Exchange Act of 1934, as amended),
                        directly or indirectly, of securities representing more
                        than fifty percent of the voting power of the Company
                        then outstanding.

                        The term "Involuntary Termination" means termination of
                        Employee's employment with the Company by Employee
                        within sixty (60) days after the occurrence of one or
                        more of the following events: (i) a material reduction
                        in the Employee's job title, position within the Company
                        and/or responsibilities; (ii) any material reduction in
                        Employee's base salary or any material reduction in
                        benefits; or (iii) a written directive from the CEO of
                        the Company that the Employee relocate to an office
                        located more than a fifty (50) mile radius from the
                        Company's headquarters.

                        The term "Cause" means Employee: (i) takes willful
                        action made in bad faith that results in material damage
                        or harm to the Company; (ii) refuses or fails to act in
                        accordance with any specific, legal direction or order
                        of the CEO or the Board; (iii) is convicted of a crime
                        involving dishonesty, breach of trust, or physical or
                        emotional harm to any person; (iv) has repeated
                        unexplained or unjustified absences from the Company; or
                        (v) breaches any material term of any agreement between
                        Employee and the Company; provided that Employee shall
                        be notified of any circumstances that may give rise to a
                        termination for Cause and shall be given at least ten
                        (10) business days from receipt of such notice to cure
                        such circumstances, if the circumstances may be cured.
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                        Austin Terms of Offer of Employment (071301 v3)
                        Exodus Confidential Information



                                  Attachment A










































Austin Terms of Offer of Employment (071301 v3)
Exodus Confidential Information