10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File Number 000-24435

MICROSTRATEGY INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1861 International Drive, McLean, VA 22102	51-0323571
(State of Incorporation)	(Address of Principal Executive Offices) (Zip Code)	(IRS Employer Identification No.)

Registrant’s Telephone Number, Including Area Code: (703) 848-8600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A common stock, par value $0.001 per share	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: Not applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    x	Accelerated filer    ¨	Non-accelerated filer    ¨	Smaller reporting company    ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (based on the last reported sale price of the registrant’s class A common stock on June 30, 2008 on the Nasdaq Global Market) was approximately $585.7 million.

The number of shares of the registrant’s class A common stock and class B common stock outstanding on February 2, 2009 was 9,119,821 and 2,770,244, respectively.

Documents incorporated by reference: Portions of the definitive proxy statement for the 2009 Annual Meeting of Stockholders of the Registrant to be filed subsequently with the SEC are incorporated by reference into Part III of this report.

MICROSTRATEGY INCORPORATED

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	33
Item 2.	Properties	33
Item 3.	Legal Proceedings	33
Item 4.	Submission of Matters to a Vote of Security Holders	34
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	37
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 8.	Financial Statements and Supplementary Data	57
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
Item 9B.	Other Information	58
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	59
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	59
Item 13.	Certain Relationships and Related Transactions, and Director Independence	59
Item 14.	Principal Accountant Fees and Services	59
PART IV
Item 15.	Exhibits and Financial Statement Schedules	60

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MicroStrategy, MicroStrategy 8, MicroStrategy 9, MicroStrategy Business Intelligence Platform, MicroStrategy Dynamic Enterprise Dashboards, MicroStrategy Mobile, and MicroStrategy Integrity Manager are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.

CERTAIN DEFINITIONS

All references in this Annual Report on Form 10-K to “MicroStrategy”, “Company”, “we”, “us” and “our” refer to MicroStrategy Incorporated and its consolidated subsidiaries (unless the context otherwise indicates).

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 1. Business,” “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects and our results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The important factors discussed under “Item 1A. Risk Factors,” among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations.

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PART I

ITEM 1. BUSINESS

Overview

MicroStrategy is a worldwide provider of business intelligence software that enables companies to report, analyze and monitor the data stored across their enterprise to reveal the trends and insights needed to make better business decisions. The MicroStrategy mission is to empower every business user to make more informed decisions by providing timely, relevant and accurate answers to their business questions. To achieve this mission, MicroStrategy’s single, integrated platform is designed to support various styles of business intelligence through an easy-to-use interface. MicroStrategy provides sophisticated analytical performance to business users in the format that suits them best, from high-level dashboards to custom reports and advanced analysis via e-mail, web, fax, wireless and voice communication channels. MicroStrategy engineers its software for reliability, scalability, security and ease of administration for organizations of all sizes. Leading companies and government organizations worldwide have chosen MicroStrategy as their enterprise business intelligence standard.

Our software platform, MicroStrategy 8, enables users to query and analyze the most detailed, transaction-level databases, turning data into business intelligence and delivering boardroom quality reports and alerts about the users’ business processes. Our web-based architecture provides reporting, security, performance and standards that are critical for web deployment. Our products can be deployed on company intranets to provide employees with information to make better, more cost-effective business and management decisions. By integrating information from across the enterprise, solutions built on the MicroStrategy platform are designed to give analysts, managers and executives the critical insight they need to make better business and management decisions and to optimize their operations. With extranet deployments, enterprises can use MicroStrategy 8 to build stronger relationships by linking customers and suppliers via the Internet. MicroStrategy facilitates customer success with a comprehensive offering of consulting, education, technical support and technical advisory services for our customers and strategic partners.

We were incorporated as a Delaware corporation on November 17, 1989.

Industry Background

Business intelligence software offers decision-makers the opportunity to ask and answer questions about data that has been captured but not yet fully exploited.

Four key business needs have driven demand for business intelligence solutions:

• Increase User Access and Scalability: In the past, dissemination of information has been limited to a few power users or analysts. Now a wide range of information customers — from customer service representatives to the CEO within a company and from customers to suppliers outside the organization — demand and can benefit from the insight that business intelligence can provide. The wide acceptance of the Internet as an information source also has fueled demand for enterprise data to be accessible over the web to tens of thousands of users across an enterprise.

• Increase Data Scalability: Increasing information generation, and in particular, the ability to capture electronically and store every business transaction has made terabyte-size data warehouses commonplace. Terabyte-size data warehouses store one trillion bytes of data or more and are among the largest databases in the world. While transaction-level information is now routinely captured, organizations can struggle to make productive use of such massive data stores. Organizations need to view data within the operational context of the data — making even the most detailed information meaningful to business users. As a result, users want to be able to discover easily trends hidden in these very large databases, and verify these trends by reviewing the underlying transaction detail.

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• Improve Supply Efficiency: Supplier transactions become more efficient with direct access to inventory and other related data. However, for true vendor-managed inventory and collaborative commerce systems, vendors also need to have access to key information about how their products are performing against business metrics. For example, vendors should be able to see how their products are selling in each geographic region so as not to over-ship products that are slow-moving or under-ship products that are selling quickly. By opening vendor performance information to the vendors themselves, buyers and sellers of goods and services become partners in the quest to optimize sales, margin and inventory.

• Improve Distribution Efficiency: Business partners collaborate more effectively with access to shared data. By granting partners access to information such as the manufacturing pipeline and build schedule, partners can be more effective at satisfying demands of end customers and setting expectations. Furthermore, opening invoice and purchase order information to partners can enable them to reduce the overhead associated with channel management, resulting in cost savings and time efficiencies. For example, notifying channel sales partners of changes in the manufacturing schedule allows them to reset end customer expectations or to increase selling activity.

The widespread acceptance of the Internet as a medium of communication and commerce has changed the way businesses interact with each other and their customers by allowing businesses to establish new revenue streams, create new distribution channels and reduce costs. Simultaneously, the amount of corporate information stored in databases continues to grow exponentially, and companies are giving an increasing number of employees, customers and suppliers access to their information. Business intelligence tools are one of the gateways to this information. For example, companies are using Internet-based systems to facilitate business operations, including sales automation, supply-chain management, marketing, customer service and human resource management. Consumers are also becoming increasingly sophisticated in their use of the Internet, relying on the Internet not only to make online purchases, but also to perform price comparisons, analyze recommendations from like-minded individuals, educate themselves about relevant products and offerings and enter into transactions that were once conducted face-to-face or via the telephone. The integration of the Internet into business processes and increased consumer sophistication create opportunities for companies to use business intelligence applications as part of a more dynamic business model. Factors driving demand for these applications include:

Increased Electronic Capture of Transaction, Operational and Customer Information. The rapid growth in the electronic capture of business information and the increased availability of related profile data on the parties or products involved in each transaction are providing businesses with a rich data foundation for performing various analyses and making decisions. Powerful data analysis and mining tools are required to sift through massive amounts of data to uncover information regarding customer interactions, trends, patterns and exceptions, in turn enabling organizations to provide superior service and products to customers.

Need to Create a Personalized, One-to-One Customer and/or Supplier Experience While Maintaining Privacy. Many companies have implemented strategies that establish personalized relationships with each customer and/or supplier based on individual needs and preferences, and earn their loyalty by providing superior service, security and convenience. In order to successfully acquire, retain and upgrade customers, organizations need to understand their customers’ profiles, transaction history, past responses to marketing campaigns, and interactions with customer service. Retrieving information from widely dispersed and complex data sources and providing a holistic view of the customer can be challenging. At the same time, while businesses have the opportunity to collect a variety of information that could improve targeting, customers are concerned about the potential for loss or abuse of their privacy.

Need to Integrate Online and Traditional Operations. While there are substantial benefits to conducting business electronically, companies need to ensure that their online operations work in combination with their traditional operations. Companies are seeking to ensure that an order placed online can be reliably fulfilled

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according to the expectations of the customer and to develop and maintain consistent interactions with customers across different channels. Maintaining the integrity of, and enhancing, the customer experience are crucial to fostering customer loyalty and supply chain relationships.

Increased Openness of Business Intelligence Applications to Customers, Suppliers and Partners. Business intelligence systems are no longer confined to the organization. Today, companies are extending their business intelligence insight to suppliers, channel partners and customers via extranets. Business partners can have up-to-the-minute access to sales histories, inventory status and billing information through their web browsers.

MicroStrategy Solution: Business Intelligence for the Whole Enterprise

MicroStrategy currently offers MicroStrategy 8, an integrated, industrial-strength business intelligence platform designed to enable organizations to consolidate business intelligence applications onto a single platform for reporting, analysis and monitoring of real-time business information. The platform provides reliable and maintainable solutions with a low total cost of ownership and can be used in departmental, enterprise or extranet deployments. The MicroStrategy 8 business intelligence platform can be used to identify trends, improve operational efficiencies, reduce costs and increase profitability. Since businesses integrate information from across the enterprise, solutions built on the MicroStrategy 8 platform give analysts, managers and executives critical insight they need in optimizing their business operations. Integrated web-based reporting, report delivery and real-time alerting capabilities can enable the entire enterprise to work smarter, faster and better.

MicroStrategy’s business intelligence platform provides the functionality users need to make better business and management decisions. The MicroStrategy 8 platform delivers a high-performance solution that meets users’ demands and is highly functional, simple to use, scalable and easy to administer. With one platform, users are able to report, analyze and monitor their business with all of the five most popular styles of business intelligence, which consist of:

1. Scorecards and Dashboards — Reports are formatted with broad visual appeal and can easily convey information “at-a-glance”. This style of business intelligence targets the business monitoring needs of managers and executives.

2. Reporting — Report formats can convey more detailed operational information than is conveyed on a scorecard or dashboard. These reports provide critical information to all personnel across the enterprise.

3. Online Analytical Processing (OLAP) Analysis — Slice-and-dice analysis with drilling, pivoting, page-by and sorting capabilities serves business users whose analytical needs exceed the content of operational reports and require a simple environment for basic exploration within a limited range of data.

4. Advanced and Predictive Analysis — Investigative queries that can analyze data in the database, down to the transaction level detail if necessary. This style provides extensive predictive and statistical treatment of the data for correlation analysis, trend analysis, financial analysis and projections.

5. Alerts and Proactive Reporting — Information that needs continuous monitoring requires alerts and proactive reporting to serve large populations on set schedules, business exceptions or on-demand. This style of business intelligence targets large user populations both internal and external to the enterprise.

Specific benefits of the MicroStrategy 8 business intelligence platform include:

Flexibility to Report, Analyze and Monitor. MicroStrategy 8 unifies reporting, analysis and real-time business monitoring into one experience for the business user, one efficient and scalable architecture for the IT professional, and one economical and extensible utility for the CIO.

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Industrial-Strength Business Intelligence. The MicroStrategy platform enables industrial-strength business intelligence with enterprise-caliber IT, high user scalability and high database scalability. It enables centralized administration, operations and operations maintenance in a unified interface and unified backplane. This enterprise-caliber infrastructure allows for data scalability and user scalability with a zero footprint web product, where business intelligence can expand across and grow with the enterprise.

Five Styles of Business Intelligence. Through MicroStrategy 8’s integration of the five styles of business intelligence, users are no longer bound to departmental reporting or solutions that offer only one style of business intelligence or combine individual styles of business intelligence. The need for multiple business intelligence or reporting tools is minimized when users have access to all five styles for their enterprise business intelligence needs.

Easy-to-use Interface for Business Users. MicroStrategy 8 exposes all the sophisticated business intelligence applications to end users through easy to use intuitive what-you-see-is-what-you-get (WYSIWYG) web interfaces. This enables deployment to large user populations with minimal training required. The user interface includes an array of “one-click” actions embedded throughout the interface. It uses dialog boxes, mouse-over tool tips, and undo/redo buttons to make it easy for business people to explore the software without prior training.

Interactive Reporting. MicroStrategy 8 has extended the MicroStrategy reporting capability by making all reports and scorecards fully interactive. Business users can rearrange the organization of any report with simple drag-n-drop actions or by clicking on the toolbar icons to get views of the data, all from the same report and without requiring assistance from IT.

Integration of Analysis in Every Report or Scorecard. MicroStrategy 8 makes the same powerful analytic capability available directly from enterprise reports or scorecards automatically. MicroStrategy 8 delivers analytic integration to reporting users in two ways. The first is by providing OLAP capabilities directly to tables embedded within report documents, allowing business users to analyze the data within the table while staying within the bigger report document. The second way is by allowing users to “drill” from a report document to a dedicated analysis view that is optimized for conducting detailed analysis. In both cases, the integration of reporting with analysis is automatic.

Direct Access to SAP BW, Microsoft Analysis Services and Hyperion Essbase. MicroStrategy 8 incorporates a dynamic data access engine designed to access multi-dimensional databases (MDDBs or OLAP Cube Databases), such as those from SAP Business Warehouse (BW), Microsoft Analysis Services and Hyperion Essbase.

MicroStrategy 8’s Dynamic Multi-Dimensional Expressions (MDX) Engine generates MDX syntax that is fully certified with SAP BW using SAP’s high performance Business API interfaces. Because MicroStrategy’s MDX is dynamically generated using the multidimensional models implicit in SAP InfoCubes, QueryCubes and ODS databases, users can automatically and transparently drill back into SAP BW for more data, without any prior programming or prior design of drill paths. MicroStrategy 8 can also join data across SAP Infocubes and QueryCubes as well as access multiple instances of SAP BW and non-SAP sources at once.

In addition, MicroStrategy 8’s Dynamic MDX Engine generates MDX syntax against Microsoft Analysis Services and Hyperion Essbase using the XMLA (XML for Analysis) standard for communication. XMLA is a standard for accessing multidimensional data jointly developed by members of the XMLA council. As with SAP BW, MicroStrategy’s MDX is dynamically generated using the multidimensional models implicit in Microsoft Analysis Services and Hyperion Essbase cubes. Because of this, users can automatically drill back to underlying source data without any additional programming or drill-path design.

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Users of SAP BW, Microsoft Analysis Services and Hyperion Essbase databases each can access these reports through all of the MicroStrategy interfaces, MicroStrategy Web, Office, Narrowcast Server, and Desktop, just like any other MicroStrategy report. These reports offer standard OLAP functionality including graphing, subtotals, pivot, sort and page-by.

Direct Access to Operational Data From Enterprise Resource Planning (ERP) Systems. MicroStrategy 8 extends the MicroStrategy metadata architecture to include attributes and facts accessed directly from non-modeled databases instantly on a query-by-query basis. MicroStrategy 8’s Operational SQL Engine enables MicroStrategy reports to include data from any operational system using either completely free-form structured query language (SQL) or a graphical query builder interface, including stored procedures and views. Since the attributes and facts from operational database sources are managed by the MicroStrategy metadata architecture, MicroStrategy’s security architecture and other reusable objects such as prompts can be applied automatically.

Heterogeneous Joining of Data From Across the Enterprise. MicroStrategy 8 extends the MicroStrategy data modeling flexibility to include integrated views of data across heterogeneous data stores. By mapping conforming dimensions from different sources within the MicroStrategy object model, MicroStrategy 8 can automatically join data from multiple different sources in the same report document. Data can come from any source accessible by MicroStrategy 8, including the data warehouse, data marts, SAP BW, Microsoft Analysis Services, Hyperion Essbase and other operational system databases.

Integrating Data Mining into Mainstream Reports & Analyses. MicroStrategy 8’s analytic engine includes predictive capabilities in every MicroStrategy report or analysis. The analytic engine can calculate four of the primary data mining functions, including neural network algorithms, clustering algorithms, regression algorithms, and tree algorithms. Hand-in-hand with this calculation capability, MicroStrategy 8 also includes the ability to import data mining models directly from data mining products from vendors like IBM, Teradata, SAS, and SPSS using the predictive modeling mark-up language standard. With this capability, data mining models can be imported through a single click and automatically converted into a standard MicroStrategy metric. After that, MicroStrategy’s Data Mining Service extension enables these metrics to be used freely and calculated quickly in reports, analyses and alerts.

Support for Large Data Volumes and All Major Relational Database/Hardware Combinations. The MicroStrategy platform supports systems with very large data volumes and is specifically optimized to support all major relational database platforms commonly used for business intelligence systems as well as multi-dimensional databases like SAP BW. Important features of our solution in this area include:

• SQL optimization drivers that improve performance of each major database;

• The ability to support very large user populations;

• Highly reliable up-time, even in high volume applications; and

• The ability to work with and support nine languages for international applications.

Powerful Analytics to Customer- and Transaction-Levels of Detail. We believe that the MicroStrategy 8 platform incorporates one of the most sophisticated analysis engines available today, capable of answering highly detailed business questions. It offers support for information beyond the summary level to include information at the customer- and transaction- levels. This capability is critical to a wide range of applications, including highly targeted direct marketing, e-commerce site personalization, customer and product affinity analysis, call detail analysis, fraud detection, credit analysis forecasting, trend metrics and campaign management. The MicroStrategy 8 platform allows the creation of highly sophisticated systems that take maximum advantage of the detail available in a company’s databases.

Powerful Personalization Engine. The MicroStrategy 8 platform includes a customer- and transaction-level personalization engine. The underlying architecture is designed to generate personalization parameters based on

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data gathered by an organization from a variety of sources, including past customers’ transactions, customer clickstream information, stated user preferences and demographic information. In addition, the MicroStrategy personalization engine is able to determine when and under what circumstances a person is automatically provided with a set of information that proves useful in fraud detection and homeland security applications.

Powerful Narrowcast Server Distribution Engine for Information Delivery. Our technology offers a high performance personalized narrowcast engine for delivering periodic and alert-based information to users via Internet, e-mail, wireless devices, printer and fax. The narrowcast engine includes drivers for all major device types used in both domestic and international markets, enabling the delivery of information to users when and where it is needed.

Highly Stylized and Consolidated Reporting and Formatting Capabilities. MicroStrategy Report Services technology delivers a wide range of enterprise reports via the web, including production and operational reports, managed metrics reports and scorecards. The design capabilities provide the precision necessary to deliver reports with boardroom presentation quality, without any programming. By dragging and dropping report components, users can create high quality reports with complete formatting flexibility. Unlike other conventional reporting products, the modern architecture delivers both traditional hierarchical banded reports and newer, web-oriented zone-based reports.

MicroStrategy 9. On January 14, 2009, we introduced our upcoming software release, the MicroStrategy 9 business intelligence platform, at our annual user conference. MicroStrategy 9 includes significant new products and enhancements to the MicroStrategy 8 business intelligence software platform, such as increased scalability, performance and efficiency and a new architecture that enables the rapid deployment of departmental BI applications and consolidation of departmental and enterprise BI applications. We expect to make MicroStrategy 9 generally available in the first quarter of 2009.

Strategy

Our business objective is to become the leading provider of business intelligence software and related services to the largest enterprises, governments and the largest databases and data providers in the world. The key elements of our strategy to achieve this objective are as follows:

Marketing Strategy. Our business intelligence platform marketing strategy is designed to increase our footprint in the business intelligence market by increasing awareness of the MicroStrategy platform. Our marketing programs target five principal constituencies:

• Our historical base of corporate technology buyers and departmental technology buyers in Fortune Global 2000 enterprises;

• Corporate and departmental technology buyers in mid-sized enterprises, with annual revenues between $250 million and $1 billion;

• Government technology buyers and the vendors to the government community;

• Independent software vendors that want to embed analytical tools in their solutions; and

• System integrators that have technology relationships with the largest 2,500 enterprises, governments and information intensive businesses.

We continually seek to increase our brand awareness by focusing our messaging on the possibilities for value creation with our business intelligence platform, the benefits of using our platform and competitive differentiators. The channels we use to communicate with these constituencies include:

• Print ads;

• Online ads;

• Direct e-mail;

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• Industry events;

• User conferences;

• Strategic partners;

• Word of mouth and peer references;

• Industry awards;

• Our website; and

• Coverage in print and broadcast media.

Technology Strategy. Our technology strategy is focused on expanding our support for large information stores, enhancing our analysis and segmentation capabilities, strengthening our personalization technology and enhancing our report delivery and alerting functionality to all commonly used devices. We continue to enhance our technology for use with a broad range of operating systems and databases to enable our customers to leverage their existing technology investments to achieve faster query times with fewer required resources. In addition, we continue to develop our platform for easy integration with a wide spectrum of ERP systems. As part of this strategy, we are developing technology that further differentiates our product offerings by increasing functionality along the following key dimensions:

• Capacity — the volume of information that can be efficiently analyzed and utilized;

• Concurrency — the number of users that can be supported simultaneously;

• Sophistication — the range of analytical methods available to the application designer;

• Performance — the response time of the system;

• Database Flexibility — the range of data sources, data warehouses and online transaction processing databases which the software is capable of efficiently querying without modification;

• Robustness — the reliability and availability of the software in mission critical environments;

• Deployability — the ease with which applications can be deployed, modified, upgraded and tuned;

• Personalization — the quality and sophistication of a one-to-one user experience;

• Content Flexibility — the range of content, both structured and unstructured, that can be efficiently utilized; and

• Media Channel and Interface Flexibility — the range of media channels, interface options and display features supported.

Sales Strategy. Our sales strategy focuses on direct sales through our dedicated sales force and relationships with indirect channel partners in order to increase market share in both domestic and international markets. We recently launched an initiative to provide enhanced incentives for our indirect channel partners to market and distribute our products and services to end user customers. We also seek to increase sales to our existing base of customers by offering a range of software and services. Furthermore, we offer a comprehensive set of educational programs that enhance our potential customers’ and channel partners’ understanding of our software.

Products

We currently offer an integrated business intelligence platform, known as MicroStrategy 8, which is designed to enable businesses to turn information into strategic insight and make more effective business decisions.

MicroStrategy 8. MicroStrategy 8 includes a number of major enhancements from its predecessor, MicroStrategy 7i, including a redesigned web interface, interactive reporting in Report Services, improved

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integrated analysis to facilitate drilling into more-detailed analysis, WYSIWYG report design over the web, direct access to SAP BW metadata, direct access to operational data, improved reporting by joining heterogeneous databases, and improved predictive reporting and analysis including enhanced integration with third party data mining products.

MicroStrategy 8 is designed for business executives, report consumers and business managers, as well as power users and analysts with simplicity and high productivity in mind. MicroStrategy 8 integrates a full range of reporting, analysis and monitoring capabilities into a single platform — providing central management of security, administration, development and deployment.

MicroStrategy 8 is designed to integrate the two leading business intelligence approaches, ad hoc query and reporting (ROLAP) and cube analysis (MOLAP), delivering quick response time against almost any size data set, full access to transaction-level data and a myriad of options for complex analysis. MicroStrategy 8 enables organizations to consolidate business intelligence applications onto a single platform, resulting in reliable and maintainable solutions with a low total cost of ownership.

The MicroStrategy 8 platform consists of the following product components:

MicroStrategy Intelligence Server. MicroStrategy Intelligence Server is the foundation for our business intelligence platform. We believe that MicroStrategy Intelligence Server is the most advanced business intelligence server available in the market, capable of answering highly sophisticated business questions. Its robust ROLAP technology enables organizations to conduct large-scale product affinity and product profitability analyses, research customer preferences through sales, contribution and pricing analysis, and compare present and historical customer retention data with forecasting and trend metrics. MicroStrategy Intelligence Server generates highly optimized queries through its very large database drivers, enabling high throughput and fast response times.

MicroStrategy Intelligence Server has been built with the scalability and fault tolerance required for sophisticated analysis of multi-terabyte databases and can be deployed to thousands of users through complete user, object and data security and management. It contains thousands of specific optimizations for all major relational databases and multi-dimensional databases like SAP BW and includes the load distribution, prioritization and system tuning capabilities demanded by large-scale implementations.

MicroStrategy Intelligence Server contains an analytical engine with over 240 different sophisticated mathematical, financial and statistical data mining functions with the flexibility for further function extensions. MicroStrategy Intelligence Server combines the power of its analytical engine with the scalability of a relational database to perform complex data analysis with maximum efficiency. All of the other products in the MicroStrategy 8 platform integrate with the MicroStrategy Intelligence Server and benefit from its broad functionality.

MicroStrategy Intelligence Server is designed to be fault-tolerant to help ensure system availability and high performance. Through an enterprise management console, MicroStrategy Intelligence Server provides a sophisticated array of enterprise management tools, such as caching and query prioritization to streamline performance and batch job scheduling, which helps to maintain disparate and diverse user communities. Administrators can automate the dynamic adjustments of system and user governing settings, such as user thresholds and database thread priorities, in order to smooth the database workload and ensure the high performance that large user communities require.

MicroStrategy Intelligence Server is designed as a services oriented architecture to easily augment functionality and capabilities throughout the platform. MicroStrategy Intelligence Server Universal Edition uses an optimized 64-bit architecture and runs on a 64-bit Unix platform for even greater performance. MicroStrategy OLAP Services and Report Services employ this services-oriented architecture design.

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MicroStrategy Report Services. MicroStrategy Report Services is the enterprise reporting engine of the MicroStrategy business intelligence platform that delivers an entire range of enterprise reports, including production and operational reports, managed metrics reports and scorecards. The WYSIWYG design capabilities on the web provide the precision necessary to deliver these reports with desktop publishing quality and drag-and-drop simplicity. Users can create reports using intuitive design features without programming or outside help.

MicroStrategy’s Dynamic Enterprise Dashboards combine advanced data visualization and animation with MicroStrategy’s industrial-strength business intelligence platform to deliver highly intuitive information dashboards that yield greater business insight than traditional graphs and grids. Business users can intuitively flip through many different perspectives of corporate performance without ever leaving the dashboard, allowing them to quickly and easily identify problems and diagnose root causes.

MicroStrategy 8 OLAP Services. MicroStrategy 8 combines the speed and interactivity of multi-dimensional OLAP analysis with the analytical power and depth of relational OLAP. MicroStrategy 8 OLAP Services is an extension of MicroStrategy Intelligence Server that allows MicroStrategy Web and Desktop users to manipulate Intelligent Cubes databases. End users can add or remove report objects, add derived metrics and modify the filter, all with “speed-of-thought” response time against Intelligent Cubes. MicroStrategy 8 OLAP Services enables full multi-dimensional OLAP analysis within Intelligent Cubes, while retaining the ability of users to seamlessly drill through to the full breadth and depth of the data warehouse.

MicroStrategy Web and MicroStrategy Web Universal. MicroStrategy Web is a proprietary zero-footprint, browser independent web interface providing query, reporting and analysis through a platform independent architecture. MicroStrategy Web’s interface provides a familiar look and features drag-and-drop report creation, one-click tool bars, dialogue boxes, spreadsheet formatting, advanced printing and exporting, and right-click menus for drilling, pivoting and sorting. All of this is accomplished without ActiveX, Java Applets or client side installations or downloads, helping to ensure the highest levels of security.

MicroStrategy Web provides users with a highly interactive environment and low maintenance interface for reporting and analysis. Using this intuitive HTML-only web solution, users access, analyze and share corporate data. MicroStrategy Web provides ad hoc querying, analysis, quick deployment and rapid customizability, making it even easier for users to make informed business and management decisions on virtually any web browser.

MicroStrategy Web Universal features the same powerful functionality that users are familiar with in MicroStrategy Web with the added benefit of working with all major operating systems, application servers and web servers.

MicroStrategy Narrowcast Server. MicroStrategy Narrowcast Server is a proactive report delivery and alerting server that distributes personalized business information to recipients via e-mail, printers, file servers, portals, wireless devices, fax and phone. MicroStrategy Narrowcast Server delivers targeted information to individuals on an event-triggered or scheduled basis through the communication device that is most convenient. It provides an engine for implementing targeted messaging to acquire and retain customers and a platform for distributing information to corporate departments, the entire enterprise and other stakeholders including customers and suppliers.

MicroStrategy Narrowcast Server has a web-based interface that can be used with existing web applications. Users can subscribe to information services by providing personal information and preferences, enabling them to receive personalized information relevant to them.

In addition to proactively delivering reports from the MicroStrategy 8 platform, MicroStrategy Narrowcast Server’s open information source modules enable it to deliver information from a multitude of information

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sources to the business user. The multiple information sources can be combined to provide users with requested information in one personalized e-mail, message or document.

MicroStrategy Office. MicroStrategy Office lets every Microsoft Office user run, edit and format any MicroStrategy report directly from within Microsoft applications such as Excel, PowerPoint and Word. MicroStrategy Office is designed using Microsoft .NET technology and accesses the MicroStrategy business intelligence platform using XML and web services. MicroStrategy Office gives business users open and straightforward access to the full functionality of the MicroStrategy platform — all from familiar Microsoft Office applications. MicroStrategy Office serves as a Microsoft add-in, with MicroStrategy functionality expressed as a single tool bar in Microsoft.

MicroStrategy Desktop. MicroStrategy Desktop is a business intelligence software component that provides integrated query and reporting, powerful analytics and decision support workflow on the personal computing desktop. MicroStrategy Desktop provides a rich set of features for online analysis of corporate data. Even complex reports are easy to create and can be viewed in various presentation formats, polished into production reports, distributed to other users and extended through a host of ad hoc features including drilling, pivoting and data slicing. The interface itself can be customized to different users’ skill levels and security profiles. MicroStrategy Desktop comes in two versions:

• Desktop Analyst. A simplified version that provides interactive slice and dice required by managers; and

• Desktop Designer. A full-featured version that lets users design complex and sophisticated reports.

Applications developed within MicroStrategy Desktop can be easily deployed throughout the MicroStrategy architecture bringing integrated query and reporting capabilities, powerful analytics and decision support workflow to analysts, quantitative users and end users throughout the enterprise and beyond.

MicroStrategy Architect. MicroStrategy Architect is the MicroStrategy 8 product in which applications are modeled through an intuitive graphical user interface. MicroStrategy Architect provides a unified environment for creating and maintaining business modules and their relations to underlying data for business intelligence applications. MicroStrategy Architect is highly automated and is based on an open, flexible architecture, which can greatly reduce the cost and time required to implement and maintain systems.

MicroStrategy Administrator. MicroStrategy Administrator enables administrators to efficiently develop, deploy, monitor and maintain small and medium systems as well as enterprise-scale systems supporting thousands of users. Project migration utilities help administrators develop, test and deploy systems. Performance analysis enables administrators to monitor and tune systems for maximum performance and availability. MicroStrategy Administrator has been designed to help ensure easy management of application objects and users across multiple development, testing and production environments. MicroStrategy Administrator eases the burden of maintaining users and security by using textual commands that can be saved as scripts. These commands and scripts can be executed from either a graphical interface or from the command line giving system administrators the flexibility and ease-of-use necessary for efficient systems management. MicroStrategy Administrator tools consist of Object Manager, Enterprise Manager and Command Manager.

MicroStrategy SDK. MicroStrategy SDK is a comprehensive development environment that enables integration of MicroStrategy 8 features and functionality into any application on multiple platforms, including UNIX-based systems using a Java-based web API. Through sample code, documentation and reference guides, the MicroStrategy SDK enables an application developer to quickly learn to use the APIs to implement easy-to-use web reporting and powerful business intelligence applications.

All API interfaces within the MicroStrategy SDK reflect XML architecture. MicroStrategy SDK's Portal Integration Kit includes pre-built samples for embedding MicroStrategy 8 analysis into a corporate portal. The

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Web Services Development Kit provides sample code that enables MicroStrategy 8 functionality to be accessed via standard web services.

MicroStrategy BI Developer Kit. MicroStrategy BI Developer Kit is a package of products that includes MicroStrategy Desktop Designer, MicroStrategy Architect and modular analytic applications. The analytic modules are starter kits designed to streamline business processes through the use of business intelligence. Each of the modules ships with a sample data-model and numerous reports and key performance indicators. The analytic modules are designed to enable portability and the ability to work against existing data warehouses without the need for additional data extraction and loading concerns. The modules are easy to extend and modify and reflect a decade of business intelligence implementation experience and best practices of the most common business analysis applications.

MicroStrategy Mobile. MicroStrategy Mobile provides mobile workers with access to BI reports on their BlackBerry smartphones. With MicroStrategy Mobile, business users will receive the same reports on their BlackBerry smartphone as they receive on their desktop, without the need for reformatting or retrofitting existing reports. The report manipulation features available in MicroStrategy Mobile allow users to view large reports within the compact screen size of the BlackBerry smartphone.

MicroStrategy Integrity Manager. MicroStrategy Integrity Manager automatically compares and verifies the consistency of reports as changes are made to the BI ecosystem, and then highlights issues and discrepancies to monitor the overall reliability of the BI content used by business decision makers. MicroStrategy Integrity Manager reduces the need for resource-intensive manual testing by comparing versions of reports after data updates and throughout the BI development cycle, thereby automating report regression testing. Data inconsistencies can be captured much sooner in the development cycle, saving time in report testing, end user support, and issue resolution.

MicroStrategy 9. On January 14, 2009, we introduced our upcoming software release, MicroStrategy 9, at our annual user conference. MicroStrategy 9 includes significant new products and enhancements to the MicroStrategy 8 business intelligence software platform, and we expect to make MicroStrategy 9 generally available in the first quarter of 2009.

MicroStrategy 9 will deliver new technology and features designed to:

• Extend enterprise BI with enhancements for greater scalability, performance and efficiency;

• Enable rapid development and deployment of departmental BI applications; and

• Provide a seamless consolidation path from departmental BI to enterprise BI.

Extending Enterprise BI

As BI systems grow to thousands of users and hundreds of terabytes of data, maintaining fast query performance can be a tremendous challenge. MicroStrategy 9 includes new adaptive caching technology called In-memory ROLAP, which takes advantage of the large addressable memory now available on 64-bit Unix, Linux and Windows computer servers, and provides a performance-optimized middle-tier database that can respond directly to data requests from reports, dashboards and OLAP analyses. MicroStrategy 9 also introduces new SQL generation optimizations that can greatly improve performance for sophisticated queries involving complex metrics.

As companies merge and expand, there is an increased urgency for business intelligence to span all operations, across business units, across departments and across the globe. This expansion requires BI systems to support global deployments. MicroStrategy 9 offers the ability to present reports, dashboards or OLAP analyses in the local language of business users viewing the information. In addition, MicroStrategy 9 offers numerous capabilities to streamline coordination between development teams working around the globe on the same BI applications.

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Enabling Rapid Development and Deployment of Departmental BI

MicroStrategy 9 includes significant new architectural components and features designed to support the needs of smaller-scale BI systems for departments and workgroups. MicroStrategy 9 enables departmental BI applications to be set up quickly, providing end users with the ability to create reports and dashboards and distribute information among themselves with little or no IT support.

MicroStrategy’s new multi-source ROLAP, In-memory ROLAP and rapid metadata creation enable business departments to quickly set up small BI environments, accessing multiple databases without the time-consuming and technically-intensive work of first creating a data mart or data warehouse.

MicroStrategy 9 has numerous new features that make assembling reports simpler and faster. Business users can quickly create their own dashboards using new features in MicroStrategy 9, including out-of-the-box dashboard templates, support for custom-designed templates and new design assistants that aid novice users in creating their own dashboards.

Because of its ROLAP architecture, the MicroStrategy business intelligence platform has allowed business users to freely investigate the data or “surf” through the data warehouse without having to design a new report for each new combination of data they want to see. MicroStrategy 9 will extend this ability by allowing users to perform these same OLAP manipulations such as pivoting and drilling directly on graphs.

MicroStrategy 9 will provide users greater control of report and dashboard distribution with its Distribution Services product. Users will be able to set up report distributions for themselves or for other users, sending reports via e-mail, networked printers, or directly to recipients’ computers or servers. Business users will be empowered to create and manage their own information subscriptions without the intervention of a centralized IT administrator.

Providing Seamless Consolidation from Departmental BI to Enterprise BI

MicroStrategy 9 is designed to enable the easy merger of independent workgroup and departmental BI implementations into a larger, more expansive enterprise BI system. Using the new multi-source ROLAP capability, metadata and reports from departmental BI islands can be gradually merged into larger enterprise BI metadata, without having to move any of the original data into data warehouses or data marts. MicroStrategy 9 is also designed to allow companies to gradually move their data from disparate databases into the data warehouse simply by “re-pointing” the metadata to access the same data, but at its new location, with no disruption to reports or redesign required.

Product Support and Other Services

MicroStrategy Technical Support. MicroStrategy Technical Support provides a diverse set of support options to meet the needs of customers and projects and offers product upgrades when available. Product experts help support MicroStrategy implementation across the development, test and production environments. Support offerings include access to our highly skilled support team during standard business hours, around the clock access to our online support site, and options to secure dedicated technical support at any time of the day. Technical support services are provided to customers for a maintenance fee, which is charged in addition to the initial product license fee.

MicroStrategy Consulting. MicroStrategy Consulting offers customers a broad range of business intelligence and data warehousing expertise gathered from helping thousands of customers across diverse industries implement departmental, enterprise and extranet applications across various types of databases. MicroStrategy consultants identify the optimal design and implementation strategy that includes detailed business requirements, user interface requirements and performance tuning. By leveraging our best practices,

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strategic visioning, project planning and platform expertise, we assist customers’ technical staff in completing projects and developing solutions that business users will most easily adopt.

MicroStrategy Education. MicroStrategy Education offers goal-oriented, comprehensive education solutions for customers and partners. Through the use of self-tutorials, custom course development, joint training with customers’ internal staff or standard course offerings, MicroStrategy’s Education consultants develop an ongoing education program that meets our customers’ specific education needs. Education consultants deliver quality, cost-effective instruction and skill development for administrators, developers and analysts. MicroStrategy offers the Perennial Education Pass Program which allows customers to train named individuals through an unlimited number of public MicroStrategy instructor-led courses and online courses under this annual program.

Angel.com and Alarm.com. We also have a non-core business, Angel.com, which is a provider of interactive voice response telephony systems. Prior to February 13, 2009, we also operated Alarm.com, a provider of web-enabled residential and commercial security and activity monitoring technology. In March 2008, in connection with our consideration of strategic alternatives relating to our non-core Angel.com and Alarm.com businesses, we committed to a plan to sell these businesses. We made the decision to sell these businesses in order to focus our resources on our core competency of business intelligence software and services. The financial results for Angel.com and Alarm.com initially were reclassified as discontinued operations in the quarter ended March 31, 2008. Although we continued to explore strategic alternatives for the Angel.com business, based on changes in market conditions that occurred in the quarter ended June 30, 2008, we determined that Angel.com no longer met the criteria to permit discontinued operations treatment and held-for-sale classification. Accordingly, amounts related to Angel.com were reclassified to continuing operations in the second quarter of 2008 and since then have been reflected in continuing operations for all periods presented. On February 13, 2009, we completed the sale of our equity interest in Alarm.com to Alarm.com Holdings, Inc. As a result of the transaction, we received aggregate consideration of approximately $27.7 million in cash, subject to post-closing purchase price adjustments, if any, which will be determined based on Alarm.com’s working capital on the closing date. The sale of our ownership interest in Alarm.com is expected to result in us recognizing an after-tax gain in the range of approximately $14 million to $17 million in the first quarter of 2009, which includes the cost of terminating all outstanding Alarm.com employee stock options prior to the closing of the transaction and other costs associated with the sale.

Customers

MicroStrategy customers include many of the leading companies from a diverse group of industries, including retail, telecommunications, financial services, insurance, pharmaceutical and healthcare, manufacturing, technology and Internet, and government and public services.

Below is a representative list of companies and organizations that use the MicroStrategy business intelligence platform:

• Retail: Ahold, Burlington Coat Factory, Cabela’s, The Container Store, Corporate Express, Dick’s Sporting Goods Inc., Hard Rock Café, Limited Brands, Lowe’s Companies, Ross Stores, Inc., and Starbucks Corporation

• Telecommunications: AT&T, Bell Canada, CNN, Comcast Corporation, Telefónica, and Verizon Services Corp

• Financial Services: Austria Bank, Bank of the West, Fieldstone Mortgage, First American Financial Corp., H&R Block Financial Advisors, Republic Bank Limited, and Wells Fargo Bank

• Insurance: 21^st Century Insurance, GEICO, Grange Insurance, Guy Carpenter & Company, Nationwide Mutual Insurance Company, and Pacific Life Insurance

• Pharmaceutical and Healthcare: Dana-Farber Cancer Institute, Lloydspharmacy, Premier, Sanofi Pasteur, Wyeth Pharmaceuticals, and Upsher-Smith Laboratories

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• Manufacturing: HD Supply, Oakwood Homes, Porsche Cars North America, Rite-Hite Corporation, Sanmina SCI Corporation, and Wilton Industries, Inc.

• Technology/Internet: Classmates Online, eBay, Netflix, Priceline, and Yahoo!

• Government/Public Services: Centers for Medicare and Medicaid Services, Department of Homeland Security, Department of Housing and Urban Development, National Institutes of Health, Ohio Department of Education, State of Tennessee, Texas Department of Agriculture, U.S. Air Force and U.S. Army, U.S. Census Bureau, and U.S. Postal Service

Customer Case Studies

Burlington Coat Factory

Burlington Coat Factory, a nationally recognized retailer of high-quality, branded apparel at everyday low prices, selected MicroStrategy for merchandising reporting and analytics. Burlington Coat Factory uses MicroStrategy for reporting and analysis on key merchandising metrics. MicroStrategy converts the detailed transactional data into personalized reports through dashboards and exception reporting for Burlington Coat Factory executives and merchants. MicroStrategy teamed with QuantiSense to provide Burlington Coat Factory with an end-to-end solution for its retail business intelligence requirements.

Katz Group

Katz Group is one of North America’s leading drug store operators and Canada’s largest integrated retail pharmacy network with more than 1,800 drug stores in Canada and the United States. Katz is expanding its use of MicroStrategy in its user community to enable management in the retail organization to report on and analyze sales and store information. With daily reporting and report distribution, Katz provides its management team with retail store information to help drive key decisions. Katz selected the MicroStrategy Business Intelligence Platform for its ease-of-use and scalability.

David’s Bridal

With more than 50 years of bridal experience, David’s Bridal is the largest bridal retailer in the country with more than 280 locations nationwide. David’s Bridal uses the MicroStrategy BI Platform to support key reporting and analysis needs for the entire organization, from store managers all the way up to the CEO.

Family Dollar Store

Family Dollar Store is one of the fastest growing discount store chains in the United States with stores in 44 states. Family Dollar has expanded its use of MicroStrategy to generate sales and inventory reports for greater insight into which products are selling at its 6,500 stores. Family Dollar selected MicroStrategy based on its intuitive user interface and proven scalability in large data warehousing environments.

24 Hour Fitness

24 Hour Fitness, the largest fitness club chain in the U.S., selected MicroStrategy to support its enterprise business intelligence applications. 24 Hour Fitness plans to use the MicroStrategy Business Intelligence Platform for reporting on and analyzing a wide range of key performance indicators for its 425 clubs. Club managers, field management, and corporate management will use MicroStrategy to gain greater insights into club traffic, member preferences, and sales and financial data to help them make more informed decisions. MicroStrategy was selected for its data and user scalability, broad range of reporting features and functionality, and excellent query performance.

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Cabela’s Incorporated

Cabela’s Incorporated, a leading specialty retailer of hunting, fishing, and outdoor gear, chose MicroStrategy as its enterprise reporting standard. MicroStrategy will be used across the organization for enhanced insights into key business areas, including inventory planning, customer service, sales administration, forecast analysis, and category management. In addition, MicroStrategy will be used to help Cabela’s improve its online business by enabling Cabela’s employees to review every item purchased online and better understand the items that customers typically purchase together.

NTT America, Inc.

NTT America, Inc., a wholly owned U.S. subsidiary of NTT Communications Corporation, selected MicroStrategy to analyze and monitor key customer service performance metrics. NTT America chose MicroStrategy’s Dynamic Enterprise Dashboard to monitor customer service data, including response times to trouble tickets. NTT America executives and managers will use the MicroStrategy information dashboards for at-a-glance insights into customer service performance to help them make data-driven decisions. With MicroStrategy, NTT America expects to be able to improve its service response times, allocate resources more efficiently, and address other critical service areas to improve customer satisfaction and retention.

Sales and Marketing

Direct Sales Organization. We market our software and services primarily through our direct sales force. We have sales offices in locations throughout the world. We are represented by distributors in several countries where we do not have sales offices.

Indirect Sales Channels. We have entered into formal and informal relationships with reseller, value-added reseller, system integration, original equipment manufacturers (“OEM”) and technology partners who utilize the MicroStrategy platform for a variety of commercial purposes. Agreements with these partners generally provide non-exclusive rights to market our products and services and allow access to our marketing materials, product training and direct sales force for field level assistance. In addition, we offer product discounts to our sales partners. Favorable product recommendations from our partners to potential customers, which include leading system integration, application development and platform manufacturers, facilitate the sale of our products. We believe that such indirect sales channels allow us to leverage sales and service resources as well as marketing and industry-specific expertise to expand our user base and increase our market coverage. In addition, we have entered into agreements with resellers who resell our software on a stand-alone basis.

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Reseller/System Integration Alliances. Our resellers/systems integration alliances include marketing partners who resell our software on a stand-alone basis, value-added resellers who resell the MicroStrategy platform software bundled with their own software applications and system integrators who deploy MicroStrategy solutions to their customers. These marketing partners include:

2 finity	Accenture	AIM Computer Consultants
Alliance Consulting	Annams Systems Corporation	ASAP — Dell
Aster Data	Aviana Global	AZ Dimensional
BearingPoint	BI-Basics	BI Source
Biltmore Technologies	CapGemini	Carpio
Cherokee Consulting	Chicago Business Intelligence Group	Cognizant
Comsys	CSC	DataFactz
DBWorks	e2e Technologies	EC Data
Exigent Partners	Fujitsu Consulting	Fujitsu Transaction Solutions
Hewlett-Packard Company	High Impact Technologies, Inc.	IBM
InfoCepts	Infostep	Infosys
Inspironix	Integrant, Inc.	iOLAP, Inc.
IT Illuminations	Jelecos	Keyrus
Lancet Software Development, Inc.	Lodestar Systems	Lunexa
Marlabs	mLogica	Mobile Software
Momentum Consulting	MResult	NCS
Ontime BI	PBI Research	Persistent Systems
Prithvi Solutions	Pros Revenue Management	Quadrant
QuantiSense	RazorKnowledge	SAIC
SBIZSERVICES	Software by Design	Software House International
Soluciones	Southport Services	Strategic Enterprise Solutions
Sybase	Syntel	Systec Solutions
Tahoe Partners	TCS	Teradata
Thaxton Consulting Group	TML Solutions	WCI Consulting
Wipro	Z Y Solutions

OEM Partners. Our OEM partners integrate the MicroStrategy Business Intelligence Platform or some of its components into their applications. Our OEM partners include:

Activant Solutions Inc	Affiliated Computer Services, Inc.	AFS Technologies
Agdata	Agentrics	Alloso
Alpha Bay Corporation	Amdocs, Inc.	Aperio CI
Attensity	Autometrics	Big Machines
BI Retail	Blazent Inc.	CadenceQuest
Carrier IQ	Cegedim | Target Software	Clarabridge
Conclusive Marketing	Constellation Software	Coradiant
DECIMAL, Inc.	DemandTec	EmpowerMx
EnvisionWare	Escalate Retail	Fastech
Harris	Hubwoo	IBM | iPhrase
InQuira	IQS	iTrade Network
Ketera Technologies, Inc.	Kurt Salmon Associates	LexisNexis Examen
Maple Lake	Marketing Direct, Inc.	Marketing Software Company
MarketStance	MedAssets	MI9 Business Intelligence Systems Inc.
OATSystems	Oracle | JD Edwards	Oracle | Retek
Pinnacle Corporation	PointRight	Prescient
RapidMetrix	Risk Management Solutions	Rivermine Software
RS Software	Run.It	SAND Technology
SignalDemand	Siperian	SirsiDynix
SmartOps	SQLiaison	Suncoast Solutions (Hospice Systems)
Trizetto	Veramark	Vestmark
Vision Chain	Xtiva

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Technology Partners. In order to deliver even higher value to our customers, MicroStrategy has integrated its business intelligence platform with the leading data warehouse and related technology platforms and software. We have integrated our platform with leading portal technology, extranet, transform and load technology and specialized display technology products to name just a few. Through our Technology Partner program, we continue our efforts to help ensure that customers can easily implement the MicroStrategy business intelligence platform alongside other chosen corporate technology standards. Our technology partners include:

Ab Initio	Adastra	Adobe
AMD	Attunity	Avnet
Aster Data	Clarabridge	Composite Software
ESRI	Greenplum Software	Goldengate
Google	Hewlett-Packard	HyperRoll
IBM	Informatica	Intel
Kognitio	KXEN	Longview Solutions
Microsoft	Netezza	Novell
Oracle	Pitney Bowes MapInfo	PostgreSQL
Quadrant	QuantiSense	Red Hat
SAP	SPSS	Sun Microsystems
Sybase	Teradata	Vertica
Visual Crossing	VMWare	WhereScape

Competition

The markets for business intelligence software, analytical applications and information delivery are intensely competitive and subject to rapidly changing technology. In addition, many companies in these markets are offering, or may soon offer, products that may compete with MicroStrategy products.

MicroStrategy faces competitors in several broad categories, including business intelligence software, analytical processes, query tools, web-based reporting tools, and report delivery technology. Independent competitors that are primarily focused on business intelligence products include, among others, Actuate, Information Builders and the SAS Institute. We also compete with large software corporations including suppliers of enterprise resource planning software that provide one or more capabilities competitive with our products, such as IBM, Microsoft, Oracle, SAP AG, Infor and others, and with open source business intelligence vendors, including Pentaho, JasperSoft and others.

Many of our competitors have longer operating histories, significantly greater financial, technical, marketing or other resources, and greater name recognition than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of their products than we can. In addition, many of our competitors have strong relationships with current and potential customers and extensive knowledge of the business intelligence industry. As a result, they may be able to prevent MicroStrategy from penetrating new accounts or expanding within existing accounts due to their greater influence.

Increased competition may lead to price cuts, reduced gross margins and loss of market share. We may not be able to compete successfully against current and future competitors and the failure to meet the competitive pressures we face may have a material adverse effect on our business, operating results and financial condition.

Current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others. For example, Oracle acquired Hyperion Solutions in April 2007, IBM acquired Cognos in January 2008 and SAP acquired Business Objects in January 2008. By doing so, these competitors may increase their ability to meet the needs of our potential customers. Our current or prospective indirect channel partners may establish cooperative relationships with our current or future competitors. These relationships may limit our ability to sell our products through specific distribution channels. Accordingly, new competitors or alliances among current and future competitors may emerge and rapidly gain significant market

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share. These developments could limit our ability to obtain revenues from new customers and to maintain technical support revenues from our installed customer base.

Research and Product Development

We have made, and continue to make, substantial investments in research and product development. We believe that our future performance will depend in large part on our ability to maintain and enhance our current product line, develop new products that achieve market acceptance, maintain technological competitiveness and meet an expanding range of customer requirements. As of December 31, 2008, our research and product development staff consisted of 374 employees, 341 of whom were working on our core business intelligence projects and 33 of whom were working on research and development relating to our Angel.com and Alarm.com businesses.

Employees

As of December 31, 2008, we had a total of 1,915 employees, of whom 1,109 were based in the United States and 806 were based internationally. Of the total of 1,915 employees, 685 were engaged in sales and marketing, 374 in research and development, 501 in technical support, consulting and education services, and 355 in finance, administration and corporate operations. None of our employees is represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good.

We believe that effective recruiting, education and nurturing of human resources are critical to our success and have traditionally made investments in these areas in order to differentiate ourselves from our competition, increase employee loyalty and create a culture conducive to creativity, cooperation and continuous improvement.

All newly hired technical and sales professionals complete a professional orientation course that ranges from one day to four weeks long. The curriculum consists of lectures, problem sets and independent and group projects, covering data on our products, competitors and customers. Certain lectures also deal with general business practices and teamwork. Throughout this training, students typically must pass a number of oral and written examinations in order to begin their assignments. Course content is created by experienced members of our professional staff, who generally have an annual obligation to update course content based upon the best practices they have most recently observed in the field. This expert content is then used to upgrade and revitalize our education, consulting, support, technology and marketing operations.

Available Information

MicroStrategy’s website is located at www.microstrategy.com. MicroStrategy makes available free of charge, on or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission (“SEC”). Information found on our website is not part of this report or any other report filed with the SEC.

Item 1A. RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones facing MicroStrategy. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our class A common stock could decline and you may lose all or part of your investment.

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Our quarterly operating results, revenues and expenses may fluctuate significantly, which could have an adverse effect on the market price of our stock

For a number of reasons, including those described below, our operating results, revenues and expenses have in the past varied and may in the future vary significantly from quarter to quarter. These fluctuations could have an adverse effect on the market price of our class A common stock.

Fluctuations in Quarterly Operating Results. Our quarterly operating results may fluctuate, in part, as a result of:

• the size, timing, volume and execution of significant orders and shipments;

• the mix of products and services of customer orders, which can affect whether we recognize revenue upon the signing and delivery of our software products or whether revenue must be recognized as work progresses or over the entire contract period;

• the timing of new product announcements by us or our competitors;

• changes in our pricing policies or those of our competitors;

• market acceptance of business intelligence software generally and of new and enhanced versions of our products in particular;

• the length of our sales cycles;

• seasonal factors, such as our traditionally lower pace of new license transactions in the summer;

• changes in our operating expenses;

• personnel changes;

• our use of direct and indirect distribution channels;

• utilization of our consulting and education services, which can be affected by delays or deferrals of customer implementation of our software products;

• the quarterly performance of our Angel.com business unit, which is highly variable and particularly difficult to forecast;

• changes in foreign currency exchange rates;

• our profitability and expectations for future profitability and its effect on our deferred tax assets and net income for the period in which any adjustment to our net deferred tax asset valuation allowance may be made;

• increases or decreases in our liability for unrecognized tax benefits under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109”; and

• changes in customer budgets.

Limited Ability to Adjust Expenses. We base our operating expense budgets on expected revenue trends. Many of our expenses, such as office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall. Accordingly, any shortfall in revenue may cause significant variation in operating results in any quarter.

Based on the above factors, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the trading price of our class A common stock may fall.

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The trading price for our class A common stock has been and may continue to be volatile

The trading price of our class A common stock historically has been volatile and may continue to be volatile. The trading price of our class A common stock may fluctuate widely in response to various factors, some of which are beyond our control. These factors include:

• quarterly variations in our results of operations or those of our competitors;

• announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments;

• the emergence of new sales channels in which we are unable to compete effectively;

• our ability to develop and market new and enhanced products on a timely basis;

• commencement of, or our involvement in, litigation;

• any major change in our board or management;

• changes in governmental regulations or in the status of our regulatory approvals;

• recommendations by securities analysts or changes in earnings estimates;

• announcements about our earnings that are not in line with analyst expectations, the likelihood of which may be enhanced because it is our policy not to give guidance relating to our anticipated financial performance in future periods;

• announcements by our competitors of their earnings that are not in line with analyst expectations;

• the volume of shares of class A common stock available for public sale;

• sales of stock by us or by our stockholders;

• short sales, hedging and other derivative transactions involving shares of our class A common stock; and

• general economic conditions and slow or negative growth of related markets.

In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our class A common stock, regardless of our actual operating performance.

Revenue recognition accounting pronouncements may adversely affect our reported results of operations

We continuously review our compliance with all new and existing revenue recognition accounting pronouncements. Depending upon the outcome of these ongoing reviews and the potential issuance of further accounting pronouncements, implementation guidelines and interpretations, we may be required to modify our reported results, revenue recognition policies or business practices, which could have a material adverse effect on our results of operations.

We may have exposure to greater than anticipated tax liabilities

We are subject to income taxes and non-income taxes in a variety of domestic and foreign jurisdictions. Our future income taxes could be adversely affected by earnings that are lower than anticipated in jurisdictions where we have lower statutory rates and earnings that are higher than anticipated in jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, changes in the amount of unrecognized tax benefits under FIN 48, or by changes in tax laws, regulations, accounting principles or interpretations thereof.

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Our determination of our tax liability is subject to review by applicable domestic and foreign tax authorities. For example, we are currently under tax audit in the UK and Germany. Any adverse outcome of such a review could have an adverse effect on our operating results and financial condition. The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Moreover, as a multinational business, we have subsidiaries that engage in many intercompany transactions in a variety of tax jurisdictions where the ultimate tax determination is uncertain.

We also have contingent tax liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, we may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion.

As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may materially affect our financial results in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.

If the market for business intelligence software fails to grow as we expect, or if businesses fail to adopt our products, our business, operating results and financial condition could be materially adversely affected

Nearly all of our revenues to date have come from sales of business intelligence software and related technical support, consulting and education services. We expect these sales to account for a large portion of our revenues for the foreseeable future. Although demand for business intelligence software has grown in recent years, the market for business intelligence software applications is still evolving. Resistance from consumer and privacy groups to increased commercial collection and use of data on spending patterns and other personal behavior and governmental restrictions on the collection and use of personal data may impair the further growth of this market, as may other developments. We cannot be sure that this market will continue to grow or, even if it does grow, that businesses will adopt our solutions. We have spent, and intend to keep spending, considerable resources to educate potential customers about business intelligence software in general and our solutions in particular. However, we cannot be sure that these expenditures will help our products achieve any additional market acceptance. If the market fails to grow or grows more slowly than we currently expect, our business, operating results and financial condition would be materially adversely affected.

Current economic uncertainties, and particularly the downturn in the financial services and retail industries, could adversely affect our business and results of operations

General worldwide economic conditions have experienced a significant downturn. These conditions make it extremely difficult for our customers and us to accurately forecast and plan future business activities, and they could cause our customers to slow spending on our products and services, which would delay and lengthen sales cycles. Furthermore, during challenging economic times our customers may face issues gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for doubtful accounts and our results would be negatively impacted.

We have a significant number of customers in the financial services and retail industries. The significant downturn in these industries may cause firms to react to worsening conditions by reducing their capital expenditures in general or by specifically reducing their spending on information technology. In addition, customers in these industries may delay or cancel information technology projects or seek to lower their costs by renegotiating vendor contracts. Also, customers with excess information technology resources may choose to develop in-house software solutions rather than obtain those solutions from us. Moreover, competitors may

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respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation in the financial services industry may result in reduced overall spending on our products.

We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, generally or in the financial services and retail industries. If the downturn in the general economy or markets in which we operate persists or worsens from present levels, our business, financial condition and results of operations could be materially and adversely affected.

We face intense competition, which may lead to lower prices for our products, reduced gross margins, loss of market share and reduced revenue

The markets for business intelligence software, analytical applications and information delivery are intensely competitive and subject to rapidly changing technology. In addition, many companies in these markets are offering, or may soon offer, products and services that may compete with MicroStrategy products.

MicroStrategy faces competitors in several broad categories, including business intelligence software, analytical processes, query and web-based reporting tools, and report delivery. Independent competitors that are primarily focused on business intelligence products include, among others, Actuate, Information Builders and the SAS Institute. We also compete with large software corporations, including suppliers of enterprise resource planning software that provide one or more capabilities competitive with our products, such as IBM, Microsoft, Oracle, SAP AG, and Infor, and with open source business intelligence vendors, including Pentaho and JasperSoft.

Many of our competitors have longer operating histories, significantly greater financial, technical, marketing or other resources, and greater name recognition than we do. In addition, many of our competitors have strong relationships with current and potential customers and extensive knowledge of the business intelligence industry. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of their products than we can. Increased competition may lead to price cuts, reduced gross margins and loss of market share. We may not be able to compete successfully against current and future competitors and the failure to meet the competitive pressures we face may have a material adverse effect on our business, operating results and financial condition.

Current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others. For example, Oracle acquired Hyperion Solutions in April 2007, IBM acquired Cognos in January 2008 and SAP acquired Business Objects in January 2008. By doing so, these competitors may increase their ability to meet the needs of our potential customers. Our current or prospective indirect channel partners may establish cooperative relationships with our current or future competitors. These relationships may limit our ability to sell our products through specific distribution channels. Accordingly, new competitors or alliances among current and future competitors may emerge and rapidly gain significant market share. These developments could limit our ability to obtain revenues from new customers and to maintain technical support revenues from our installed customer base.

We depend on revenue from a single suite of products

Our MicroStrategy business intelligence platform and related products account for a substantial portion of our revenue. Because of this revenue concentration, our business could be harmed by a decline in demand for, or in the prices of, our MicroStrategy business intelligence platform software as a result of, among other factors, any change in our pricing model, increased competition, a maturation in the markets for these products or other risks described in this document.

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If we are unable to develop and release product enhancements and new products to respond to rapid technological change in a timely and cost-effective manner, our business, operating results and financial condition could be materially adversely affected.

The market for our products is characterized by rapid technological change, frequent new product introductions and enhancements, changing customer demands and evolving industry standards. The introduction of products embodying new technologies can quickly make existing products obsolete and unmarketable. We believe that our future success depends largely on three factors:

• our ability to continue to support a number of popular operating systems and databases;

• our ability to maintain and improve our current product line; and

• our ability to rapidly develop new products that achieve market acceptance, maintain technological competitiveness and meet an expanding range of customer requirements.

Business intelligence applications are inherently complex, and it can take a long time and require significant research and development expenditures to develop and test new products and product enhancements. In addition, customers may delay their purchasing decisions because they anticipate that new or enhanced versions of our products will soon become available. We cannot be sure that we will succeed in developing and marketing, on a timely and cost-effective basis, product enhancements or new products that respond to technological change or new customer requirements, nor can we be sure that any new products and product enhancements, such as the MicroStrategy 9 suite of products that we expect to make generally available in the first quarter of 2009, will achieve market acceptance. Moreover, even if we introduce a new product, we may experience a decline in revenues of our existing products that is not fully matched by the new product’s revenue. For example, customers may delay making purchases of a new product to permit them to make a more thorough evaluation of the product, or until industry and marketplace reviews become widely available. Some customers may hesitate migrating to a new product due to concerns regarding the complexity of migration and product infancy issues on performance. In addition, we may lose existing customers who choose a competitor’s product rather than migrate to our new product. This could result in a temporary or permanent revenue shortfall and materially affect our business.

Business disruptions could affect our operating results

A significant portion of our research and development activities and certain other critical business operations are concentrated in a single facility in northern Virginia. We are also a highly automated business and a disruption or failure of our systems could cause delays in completing sales and providing services. A major earthquake, fire, act of terrorism or other catastrophic event that results in the destruction or disruption of any of our critical business operations or information technology systems could severely affect our ability to conduct normal business operations and as a result our future operating results could be materially and adversely affected.

We use strategic channel partners and if we are unable to maintain successful relationships with them, our business, operating results and financial condition could be materially adversely affected

In addition to our direct sales force, we use strategic channel partners such as value-added resellers, system integrators and original equipment manufacturers to license and support our products. For the year ended December 31, 2008, transactions by channel partners for which we recognized revenues accounted for 4.4%, of our total product licenses revenues. Our channel partners generally offer customers the products of several different companies, including products that compete with ours. Because our channel partners generally do not have an exclusive relationship with us, we cannot be certain that they will prioritize or provide adequate resources to selling our products. Moreover, divergence in strategy or contract defaults by any of these channel partners may materially adversely affect our ability to develop, market, sell or support our products.

Although we believe that direct sales will continue to account for a majority of product licenses revenues, we seek to maintain a significant level of indirect sales activities through our strategic channel partners. There

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can be no assurance that our strategic partners will continue to cooperate with us when our distribution agreements expire or are up for renewal. In addition, there can be no assurance that actions taken or omitted to be taken by such parties will not adversely affect us. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our strategic partners. If we are unable to maintain our relationships with these strategic partners, our business, operating results and financial condition could be materially adversely affected.

In addition, we rely on our strategic channel partners to operate in accordance with the terms of their contractual agreements with us. For example, our agreements with our channel partners limit the terms and conditions pursuant to which they are authorized to resell or distribute our software and offer technical support and related services. We also typically require our channel partners to represent to us the dates and details of product license transactions sold through to end user customers. If our strategic channel partners do not comply with their contractual obligations to us, our business, results of operations and financial condition may be materially and adversely affected.

Our recognition of deferred revenue and advance payments and future customer purchase commitments is subject to future performance obligations and may not be representative of revenues for succeeding periods

Our gross current and long-term deferred revenue and advance payments totaled $130.8 million as of December 31, 2008. We offset our accounts receivable and deferred revenue for any billed and unpaid items, which totaled $62.6 million, resulting in net deferred revenue and advance payments of $68.2 million as of December 31, 2008. The timing and ultimate recognition of our deferred revenue and advance payments depend on various factors, including our performance of various service obligations. We have also entered into certain additional agreements that include future minimum commitments by our customers to purchase products, product support or other services through 2013 totaling approximately $52.5 million. These future commitments are not included in our deferred revenue balances. Because of the possibility of customer changes or delays in customer development or implementation schedules or budgets, and the need for us to satisfactorily perform product support services, deferred revenue and advance payments at any particular date may not be representative of actual revenue for any succeeding period.

We may not be able to sustain or increase profitability in the future

We generated net income for each of the years ended December 31, 2008, 2007 and 2006; however, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If operating expenses exceed our expectations or cannot be adjusted accordingly or revenues fall below our expectations, we may cease to be profitable and our business, results of operations and financial condition may be materially and adversely affected. We have significant deferred tax assets, and if we are unable to sustain profitability, we may be required to establish a valuation allowance against these deferred tax assets, which would result in a charge that would adversely affect net income in the period in which the charge is incurred.

Managing our international operations is complex and our failure to do so successfully or in a cost-effective manner could have a material adverse effect on our business, operating results and financial condition

We receive a significant portion of our total revenues from international sales from foreign direct and indirect operations. International revenues accounted for 40.4%, 38.0% and 36.8% of our total revenues for the years ended December 31, 2008, 2007 and 2006, respectively. Our international operations require significant management attention and financial resources.

There are certain risks inherent in our international business activities including:

• changes in foreign currency exchange rates;

• unexpected changes in regulatory requirements;

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• tariffs, export restrictions and other trade barriers;

• costs of localizing products;

• lack of acceptance of localized products;

• difficulties in and costs of staffing, managing and operating our international operations;

• tax issues, including restrictions on repatriating earnings;

• weaker intellectual property protection;

• economic weakness or currency related crises;

• the burden of complying with a wide variety of laws, including labor laws;

• generally longer payment cycles and greater difficulty in collecting accounts receivable;

• our ability to adapt to sales practices and customer requirements in different cultures; and

• political instability in the countries where we are doing business.

In addition, compliance with foreign and U.S. laws and regulations that are applicable to our international operations is complex and may increase our cost of doing business in international jurisdictions, and our international operations could expose us to fines and penalties if we fail to comply with these regulations. These laws and regulations include import and export requirements, U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures designed to help ensure compliance with these laws, there can be no assurance that our employees, partners and other persons with whom we do business will not take actions in violation of our policies or these laws. Any violations of these laws could subject us to civil or criminal penalties, including substantial fines or prohibitions on our ability to offer our products and services to one or more countries, and could also materially damage our reputation, our brand and our international expansion efforts.

These factors may have a material adverse effect on our future international sales and, consequently, on our business, operating results and financial condition.

We may lose sales, or sales may be delayed, due to the long sales and implementation cycles for our products, which could reduce our revenues

To date, our customers have typically invested substantial time, money and other resources and involved many people in the decision to license our software products and purchase our consulting and other services. As a result, we may wait nine months or more after the first contact with a customer for that customer to place an order while it seeks internal approval for the purchase of our products and/or services. During this long sales cycle, events may occur that affect the size or timing of the order or even cause it to be canceled. For example, our competitors may introduce new products, or the customer’s own budget and purchasing priorities may change.

Even after an order is placed, the time it takes to deploy our products and complete consulting engagements can vary widely. Implementing our product can take several months, depending on the customer’s needs, and may begin only with a pilot program. It may be difficult to deploy our products if the customer has complicated deployment requirements, which typically involve integrating databases, hardware and software from different vendors. If a customer hires a third party to deploy our products, we cannot be sure that our products will be deployed successfully.

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Our results in any particular period may depend upon the number and volume of large transactions in that period and these transactions may involve more lengthy, complex and unpredictable sales cycles than other transactions

As existing and potential customers seek to standardize on a single business intelligence vendor, our business may experience larger transactions at the enterprise level and larger transactions may account for a greater proportion of our business. The presence or absence of one or more large transactions in a particular period may have a material positive or negative effect on our revenue and operating results for that period. During 2008, our top three product license transactions totaled approximately $9.1 million of recognized revenue, including one transaction with $4.0 million of recognized revenue, compared to $5.7 million of recognized revenue in 2007, or 9.5% and 5.7% of total product licenses revenues during 2008 and 2007, respectively. These transactions represent significant business and financial decisions for our customers and require considerable effort on the part of customers to assess alternative products and require additional levels of management approval before being concluded. They are also often more complex than smaller transactions. These factors generally lengthen the typical sales cycle and increase the risk that the customer’s purchasing decision may be postponed or delayed from one period to another subsequent or later period or that the customer will alter his purchasing requirements. The sales effort and service delivery scope for larger transactions also require additional resources to execute the transaction. These factors could result in lower than anticipated revenue and earnings for a particular period or in the reduction of estimated revenue and earnings in future periods.

We face a variety of risks in doing business with the U.S. and foreign governments, various state and local governments, and agencies, including risks related to the procurement process, budget constraints and cycles, termination of contracts and audits

Our customers include the U.S. government and a number of state and local governments or agencies. There are a variety of risks in doing business with government entities, including:

Procurement. Contracting with public sector customers is highly competitive and can be time-consuming and expensive, requiring that we incur significant up-front time and expense without any assurance that we will win a contract.

Budgetary Constraints and Cycles. Demand and payment for our products and services are impacted by public sector budgetary cycles and funding availability, with funding reductions or delays adversely impacting public sector demand for our products and services.

Termination of Contracts. Public sector customers often have contractual or other legal rights to terminate current contracts for convenience or due to a default. If a contract is terminated for convenience, which can occur if the customer’s needs change, we may only be able to collect for products or services delivered prior to termination and settlement expenses. If a contract is terminated because of default, we may not recover even those amounts, and we may be liable for excess costs incurred by the customer for procuring alternative products or services.

Audits. The U.S. government and state and local governments and agencies routinely investigate and audit government contractors for compliance with a variety of complex laws, regulations, and contract provisions relating to the formation, administration or performance of government contracts, including provisions governing reports of and remittances of fees based on sales under government contracts, price protection, compliance with socio-economic policies, and other terms that are particular to government contracts. If, as a result of an audit or review, it is determined that we have failed to comply with such laws, regulations or contract provisions, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines and suspensions or debarment from future government business, and we may suffer harm to our reputation.

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Our customers also include a number of foreign governments and agencies. Similar procurement, budgetary, contract and audit risks also apply to our doing business with these entities. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be expensive and consume significant management resources. In certain jurisdictions our ability to win business may be constrained by political and other factors unrelated to our competitive position in the market. Each of these difficulties could adversely affect our business and results of operations.

We depend on technology licensed to us by third parties, and the loss of this technology could impair our software, delay implementation of our products or force us to pay higher license fees

We license third-party technologies that we incorporate into our existing products. There can be no assurance that the licenses for such third-party technologies will not be terminated or that we will be able to license third-party software for future products. In addition, we may be unable to renegotiate acceptable third-party license terms. Changes in or the loss of third party licenses could lead to a material increase in the costs of licensing or to our software products becoming inoperable or their performance being materially reduced, with the result that we may need to incur additional development costs to ensure continued performance of our products, and we may experience a decreased demand for our products.

If we are unable to recruit or retain skilled personnel, or if we lose the services of any of our key management personnel, our business, operating results and financial condition could be materially adversely affected

Our future success depends on our continuing ability to attract, train, assimilate and retain highly skilled personnel. Competition for these employees is intense. We may not be able to retain our current key employees or attract, train, assimilate or retain other highly skilled personnel in the future. Our future success also depends in large part on the continued service of key management personnel, particularly Michael J. Saylor, our Chairman, President and Chief Executive Officer, and Sanju K. Bansal, our Vice Chairman, Executive Vice President and Chief Operating Officer. If we lose the services of one or both of these individuals or other key personnel, or if we are unable to attract, train, assimilate and retain the highly skilled personnel we need, our business, operating results and financial condition could be materially adversely affected.

The emergence of new industry standards may adversely affect the demand for our existing products

The emergence of new industry standards in related fields may adversely affect the demand for our existing products. This could happen, for example, if new web standards and technologies emerged that were incompatible with customer deployments of our products. MicroStrategy currently supports SQL and MDX standards in database access technology. If we are unable to adapt our products on a timely basis to new standards in database access technology, the ability of MicroStrategy’s products to access customer databases could be impaired. In addition, the emergence of new standards in the field of operating system support could adversely affect the demand for our existing products. MicroStrategy technology is currently compatible with nearly all major operating systems, including, among others, Windows Server, Sun Solaris, IBM AIX, HP’s HP-UX, Red Hat Linux AS and SuSE Linux Enterprise Server. If a different operating system were to gain widespread acceptance, we may not be able to achieve compatibility on a timely basis, resulting in an adverse effect on the demand for our products.

The nature of our products makes them particularly vulnerable to undetected errors, or bugs, which could cause problems with how the products perform and which could in turn reduce demand for our products, reduce our revenue and lead to product liability claims against us

Software products as complex as ours may contain errors and/or defects. Although we test our products extensively, we have in the past discovered software errors in our products after their introduction. Despite testing by us and by our current and potential customers, errors may be found in new products or releases after

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commercial shipments begin. This could result in lost revenue, damage to our reputation or delays in market acceptance, which could have a material adverse effect upon our business, operating results and financial condition. We may also have to expend resources and capital to correct these defects.

Our license agreements with customers typically contain provisions designed to limit our exposure to product liability, warranty and other claims. It is possible, however, that these provisions may not be effective under the laws of certain domestic or international jurisdictions and we may be exposed to product liability, warranty and other claims. A successful product liability claim against us could have a material adverse effect on our business, operating results and financial condition.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand

We rely on a combination of copyright, patent, trade secrets, confidentiality procedures and contractual commitments to protect our proprietary information. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. Any patents owned by us may be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all. In addition, the laws of some countries do not provide the same level of protection of our proprietary rights as do the laws of the United States. If we cannot protect our proprietary technology against unauthorized copying or use, we may not remain competitive.

Third parties may claim we infringe their intellectual property rights

We periodically receive notices from others claiming we are infringing their intellectual property rights, principally patent rights. We expect the number of such claims will increase as the number of products and level of competition in our industry segments grow, the functionality of products overlap, and the volume of issued software patents and patent applications continues to increase. Responding to any infringement claim, regardless of its validity, could:

• be time-consuming, costly and/or result in litigation;

• divert management’s time and attention from developing our business;

• require us to pay monetary damages or enter into royalty and licensing agreements that we would not normally find acceptable;

• require us to stop selling certain of our products;

• require us to redesign certain of our products using alternative non-infringing technology or practices, which could require significant effort and expense; or

• require us to satisfy indemnification obligations to our customers.

If a successful claim is made against us and we fail to develop or license a substitute technology, our business, results of operations, financial condition or cash flows could be adversely affected.

For example, on November 8, 2007 Diagnostic Systems Corp. (DSC), a subsidiary of Acacia Technology Group, filed a complaint for patent infringement against MicroStrategy and a number of other unrelated defendants in the United States District Court for the Central District of California, Southern Division. The case has been consolidated with Case No. SA CV 07-896 AG (MLGx) pending against other unrelated defendants. The consolidated complaint accuses MicroStrategy of infringing U.S. Patent No. 5,537,590 directly, contributorily and by inducement by making, using, selling and offering for sale in the United States MicroStrategy 8 Business Intelligence Platform, when used with an appropriate database. The consolidated complaint accuses MicroStrategy of willful infringement and seeks damages, a finding that the case is

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exceptional and an award of attorneys’ fees, and preliminary and permanent injunctive relief. In its initial disclosures pursuant to Federal Rule of Civil Procedure 26(a) served on December 28, 2007, DSC declined to disclose the amount of its alleged damages, but disclosed that its alleged damages are based on a reasonable royalty theory. MicroStrategy answered the consolidated complaint on December 28, 2007, denied infringement, asserted affirmative defenses of non-infringement, invalidity and unenforceability, among others, and counter-claimed for declaratory judgment that the ‘590 patent is not infringed, is invalid, and is unenforceable. The Court has not yet set a trial date. This case had been stayed in its entirety pending resolution of a writ of mandamus filed by DSC in the United States Court of Appeals for the Federal Circuit challenging an order by the District Court compelling DSC to produce documents to defendants in discovery that DSC alleges are privileged. The Federal Circuit denied DSC’s request for a writ of mandamus at the end of 2008, and the District Court has lifted the stay on the litigation. A revised schedule for the litigation has not yet been set by the Court. The outcome of this litigation is not presently determinable.

Pending or future litigation could have a material adverse impact on our results of operation and financial condition

In addition to intellectual property litigation, from time to time, we have been subject to other litigation. Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our estimates could be wrong. In addition to the related cost and use of cash, pending or future litigation could cause the diversion of management’s attention and resources.

Because of the rights of our two classes of common stock, and because we are controlled by our existing holders of class B common stock, these stockholders could transfer control of MicroStrategy to a third party without the approval of our Board of Directors or our other stockholders, prevent a third party from acquiring MicroStrategy, or limit your ability to influence corporate matters

We have two classes of common stock: class A common stock and class B common stock. Holders of our class A common stock generally have the same rights as holders of our class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share. As of February 2, 2009, holders of our class B common stock owned 2,770,244 shares of class B common stock, or 75.2% of the total voting power. Michael J. Saylor, our Chairman, President and Chief Executive Officer, beneficially owned 399,800 shares of class A common stock and 2,429,582 shares of class B common stock, or 67.1% of the total voting power, as of February 2, 2009. Accordingly, Mr. Saylor is able to control MicroStrategy through his ability to determine the outcome of elections of our directors, amend our certificate of incorporation and by-laws and take other actions requiring the vote or consent of stockholders, including mergers, going-private transactions and other extraordinary transactions and their terms.

Our certificate of incorporation allows holders of class B common stock, all of whom are current employees or directors of our company or related parties, to transfer shares of class B common stock, subject to the approval of stockholders possessing a majority of the outstanding class B common stock. Mr. Saylor or a group of stockholders possessing a majority of the outstanding class B common stock could, without the approval of our Board of Directors or our other stockholders, transfer voting control of MicroStrategy to a third party. Such a transfer of control could have a material adverse effect on our business, operating results and financial condition. Mr. Saylor or a group of stockholders possessing a majority of the outstanding class B common stock will also be able to prevent a change of control of MicroStrategy, regardless of whether holders of class A common stock might otherwise receive a premium for their shares over the then current market price. In addition, this concentrated control limits stockholders’ ability to influence corporate matters and, as a result, we may take actions that our non-controlling stockholders do not view as beneficial. As a result, the market price of our class A common stock could be adversely affected.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal offices are located in Northern Virginia and, as of December 31, 2008, consist of approximately 182,000 square feet of leased facilities, including 30,000 square feet that had been subleased to a third party. The term of the lease for 152,000 square feet expires in 2010 but may be extended at our option for two additional five-year terms. The terms of the third party sublease and our primary lease for the remaining 30,000 square feet expire in February 2009 and we are not extending these terms.

In addition, we lease approximately 45,000 square feet of sales, research and development and administrative offices domestically and approximately 129,000 square feet of sales, research and development and administrative offices internationally in a variety of locations.

ITEM 3. LEGAL PROCEEDINGS

On November 8, 2007, Diagnostic Systems Corp. (DSC), a subsidiary of Acacia Technology Group, filed a complaint for patent infringement against MicroStrategy and a number of other unrelated defendants in the United States District Court for the Central District of California, Southern Division. The case has been consolidated with Case No. SA CV 07-896 AG (MLGx) pending against other unrelated defendants. The consolidated complaint accuses MicroStrategy of infringing U.S. Patent No. 5,537,590 directly, contributorily and by inducement, by making, using, selling and offering for sale in the United States MicroStrategy 8 Business Intelligence Platform, when used with an appropriate database. The consolidated complaint accuses MicroStrategy of willful infringement and seeks damages, a finding that the case is exceptional and an award of attorneys’ fees, and preliminary and permanent injunctive relief. In its initial disclosures pursuant to Federal Rule of Civil Procedure 26(a) served on December 28, 2007, DSC declined to disclose the amount of its alleged damages, but disclosed that its alleged damages are based on a reasonable royalty theory. MicroStrategy answered the consolidated complaint on December 28, 2007, denied infringement, asserted affirmative defenses of non-infringement, invalidity and unenforceability, among others, and counter-claimed for declaratory judgment that the ‘590 patent is not infringed, is invalid, and is unenforceable. The Court has not yet set a trial date. This case had been stayed in its entirety pending resolution of a writ of mandamus filed by DSC in the United States Court of Appeals for the Federal Circuit challenging an order by the District Court compelling DSC to produce documents to defendants in discovery that DSC alleges are privileged. The Federal Circuit denied DSC’s request for a writ of mandamus at the end of 2008, and the District Court has lifted the stay on the litigation. A revised schedule for the litigation has not yet been set by the Court. The outcome of this litigation is not presently determinable. Accordingly, no provision for this matter has been made in the accompanying consolidated financial statements.

On December 10, 2003, MicroStrategy filed a complaint for patent infringement against Crystal Decisions, Inc. in the United States District Court for the District of Delaware. The lawsuit alleged that Crystal Decisions willfully infringed three patents issued to MicroStrategy relating to: (i) asynchronous control of report generation using a web browser (the ‘033 patent); (ii) management of an automatic OLAP report broadcast system (the ‘796 patent); and (iii) providing business intelligence web content with reduced client-side processing (the ‘432 patent). Following the filing of the complaint, Crystal Decisions was acquired by Business Objects Americas, Inc. Business Objects Americas, Inc. answered the complaint, denying infringement and seeking a declaration that the patents in suit are invalid and not infringed by Business Objects Americas, Inc. MicroStrategy filed a motion for summary judgment of infringement of the ‘432, ‘796, and ‘033 patents on October 13, 2005. Business Objects filed motions for summary judgment of non-infringement and invalidity of the ‘432, ‘796, and ‘033 patents on October 13, 2005. The Court granted Business Objects’ motions for summary judgment of non-infringement of the ‘033 patent and of invalidity of the ‘432 and ‘796 patents. The Court denied Business

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Objects’ motion for summary judgment of invalidity of the ‘033 patent and denied as moot Business Objects’ motion for summary judgment of non-infringement of the ‘432 and ‘796 patents. On February 23, 2006, the Court entered judgment in favor of Business Objects and against MicroStrategy. MicroStrategy filed a notice of appeal to the Federal Circuit on March 24, 2006. On June 25, 2007, the Federal Circuit affirmed the District Court’s judgment in favor of Business Objects and against MicroStrategy on each of the ‘432, ‘796, and ‘033 patents. MicroStrategy did not file a request for rehearing before the Federal Circuit or file a petition for a writ of certiorari before the United States Supreme Court.

On March 9, 2006, Business Objects filed a motion seeking reimbursement from MicroStrategy of Business Objects’ attorneys’ fees and costs in the amount of approximately $4.7 million. On March 25, 2008, the Court issued a memorandum opinion and an order. The Court awarded partial fees and expenses to Business Objects as the prevailing party. Business Objects was awarded reasonable fees and expenses after March 14, 2005 defending against the ‘796 patent, the ‘033 patent and claims 1, 2, 4, and 5 of the ‘432 patent. Business Objects’ motion for fees and expenses related to claims 6, 9, 10 and 13 of the ‘432 patent was denied. Business Objects was required to submit a detailed summary of the hours spent after March 14, 2005, the hourly rate charged, and the expenses incurred defending against the ‘796 patent, the ‘033 patent, and claims 1, 2, 4 and 5 of the ‘432 patent. On April 15, 2008, Business Objects submitted its fee petition seeking $2.3 million. On May 15, 2008, MicroStrategy submitted its opposition to the petition. On November 20, 2008, the Court awarded Business Objects attorneys’ fees and costs of $2,245,263.87 for its defense of the ‘796 patent, the ‘033 patent and claims 1, 2, 4 and 5 of the ‘432 patent after March 14, 2005 and $138,399.02 for the preparation of the petition. We have filed a notice of appeal of the order. During the first quarter of 2008, we recorded a $2.3 million accrued liability related to this claim. The $2.3 million accrual is included in accounts payable and accrued expense in our consolidated balance sheets, and has been recorded as a general and administrative expense in our consolidated statements of operations. The ultimate liability to us resulting from this proceeding may differ materially from the accrued amount.

We also are involved in various other legal proceedings arising in the normal course of business. Although the outcomes of these other legal proceedings are inherently difficult to predict, we do not expect the resolution of these other legal proceedings to have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2008.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our class A common stock is traded on the Nasdaq Global Market under the symbol “MSTR.” The following table sets forth the high and low sales prices for the class A common stock for the periods indicated as reported by the Nasdaq Global Market:

	High		Low
Year ended December 31, 2008
First Quarter	$	96.15	$	64.25
Second Quarter		90.98		64.68
Third Quarter		67.59		53.50
Fourth Quarter		59.95		30.55
Year ended December 31, 2007
First Quarter	$	133.12	$	113.33
Second Quarter		127.76		92.41
Third Quarter		97.86		60.77
Fourth Quarter		112.39		78.85

There is no established public trading market for our class B common stock. As of February 2, 2009, there were approximately 2,328 stockholders of record of our class A common stock and 5 stockholders of record of our class B common stock.

Holders of our class A common stock generally have the same rights as holders of our class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share.

We have never declared or paid any cash dividends on either our class A or class B common stock and have no current plans to declare or pay any such dividends.

During the three months ended December 31, 2008, we did not repurchase any equity securities registered by us pursuant to Section 12 of the Exchange Act.

On July 28, 2005, we announced that our Board of Directors had authorized our repurchase of up to an aggregate of $300.0 million of our class A common stock from time to time on the open market, pursuant to the 2005 Share Repurchase Program. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors. The 2005 Share Repurchase Program may be funded using our working capital, as well as proceeds from any credit facilities and other borrowing arrangements which we may enter into in the future. On April 29, 2008, our Board of Directors amended the 2005 Share Repurchase Program to increase the amount of class A common stock that we are authorized to repurchase from $300 million to $800 million in the aggregate. The term of the 2005 Share Repurchase Program was also extended to April 29, 2013, although the program may be suspended or discontinued by us at any time. As of December 31, 2008, we had repurchased an aggregate of 2,469,473 shares of our class A common stock at an average price per share of $95.69 and an aggregate cost of $236.3 million under the 2005 Share Repurchase Program. As of December 31, 2008, $563.7 million remained available under the 2005 Share Repurchase Program to repurchase our class A common stock.

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Performance Graph

The following graph compares the cumulative total stockholder return on the class A common stock of the Company from December 31, 2002 (the last trading day before the beginning of the Company’s fifth preceding fiscal year) to December 31, 2008 (the last trading day of the fiscal year ended December 31, 2008) with the cumulative total return of (i) the Total Return Index for The Nasdaq Stock Market (U.S. Companies) (the “Nasdaq Composite Index”) and (ii) the Nasdaq Computer Index (the “NASDAQ Computer Index”). The graph assumes the investment of $100.00 on December 31, 2002 in the class A common stock of the Company, the NASDAQ Composite Index and the NASDAQ Computer Index, and assumes any dividends are reinvested. Measurement points are December 31, 2003, December 31, 2004, December 30, 2005, December 29, 2006, December 31, 2007 and December 31, 2008.

	12/31/03		12/31/04		12/30/05		12/29/06		12/31/07		12/31/08
MicroStrategy Incorporated	$	100.00	$	114.81	$	157.57	$	217.33	$	181.27	$	70.75
NASDAQ Composite Index	$	100.00	$	109.16	$	111.47	$	123.05	$	140.12	$	84.12
NASDAQ Computer Index	$	100.00	$	103.54	$	106.96	$	114.24	$	139.21	$	74.21

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and notes thereto, and other financial information appearing elsewhere in this Annual Report on Form 10-K.

	Years Ended December 31,
	2008		2007			2006			2005			2004
	(in thousands)
Statements of Operations Data
Revenues:
Product licenses	$	95,924	$	100,344		$	107,383		$	99,926		$	96,995
Product support and other services		264,469		235,029			202,903			167,157			134,082
Total revenues		360,393		335,373			310,286			267,083			231,077
Cost of revenues:
Product licenses		1,877		3,055			2,763			3,886			3,710
Product support and other services		61,529		47,486			38,789			31,201			29,056
Total cost of revenues		63,406		50,541			41,552			35,087			32,766
Gross profit		296,987		284,832			268,734			231,996			198,311
Operating expenses:
Sales and marketing		137,683		110,436			87,410			69,961			69,538
Research and development		30,571		35,171			33,068			30,777			24,439
General and administrative		60,933		49,514			45,813			35,645			34,483
Total operating expenses		229,187		195,121			166,291			136,383			128,460
Income from continuing operations before financing and other income and income taxes		67,800		89,711			102,443			95,613			69,851
Financing and other income (expense):
Interest income, net		2,266		3,674			2,820			2,880			1,168
Other income (expense), net		705		(866	)		(1,571	)		1,140			(532	)
Total financing and other income		2,971		2,808			1,249			4,020			636
Income from continuing operations before income taxes		70,771		92,519			103,692			99,633			70,487
Provision (benefit) for income taxes		29,003		33,311			31,520			34,107			(98,447	)
Income from continuing operations		41,768		59,208			72,172			65,526			168,934
Income (loss) from discontinued operations, net of tax		65		(740	)		(1,296	)		(783	)		(621	)
Net income	$	41,833	$	58,468		$	70,876		$	64,743		$	168,313
Basic earnings (loss) per share (1):
From continuing operations	$	3.51	$	4.80		$	5.56		$	4.44		$	10.52
From discontinued operations		0.01		(0.06	)		(0.10	)		(0.06	)		(0.04	)
Basic earnings per share	$	3.52	$	4.74		$	5.46		$	4.38		$	10.48
Weighted average shares outstanding used in computing basic earnings per share		11,886		12,325			12,987			14,768			16,055
Diluted earnings (loss) per share (1):
From continuing operations	$	3.39	$	4.61		$	5.29		$	4.24		$	9.87
From discontinued operations		0.01		(0.06	)		(0.09	)		(0.05	)	$	(0.04	)
Diluted earnings per share	$	3.40	$	4.55		$	5.20		$	4.19		$	9.83
Weighted average shares outstanding used in computing diluted earnings per share		12,303		12,853			13,633			15,436			17,119

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	As of December 31,
	2008		2007		2006		2005		2004
	(in thousands)
Balance Sheet Data
Cash and cash equivalents	$	122,915	$	85,194	$	78,980	$	42,318	$	68,314
Restricted cash		619		2,982		3,799		5,076		1,210
Short-term investments		3		8		16		53,761		37,816
Assets held-for-sale		4,964		4,272		995		438		258
Net working capital (2)		71,278		55,241		62,639		80,792		85,636
Long-term investments		—		—		—		—		26,365
Deferred tax assets, net, short-term		26,743		29,652		29,510		22,971		20,583
Deferred tax assets, net, long-term		17,105		35,347		57,944		86,393		110,818
Total assets		292,139		242,191		249,344		277,890		336,975
Liabilities held-for-sale		6,325		3,436		1,396		358		218
Deferred revenue and advance payments, short-term		66,495		64,234		56,547		45,874		43,668
Deferred revenue and advance payments, long-term		1,679		1,368		1,127		1,554		1,681
Long-term liabilities, excluding deferred revenue and advance payments		9,268		9,137		1,710		2,815		5,063
Total stockholders’ equity		138,041		103,329		133,151		180,722		240,578

(1) Basic and fully diluted earnings per share for class A and class B common stock are the same.

(2) Net working capital is equivalent to current assets less current liabilities, including net assets (liabilities) of discontinued operations, deferred revenue and advance payments and contingencies from terminated contracts.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

This discussion contains forward-looking statements within the meaning of Section 21E of the Exchange Act. For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements regarding industry prospects and our results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The important factors discussed under “Item 1A. Risk Factors,” among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations.

Overview

We are a worldwide provider of business intelligence software that enables companies to analyze the raw data stored across their enterprise to reveal the trends and insights needed to develop solutions to manage their business effectively. Our software delivers this information to workgroups, the enterprise and extranet communities via e-mail, web, fax, wireless and voice communication channels. Businesses can use our software platform to develop user-friendly solutions, proactively refine revenue-generating strategies, enhance cost-efficiency and productivity and improve customer relationships.

The MicroStrategy software platform enables users to query and analyze the most detailed, transaction-level databases, turning data into business intelligence and delivering boardroom quality reports and alerts about the users’ business processes. Our web-based architecture provides reporting, security, performance and standards that are critical for web deployment. With intranet deployments, our products provide employees with information to enable them to make better, more cost-effective business decisions. With extranet deployments, enterprises can use the MicroStrategy software platform to build stronger relationships by linking customers and suppliers via the Internet. We also offer a comprehensive set of consulting, education, technical support and technical advisory services for our customers and strategic partners.

Our core business intelligence (“BI”) business derives its revenues from product licenses and product support and other services. Product licenses revenues are derived from the sale of software licenses for our MicroStrategy 8 business intelligence platform and related products. We license our software to end users through our direct sales organization and through indirect sales channels, such as resellers, systems integrators and original equipment manufacturers, or OEMs. Our arrangements with customers typically include: (a) an end user license fee paid for the use of our products in perpetuity or over a specified term; (b) an annual maintenance agreement that provides for software updates and upgrades and technical support for an annual fee; and (c) a services work order for implementation, consulting and training, generally for a fee determined on a time-and-materials basis or, in certain circumstances, a fixed-fee.

During 2008, we operated two non-core businesses, Alarm.com and Angel.com, which focus outside of the BI software and services market. Alarm.com is a provider of web-enabled residential and commercial security and activity monitoring technology, and Angel.com is a provider of interactive voice response telephony systems. In March 2008, in connection with our consideration of strategic alternatives relating to our non-core Alarm.com and Angel.com businesses, we committed to a plan to sell these businesses. We made the decision to sell these businesses in order to focus our resources on our core competency of business intelligence software and services. Accordingly, the financial results for Alarm.com and Angel.com were reclassified as discontinued operations in the quarter ended March 31, 2008.

Although we continued to explore strategic alternatives for the Angel.com business, based on changes in market conditions that occurred in the quarter ended June 30, 2008, we determined that Angel.com no longer met

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the criteria to permit discontinued operations treatment and held-for-sale classification. Accordingly, amounts related to Angel.com were reclassified to continuing operations in the second quarter of 2008. This reclassification did not have a material impact on our financial results for any period presented.

On February 13, 2009, we completed the sale of our equity interest in Alarm.com to Alarm.com Holdings, Inc. As a result of the transaction, we received aggregate consideration of approximately $27.7 million in cash, subject to post-closing purchase price adjustments, if any, which will be determined based on Alarm.com’s working capital on the closing date. The sale of our ownership interest in Alarm.com is expected to result in us recognizing an after-tax gain in the range of approximately $14 million to $17 million in the first quarter of 2009, which includes the cost of terminating all outstanding Alarm.com employee stock options prior to the closing of the transaction and other costs associated with the sale. Accordingly, on our Consolidated Balance Sheets, we classified the associated assets and liabilities of the Alarm.com business as held-for-sale in accordance with Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment of Long-Lived Assets”, or SFAS 144. In our Consolidated Statement of Operations, we classified the operations of the Alarm.com business as Income (Loss) from Discontinued Operations, net of tax, because we do not expect to have significant continuing involvement or cash flows from this business after the divestiture. All assets and liabilities that are reported in these financial statements as “held-for-sale” are reported at the lower of the carrying cost or fair value less cost to sell.

The following tables set forth certain operating highlights for the years ended December 31, 2008, 2007, and 2006 (in thousands):

	Core BI Business		Angel.com			Consolidated
	Twelve Months Ended December 31, 2008		Twelve Months Ended December 31, 2008			Twelve Months Ended December 31, 2008
Revenues
Product licenses	$	95,924	$	—		$	95,924
Product support and other services		253,660		—			253,660
Angel.com telephony services		—		10,809			10,809
Total revenues		349,584		10,809			360,393
Cost of Revenues
Product licenses		1,877		—			1,877
Product support and other services		59,331		—			59,331
Angel.com telephony services		—		2,198			2,198
Total cost of revenues		61,208		2,198			63,406
Gross profit		288,376		8,611			296,987
Operating Expenses
Sales and marketing		129,721		7,962			137,683
Research and development		27,546		3,025			30,571
General and administrative		60,651		282			60,933
Total operating expenses		217,918		11,269			229,187
Income (loss) from operations	$	70,458	$	(2,658	)	$	67,800

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	Core BI Business		Angel.com			Consolidated
	Twelve Months Ended December 31, 2007		Twelve Months Ended December 31, 2007			Twelve Months Ended December 31, 2007
Revenues
Product licenses	$	100,344	$	—		$	100,344
Product support and other services		227,917		—			227,917
Angel.com telephony services		—		7,112			7,112
Total revenues		328,261		7,112			335,373
Cost of Revenues
Product licenses		3,055		—			3,055
Product support and other services		45,662		—			45,662
Angel.com telephony services		—		1,824			1,824
Total cost of revenues		48,717		1,824			50,541
Gross profit		279,544		5,288			284,832
Operating Expenses
Sales and marketing		104,525		5,911			110,436
Research and development		32,464		2,707			35,171
General and administrative		49,402		112			49,514
Total operating expenses		186,391		8,730			195,121
Income (loss) from operations	$	93,153	$	(3,442	)	$	89,711

	Core BI Business		Angel.com			Consolidated
	Twelve Months Ended December 31, 2006		Twelve Months Ended December 31, 2006			Twelve Months Ended December 31, 2006
Revenues
Product licenses	$	107,383	$	—		$	107,383
Product support and other services		197,915		—			197,915
Angel.com telephony services		—		4,988			4,988
Total revenues		305,298		4,988			310,286
Cost of Revenues
Product licenses		2,763		—			2,763
Product support and other services		37,695		—			37,695
Angel.com telephony services		—		1,094			1,094
Total cost of revenues		40,458		1,094			41,552
Gross profit		264,840		3,894			268,734
Operating Expenses
Sales and marketing		83,261		4,149			87,410
Research and development		31,196		1,871			33,068
General and administrative		45,814		—			45,813
Total operating expenses		160,271		6,020			166,291
Income (loss) from operations	$	104,569	$	(2,126	)	$	102,443

The business intelligence market is highly competitive and our results of operations depend on our ability to market and sell product offerings that provide customers with greater value than those offered by our competitors. Organizations recently have sought, and we expect may continue to seek, to standardize their various business intelligence applications around a single software platform. This trend presents both opportunities and risks for our business. It offers us the opportunity to increase the size of transactions with new customers and to expand the size of our business intelligence installations with existing customers. On the other

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hand, it presents the risk that we may not be able to penetrate accounts where a competitor currently is or may become the incumbent business intelligence application provider. In addition, companies with industry leading positions in certain software markets, such as Microsoft, Oracle, IBM and SAP AG, have incorporated business intelligence capabilities into their product suites. As a result, our products need to be sufficiently differentiated from these bundled software offerings to create customer demand for our platform and products.

To address these opportunities and challenges, we are implementing a number of initiatives, including:

• concentrating our research and development efforts on maintaining our position as a technology leader by continuing to innovate and lead in enterprise business intelligence, improving the capability of our products to efficiently handle the ever increasing volume of data and user scalability needs of our current and future customers, and adding analytical and end user features to support the increasing levels of sophistication in our customers’ business intelligence needs and applications, such as the incorporation of “dynamic enterprise dashboards” to our interfaces; and

• enhancing our global sales and services organizations, which we have grown substantially over the last three years, by focusing on integrating and leveraging the additional sales and services capacity we now have in place.

General worldwide economic conditions have experienced a significant downturn. These conditions could cause our customers to slow spending on our products and services, which may delay and lengthen sales cycles. In addition, customers may delay or cancel information technology projects or seek to lower their costs by renegotiating vendor contracts. Also, customers with excess information technology resources may seek to develop in-house software solutions rather than obtain those solutions from us. Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers.

We base our internal operating expense forecasts on expected revenue trends and strategic objectives. Many of our expenses, such as office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough in any particular period to offset any unexpected revenue shortfall in that period. Accordingly, any shortfall in revenue may cause significant variation in our operating results. We therefore believe that quarter-to-quarter comparisons of our operating results may not be a good indication of our future performance.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates, particularly estimates relating to revenue recognition, allowance for doubtful accounts, valuation of net deferred tax assets, and litigation and contingencies, have a material impact on our financial statements and are discussed in detail throughout our analysis of the results of operations discussed below.

In addition to evaluating estimates relating to the items discussed above, we also consider other estimates and judgments, including, but not limited to, those related to software development costs, intangible assets, provision for income taxes, and other contingent liabilities, including liabilities that we deem not probable of assertion. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from these estimates and assumptions.

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MicroStrategy does not have any material ownership interest in any special purpose or other entities that are not wholly-owned and/or consolidated into our consolidated financial statements. Additionally, MicroStrategy does not have any material related party transactions as defined under Statement of Financial Accounting Standards (“SFAS”) No. 57, “Related Party Disclosures.”

Revenue Recognition. MicroStrategy’s software revenue recognition policies are in accordance with the American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. In the case of software arrangements that require significant production, modification or customization of software, we follow the guidance in SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” We also follow the guidance provided by SEC Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” and SAB No. 104, “Revenue Recognition” where applicable.

We recognize revenue from sales of software licenses to end users upon:

1) persuasive evidence of an arrangement, as provided by agreements, contracts, purchase orders or other arrangements, generally executed by both parties (other than certain customer specific instances in which we have a customary and historical business practice of accepting orders without signed agreements);

2) existence of a fixed or determinable fee;

3) delivery of the software; and

4) determination that collection is reasonably assured.

For reseller transactions, we generally require evidence of sell-through to the end-user prior to recognition of revenue, in addition to the four criteria listed above.

When the fees for software upgrades and enhancements, technical support, consulting and education are bundled with the license fee, they are unbundled for revenue recognition purposes using vendor specific objective evidence of the fair value (“VSOE”) of the elements.

Product support or post contract support (“PCS”) revenue is derived from providing technical software support and software updates and upgrades to customers. PCS revenue is recognized ratably over the term of the contract, which in most cases is one year. Our VSOE for PCS, which includes updates, upgrades, and enhancements, is determined based upon the optional stated renewal fee for PCS in the contract, which is the price the customer is required to pay when PCS is renewed. Additionally, the optional stated renewal fee used to establish VSOE for PCS in a software transaction must be above our minimum substantive VSOE rate for PCS. If a stated renewal rate is considered non-substantive, VSOE of PCS has not been established and we recognize all revenue under the arrangement ratably over the PCS period. A minimum substantive VSOE rate is determined based upon an analysis of historical sales of PCS. For a renewal rate to be non-substantive, we believe it must be significantly lower than our minimum VSOE rate.

Revenue from consulting, education and other services is recognized as the services are performed. Our VSOE for services other than PCS is determined based upon an analysis of our historical sales of each element when sold separately from software. We sell various levels of consulting services such as associate, consultant, senior consultant, manager, and senior manager.

In accordance with SOP 97-2, for new offerings of services other than PCS or service offerings that have not had a sufficient history of sales activity, we initially establish VSOE based on the list price as determined by management with the relevant authority. Each service offering has a single list price in each country where sold.

If VSOE exists for all undelivered elements and there is no such evidence of fair value established for delivered elements, the arrangement fee is first allocated to the elements where evidence of fair value has been

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established and the residual amount is allocated to the delivered elements. If evidence of fair value for any undelivered element of an arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value exists for undelivered elements or until all elements of the arrangement are delivered, subject to certain limited exceptions set forth in SOP 97-2.

When a software license arrangement requires us to provide significant production, customization or modification of the software, or when the customer considers these services essential to the functionality of the software product, both the product licenses revenue and consulting services revenue are recognized using the percentage of completion method. Under percentage of completion accounting, both product licenses and consulting services revenue are recognized as work progresses based upon labor hours incurred. Any expected losses on contracts in progress are expensed in the period in which the losses become probable and reasonably estimable. There were no contracts accounted for under the percentage of completion method for the years ended December 31, 2008, 2007, and 2006.

If an arrangement includes acceptance criteria, revenue is not recognized until we can objectively demonstrate that the software or service can meet the acceptance criteria or the acceptance period lapses, whichever occurs earlier. If a software license arrangement obligates us to deliver specified future products or upgrades, revenue is recognized when the specified future product or upgrades are delivered or when the obligation to deliver specified future products expires, whichever occurs earlier. If a software license arrangement obligates us to deliver unspecified future products, then revenue is recognized on the subscription basis, ratably over the term of the contract.

License revenue derived from sales to resellers or OEMs who purchase our products for resale is recognized upon sufficient evidence that the products have been sold to the ultimate end users provided all other revenue recognition criteria have been met. Our standard software license and reseller agreements do not include any return rights other than the right to return non-conforming products for repair or replacement under our standard product warranties, which we account for in accordance with SFAS No. 5. During the last three fiscal years, we have not experienced any product returns related to warranty claims.

Our standard software license agreements do not include any price protection or similar rights. We offer price protection to certain government agencies as required by applicable laws and regulations. For example, transactions under our General Services Administration Federal Supply Schedule contract must comply with the Price Reductions clause. In addition, certain government agencies have the right to cancel contracts for “convenience”. During the last three fiscal years, contracts cancelled for convenience were not significant.

During the last three fiscal years, we have not paid any significant amounts with regards to a return, price protection or similar rights clause. Therefore no allowance for returns, price protection or similar rights has been recorded in our financial statements for the last three fiscal years.

Amounts collected prior to satisfying the above revenue recognition criteria are included in deferred revenue and advance payments in the accompanying consolidated balance sheets.

The application of SOP 97-2, as amended, requires judgment, including a determination that collectibility is reasonably assured, the fee is fixed and determinable, whether a software arrangement includes multiple elements, and if so, whether VSOE of fair value exists for those elements. Judgment is also required to assess whether future releases of certain software represent new products or upgrades and enhancements to existing products.

Allowance for doubtful accounts. We have established an allowance for doubtful accounts, which represents our best estimate of probable losses inherent in the accounts receivable balance. We evaluate specific accounts when we become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its liquidity or financial viability, credit ratings or bankruptcy. Each quarter,

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we adjust this allowance based upon management’s review and assessment of each category of receivable. While actual credit losses have historically been within management’s expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates we have in the past. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Litigation and Contingencies. We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

We are involved in a lawsuit with Diagnostic Systems Corp. relating to claims involving patent infringement. The outcome of this litigation is not presently determinable, and as such, we are currently unable to estimate the potential range of gain or loss, if any, relating to this action. Accordingly, no provision for this matter has been made in the accompanying consolidated financial statements.

We are also involved in a lawsuit with Business Objects Americas, Inc. relating to claims involving patent infringement. During the first quarter of 2008, we recorded a $2.3 million accrued liability related to this claim. The $2.3 million accrual is included in accounts payable and accrued expense in our consolidated balance sheets, and has been recorded as a general and administrative expense in our consolidated statements of operations. The ultimate liability to us resulting from this proceeding may differ materially from the accrued amount.

Additional information regarding these matters is included under “Item 3. Legal Proceedings.”

We have contingent liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, we may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion.

Income Taxes. In determining our net deferred tax assets and valuation allowances, management is required to make judgments and estimates related to projections of domestic and foreign profitability, the timing and extent of the utilization of net operating loss carryforwards, changes in applicable tax laws, transfer pricing methods, and prudent and feasible tax planning strategies. However, judgments and estimates related to our projections and assumptions are inherently uncertain; therefore, actual results could differ materially from our projections, which could impact the carrying value of our net deferred tax assets in future periods.

As a global company with subsidiaries in many countries, we are required to calculate and provide for estimated income tax liabilities for each of the tax jurisdictions in which we operate. This process involves estimating current tax liabilities and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Changes in the estimated level of annual pre-tax income, changes in tax laws related to the utilization of net operating losses in various jurisdictions, changes in tax rates, and changes resulting from tax audits can all affect the overall effective income tax rate which, in turn, impacts the overall level of income tax expense and net income. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We consider past and future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance. If we determine that we would not be able to realize all or part of net deferred tax assets in the future, an adjustment to deferred tax assets would reduce income in the period that such determination was made.

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Impact of Foreign Currency Exchange Rate Fluctuations on Results of Operations

We conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which we report our consolidated financial statements. Historically, we have generated a significant portion of our revenues and incurred a significant portion of our expenses in euro and British pound sterling. As currency rates change from quarter to quarter and year over year, our results of operation may be impacted. The table below summarizes the impact (in thousands) of fluctuations in foreign currency exchange rates on certain components of our consolidated statements of operations by showing the increase (decrease) to the revenues or expenses, as applicable, from the prior year.

	Years Ended December 31,
	2008		2007		2006
International product licenses revenues	$	732	$	2,872	$	459
International product support revenues		3,098		4,927		802
International other services revenues		887		1,509		219
Cost of product support revenues		89		189		36
Cost of other services revenues		856		936		169
Sales and marketing expenses		1,452		3,217		502
General and administrative expenses		743		688		125

The term “international” refers to operations outside of the United States and Canada. For example, if there had been no change to the foreign currency exchange rates from 2007 to 2008, international product licenses revenues for 2008 would have been $37.3 million rather than $38.1 million. If there had been no change to foreign currency exchange rates from 2007 to 2008, sales and marketing expenses for 2008 would have been $136.2 million rather than $137.7 million.

The change in the impact of fluctuations in foreign currency exchange rates during 2008 and 2007, as compared to the prior year, is primarily due to the weakening of the U.S. dollar as compared to the euro and the other currencies in which our foreign subsidiaries conduct business.

Results of Operations

Comparison of the years ended December 31, 2008, 2007 and 2006

Revenues

Except as otherwise indicated herein, the term “domestic” refers to operations in the United States and Canada, and the term “international” refers to operations outside of the United States and Canada.

Product licenses revenues. The following table sets forth product licenses revenues (in thousands) and percentage changes for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Product Licenses Revenues:
Domestic	$	57,848	$	61,294	$	69,816	-5.6	%	-12.2	%
International		38,076		39,050		37,567	-2.5	%	3.9	%
Total product licenses revenues	$	95,924	$	100,344	$	107,383	-4.4	%	-6.6	%

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	Years Ended December 31,
	2008	2007	2006
Product License Transactions with Revenue Recognized in the Applicable Period:
Above $1.0 million of licenses revenue recognized	10	13	17
From $500,000 to $1.0 million of licenses revenue recognized	20	23	22
Total	30	36	39
Domestic:
Above $1.0 million of licenses revenue recognized	9	8	12
From $500,000 to $1.0 million of licenses revenue recognized	11	19	18
Total	20	27	30
International:
Above $1.0 million of licenses revenue recognized	1	5	5
From $500,000 to $1.0 million of licenses revenue recognized	9	4	4
Total	10	9	9

The following table sets forth the recognized revenue attributable to product license transactions, grouped by size, during the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Product Licenses Revenue Recognized in the Applicable Period (in thousands):
Above $1.0 million of licenses revenue recognized	$	17,757	$	18,541	$	29,302	-4.2	%	-36.7	%
From $500,000 to $1.0 million of licenses revenue recognized		13,430		15,421		15,899	-12.9	%	-3.0	%
Below $500,000 of licenses revenue recognized		64,737		66,382		62,182	-2.5	%	6.8	%
Total		95,924		100,344		107,383	-4.4	%	-6.6	%
Domestic:
Above $1.0 million of licenses revenue recognized	$	14,987		12,206		22,868	22.8	%	-46.6	%
From $500,000 to $1.0 million of licenses revenue recognized		7,650		13,014		13,014	-41.2	%	0.0	%
Below $500,000 of licenses revenue recognized		35,211		36,074		33,934	-2.4	%	6.3	%
Total		57,848		61,294		69,816	-5.6	%	-12.2	%
International:
Above $1.0 million of licenses revenue recognized		2,770		6,335		6,434	-56.3	%	-1.5	%
From $500,000 to $1.0 million of licenses revenue recognized		5,780		2,407		2,885	140.1	%	-16.6	%
Below $500,000 of licenses revenue recognized		29,526		30,308		28,248	-2.6	%	7.3	%
Total	$	38,076	$	39,050	$	37,567	-2.5	%	3.9	%

For the years ended December 31, 2008, 2007 and 2006, product license transactions with above $500,000 in recognized revenue represented 32.5%, 33.8%, and 42.1% respectively, of our product licenses revenues. During 2008, our top three product license transactions totaled approximately $9.1 million in revenue recognized, compared to $5.7 million and $10.2 million during 2007 and 2006, respectively, or 9.5%, 5.7%, and 9.5% of total product licenses revenues during 2008, 2007 and 2006, respectively.

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Product licenses revenues decreased during 2008, as compared to 2007, due to decreases in both the number and the average deal size of product license transactions. During 2008, product license transactions included one atypically large transaction in which $4.0 million in revenue was recognized.

Product licenses revenues decreased during 2007, as compared to 2006, due to decreases in both the number and the average deal size of product license transactions with above $1.0 million in recognized revenue. During 2006, product license transactions included one atypically large transaction in which $4.3 million in revenue was recognized.

Domestic product licenses revenues. Domestic product licenses revenues decreased during 2008, as compared to 2007, due to a significant decrease in the number of product license transactions with $500,000 to $1.0 million in recognized revenue.

Domestic product licenses revenues decreased during 2007, as compared to 2006, due to decreases in both the number and the average deal size of product license transactions with above $1.0 million in recognized revenue.

International product licenses revenues. International product licenses revenues decreased during 2008, as compared to 2007, due to a decrease in the number of product license transactions with above $1.0 million in recognized revenue.

International product licenses revenues increased during 2007, as compared to 2006, due to changes in foreign currency exchange rates and an increase in the volume of product license transactions with below $500,000 in recognized revenue.

Product support and services revenues. The following table sets forth product support revenues (in thousands) and percentage changes for our core BI business for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Product Support and Services Revenues:
Domestic	$	105,685	$	97,760	$	84,619	8.1	%	15.5	%
International		78,348		67,848		57,517	15.5	%	18.0	%
Total product support revenues		184,033		165,608		142,136	11.1	%	16.5	%
Consulting		54,132		48,045		42,645	12.7	%	12.7	%
Education		15,495		14,264		13,134	8.6	%	8.6	%
Total product support and services revenues	$	253,660	$	227,917	$	197,915	11.3	%	15.2	%

Product support revenues. Product support revenues are derived from providing technical software support and software updates and upgrades to customers. Product support revenues are recognized ratably over the term of the contract, which in most cases is one year.

Both domestic and international product support revenues increased during 2008, as compared to 2007. Contributing to this increase was a 23.0% growth in the number of technical support contracts, totaling $37.3 million and favorable changes in foreign currency exchange rates of $3.1 million, partially offset by a decrease in the average annual prices totaling $22.0 million.

Both domestic and international product support revenues increased during 2007, as compared to 2006. Contributing to this increase was a 12.2% growth in the number of technical support contracts, totaling $17.0 million, favorable changes in foreign currency exchange rates of $4.9 million and an increase in the average annual prices totaling $1.6 million.

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Although our domestic product licenses revenues decreased during each of 2008 and 2007, as compared to the prior year, domestic product support revenues increased 8.1% and 15.5% during these time periods. In addition, although our international product licenses revenues decreased during 2008, as compared to 2007, and increased slightly during 2007, as compared to 2006, international product support revenues increased by 15.5% and 18.0% during these time periods. The increase in product support revenues was attributable to the following: (1) an increase in product support contract pricing, (2) our continued shift in our product support strategy, from having distributors providing product support services in 2005 and prior periods to our providing the support directly to the customer, (3) differences in timing between the recognition of product licenses revenues and related product support revenues and (4) changes in foreign currency exchange rates.

Consulting revenues. Consulting revenues are derived from helping customers plan and execute the deployment of our software.

Consulting revenues increased during 2008, as compared to the prior year, due to an increase in the number of billable systems integration hours provided to our customers totaling $18.0 million, partially offset by a decrease in the average hourly rate totaling $11.9 million.

Consulting revenues increased during 2007, as compared to the prior year, due to an increase in the number of billable systems integration hours provided to our customers totaling $3.8 million and an increase in the average hourly rate totaling $1.6 million.

Education revenues. Education revenues are derived from the education and training that we provide to our customers to enhance their ability to fully utilize the features and functionality of our software. Education revenues increased during each of 2008 and 2007, as compared to the prior year, due to growth in the number of students trained.

Angel.com revenues. The following table sets forth Angel.com revenues (in thousands) and percentage changes for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Angel.com telephony services	$	10,809	$	7,112	$	4,988	52.0	%	42.6	%

Angel.com telephony services revenues increased during each of 2008 and 2007, as compared to the prior year, primarily due to an increase in the number of customers, an increase in the number of higher-value contracts and the addition of new telephony services offerings.

Costs and Expenses

Cost of Revenues. The following table sets forth cost of revenues (in thousands) and percentage changes in cost of revenues for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Cost of Revenues:
Product licenses	$	1,877	$	3,055	$	2,763	-38.6	%	10.6	%
Product support		12,839		10,824		9,058	18.6	%	19.5	%
Consulting		39,058		28,309		23,316	38.0	%	21.4	%
Education		7,434		6,529		5,321	13.9	%	22.7	%
Angel.com telephony services		2,198		1,824		1,094	20.5	%	66.7	%
Total cost of revenues	$	63,406	$	50,541	$	41,552	25.5	%	21.6	%

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Cost of product licenses revenues. Cost of product licenses revenues consists of amortization of capitalized software development costs and the costs of product manuals, media and royalties paid to third-party software vendors. Capitalized software development costs are amortized over a useful life of three years.

Cost of product licenses revenues decreased during 2008, as compared to 2007, primarily due to the decrease in amortization of capitalized software development costs because development costs attributable to MicroStrategy 8.0 software product became fully amortized during 2007. We anticipate that we will make our new MicroStrategy 9 software product generally available in the first quarter of 2009. As of December 31, 2008, we had capitalized software development costs relating to this product of $13.6 million, which we will begin amortizing in the first quarter of 2009 ratably over a period of three years.

Cost of product licenses revenues increased during 2007, as compared to 2006, with 54.4% of the increase attributable to increases in referral fees and royalties paid and 46.6% of the increase attributable to an increase in amortization expense in 2007 related to new products offset by the decrease in amortization expense related to several of our products for which we recognized amortization expense during 2006 and became fully amortized during 2007.

Cost of product support revenues. Cost of product support revenues consists of product support personnel and related overhead costs.

The increase in cost of product support revenues during 2008 and 2007, as compared to the prior year, was primarily attributable to the expenses related to an increase in staffing levels, variable compensation costs to support our growing customer base and higher compensation levels. Product support headcount at year-end decreased 1.7% to 114 at December 31, 2008 from 116 at December 31, 2007. Although the headcount at the end of the year declined, the weighted average headcount during 2008 increased to 119 from 107 during 2007 which resulted in higher expenses for the full year. Product support headcount increased 28.9% during 2007 to 116 at December 31, 2007 from 90 at December 31, 2006.

Cost of consulting revenues. Cost of consulting revenues consists of personnel and related overhead costs. The increase in cost of consulting revenues during 2008 and 2007, as compared to the prior year, was primarily attributable to the expenses related to increases in staffing levels and variable compensation costs to support our growing customer base. Consulting headcount increased 43.0% to 329 at December 31, 2008 from 230 at December 31, 2007. Consulting headcount increased 16.8% to 230 at December 31, 2007 from 197 at December 31, 2006.

Cost of education revenues. Cost of education revenues consists of personnel and related overhead costs. The increase in cost of education revenues during 2008 and 2007, as compared to the prior year, was primarily attributable to the expenses related to an increase in staffing levels and variable compensation to support our growing customer base. Education headcount increased 26.1% to 58 at December 31, 2008 from 46 at December 31, 2007. Education headcount increased 15.0% to 46 at December 31, 2007 from 40 at December 31, 2006.

Cost of Angel.com revenues. Cost of Angel.com revenues includes hardware and telephony costs. The increase in cost of Angel.com telephony services revenues during 2008 and 2007, as compared to the prior year, was the result of the increase in customer demand, which requires us to purchase additional telecommunications capacity.

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Sales and marketing, general and administrative, and other operating expenses for core BI business. The following table sets forth (in thousands) sales and marketing, general and administrative and other operating expenses for our core BI business and percentage changes for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Sales and marketing	$	129,721	$	104,525	$	83,261	24.1	%	25.5	%
General and administrative		60,651		49,402		45,814	22.8	%	7.8	%
Total	$	190,372	$	153,927	$	129,075	23.7	%	19.3	%

Sales and marketing expenses for core BI business. Sales and marketing expenses for our core BI business consists of personnel costs, commissions, office facilities, travel, advertising, public relations programs and promotional events, such as trade shows, seminars and technical conferences.

Sales and marketing expenses increased during 2008, as compared to 2007, with 85.9% of the increase attributable to an increase in staffing levels and higher compensation levels, including changes in bonus plans and commission rate structures in 2008, 7.2% of the increase attributable to increases in marketing costs from new advertising campaigns and increased sponsorships, and 4.8% of the increase attributable to increases in facility and other related support costs. Sales and marketing headcount increased 24.6% to 648 at December 31, 2008 from 520 at December 31, 2007.

Sales and marketing expenses increased during 2007, as compared to 2006, with 82.6% of the increase attributable to an increase in staffing levels and 10.6% of the increase due to increases in facility and other related support costs. The remainder of the increase was primarily attributable to increases in travel expenses and entertainment costs. These expenditures assist us in expanding our footprint both domestically and internationally. Sales and marketing headcount increased 23.5% to 520 at December 31, 2007 from 421 at December 31, 2006.

General and administrative expenses for our core BI business. General and administrative expenses for our core BI business consists of personnel and other costs of our executive, finance, human resources, information systems and administrative departments, as well as third-party consulting, legal and other professional fees.

General and administrative expenses increased during 2008, as compared to 2007, with 46.3% of the increase attributable to an increase in compensation and related costs due to an increase in staffing levels, 31.8% of the increase related to an increase in legal costs due to a $2.3 million accrual related to a litigation matter made during the first quarter of 2008 and a settlement and reduction of an accrual for legal services of $0.8 million during the three months ended June 30, 2007, 8.7% of the increase attributable to an increase in recruiting costs, 5.2% of the increase attributable to increase in facility and other related support costs, and 4.6% of the increase related to increases in transaction taxes. The increase in transaction taxes was primarily due to a change in the tax law related to our subsidiary in Brazil which resulted in a one-time tax credit during the three months ended September 30, 2007. General and administrative headcount increased 10.1% during 2008 to 339 at December 31, 2008 from 308 at December 31, 2007.

General and administrative expenses increased during 2007, as compared to 2006, with a $4.6 million increase due to an increase in expenses related to an increase in staffing levels and $0.9 million increase in recruiting costs. Partially offsetting these increases were a decrease in withholding taxes in our Brazil subsidiary of $1.2 million due to a change in the tax law related to our subsidiary in Brazil and a reduction in domestic legal costs of $0.8 million. General and administrative headcount increased 27.8% during 2007 to 308 at December 31, 2007 from 241 at December 31, 2006.

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Angel.com sales and marketing and general and administrative expenses. The following table sets forth sales and marketing and general and administrative expenses (in thousands) for our Angel.com business and percentage changes for these expenses for the periods indicated:

	Years Ended December 31,						% Change in 2008		% Change in 2007
	2008		2007		2006
Sales and marketing	$	7,962	$	5,911	$	4,149	34.7	%	42.5	%
General and administrative		282		112		—	151.8	%	n/a
Total operating expenses	$	8,244	$	6,023	$	4,149	36.9	%	45.2	%

The increase in Angel.com sales and marketing and general and administrative expenses during 2008, as compared to 2007, was primarily attributable to an increase in compensation costs related to certain compensation paid to management in connection with the exploration of strategic alternatives for the Angel.com business, and to an increase in expenses related to growing revenue streams of our Angel.com telephony services. The increase in Angel.com sales and marketing and general and administrative expenses during 2007, as compared to 2006, was primarily attributable to an increase in expenses related to growing revenue streams of our Angel.com telephony services. Additionally, an insignificant amount of general and administrative services is provided to Angel.com by our core BI business.

Research and development expenses. Research and development expenses consists of the personnel costs for our software engineering personnel, depreciation of equipment and other related costs.

The following table summarizes research and development expenses and amortization of capitalized software development costs (in thousands) and percentage changes for the periods indicated:

	Years Ended December 31,									% Change in 2008		% Change in 2007
	2008			2007			2006
Gross research and development expenses:
Core research and development activities	$	41,121		$	35,114		$	31,507		17.1	%	11.4	%
Angel.com research and development activities		3,025			2,707			1,871		11.7	%	44.7	%
Total research and development expenses before capitalized software development costs	$	44,146		$	37,821		$	33,378		16.7	%	13.3	%
Capitalized software development costs		(13,575	)		(2,650	)		(310	)	412.3	%	754.8	%
Total research and development expenses	$	30,571		$	35,171		$	33,068		-13.1	%	6.4	%
Amortization of capitalized software development costs included in cost of product licenses revenues	$	1,091		$	2,212		$	2,076		-50.7	%	6.6	%

Research and development expenses decreased during 2008, as compared to 2007, primarily due to the capitalization of $13.6 million of software development costs in 2008 as compared to $2.6 million of software development costs capitalized in 2007. During 2008, our development efforts related to new products resulted in a higher percentage of our research and development costs being expended on developments in preparation for commercial release as compared to costs associated with other development efforts that do not qualify for capitalization. We expect research and development expenses to significantly increase in 2009 after the expected general release of our MicroStrategy 9 software product in the first quarter of 2009, at which time we will no longer capitalize software development costs associated with MicroStrategy 9. Excluding capitalized software development costs, core research development expenses increased 17.1% during 2008, as compared to 2007, primarily due to the increase in expenses relating to the hiring of staff in our China technology center. Research and development headcount increased 20.7% during 2008 to 362 at December 31, 2008 from 300 at December 31, 2007.

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Research and development expenses increased during 2007, as compared to 2006, primarily due to the increase in expenses relating to the hiring of staff in our China technology center, offset by an increase in capitalized software development costs. Research and development headcount increased 29.9% during 2007 to 300 at December 31, 2007 from 231 at December 31, 2006.

As of December 31, 2008, our research and development resources were allocated to the following projects: 70.9% to MicroStrategy 9, 3.6% to MicroStrategy 8, 7.3% to new project initiatives, and 18.2% to other research and development, including our Angel.com business and internal product initiatives.

Provision for Income Taxes. During 2008 and 2007, we recorded a provision for income taxes from continuing operations of $29.0 million and $33.3 million, respectively, resulting in an effective tax rate of 41.0% and 36.0%, respectively. Our effective tax rate increased during 2008, as compared to 2007, primarily as a result of an increase in cross border withholding taxes and certain adjustments to our U.S. and foreign deferred tax assets. We established valuation allowances for losses related to foreign net operating loss carryforward and other deferred tax assets, that more likely than not, in our present estimation, will not be realized. Of the $29.0 million provision in 2008, $20.6 million was deferred and was primarily related to the non-cash use of domestic net operating loss carryforwards. Of the $33.3 million provision in 2007, $26.9 million was deferred and was also primarily related to the non-cash use of domestic net operating loss carryforwards.

As of December 31, 2008, we had domestic and foreign net operating loss carryforwards of $66.3 million and other temporary differences, carryforwards, and credits, which resulted in net deferred tax assets of $43.8 million. We have domestic net operating loss carryforwards of $50.5 million that begin to expire in 2023, and $15.8 million of foreign net operating loss carryforwards of which $2.2 million expired in 2008. As of December 31, 2008, we had a valuation allowance of $5.7 million primarily related to certain foreign net operating loss carryforward tax assets that more likely than not, in our present estimation, will not be realized.

With the exception of previously taxed “Subpart F” income, we intend to indefinitely reinvest the undistributed 2008 earnings of certain foreign subsidiaries. Previously taxed foreign income of $1.0 million was repatriated in 2008 with no additional tax. The annualized effective tax rate applied to our pre-tax income for the year ended December 31, 2008 did not include any provision for U.S. federal and state taxes on the projected amount of non-Subpart F undistributed 2008 foreign earnings. We accrue applicable U.S. federal and state taxes, net of foreign tax credits, on projected undistributed foreign subsidiary earnings that we intend to repatriate.

During 2006, we recorded a provision for income taxes from continuing operations of $31.5 million, resulting in an effective tax rate of 30.4%. Our effective tax rate increased during 2007, as compared to 2006, primarily as a result of foreign pre-tax losses in certain foreign jurisdictions with no related income tax benefit.

Discontinued Operations. In March 2008, we committed to a plan to sell our Alarm.com business, which focuses outside of the business intelligence software and services market. As of December 31, 2008, we continued to own and operate our Alarm.com business. SFAS 144 requires that we report this business as “discontinued” on our Consolidated Statements of Operations, because we do not expect to have continuing involvement in, or cash flows from, this operation after its divestiture.

On February 13, 2009, we completed the sale of our equity interest in Alarm.com and received consideration of approximately $27.7 million in cash, subject to post-closing purchase price adjustments, if any, which will be determined based on Alarm.com’s working capital on the closing date.

As such, we reclassified revenues and expenses associated with the Alarm.com business held-for-sale to discontinued operations for all periods represented. The following table summarizes the income (loss) from discontinued operations, net of tax, (in thousands) and percentage changes for the periods indicated:

	Years Ended December 31,								% Change in 2008		% Change in 2007
	2008		2007			2006
Income (loss) from discontinued operations, net of tax:	$	65	$	(740	)	$	(1,296	)	108.8	%	42.9	%

Deferred Revenue and Advance Payments. Deferred revenue and advance payments represents product support and other services fees that are collected in advance and recognized over the contract service period and product licenses revenues relating to multiple element software arrangements that include future deliverables.

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The following table summarizes deferred revenue and advance payments (in thousands), as of:

	December 31,
	2008			2007
Current:
Deferred product licenses revenue	$	6,024		$	3,523
Deferred product support revenue		105,123			99,885
Deferred other services revenue		13,249			15,692
		124,396			119,100
Less: billed and unpaid deferred revenue		(57,901	)		(54,866	)
	$	66,495		$	64,234
Non-current:
Deferred product licenses revenue	$	696		$	290
Deferred product support revenue		5,690			1,587
Deferred other services revenue		40			59
		6,426			1,936
Less: billed and unpaid deferred revenue		(4,747	)		(568	)
	$	1,679		$	1,368

We offset our accounts receivable and deferred revenue for any billed and unpaid items included in deferred revenue and advance payments.

The increase in deferred revenue and advance payments in 2008, as compared to 2007, was primarily attributable to the growth in the number of technical support contracts in our installed customer base and a high percentage of technical support renewals from our existing contracts.

Including billed and unpaid deferred revenue, we expect to recognize approximately $124.4 million of deferred revenue and advance payments over the next 12 months. However, the timing and ultimate recognition of our deferred revenue and advance payments depend on our performance of various service obligations, and the amount of deferred revenue and advance payments at any date should not be considered indicative of revenues for any succeeding period.

We have also entered into certain additional agreements that include future minimum commitments by our customers to purchase products, product support or other services through 2013, totaling approximately $52.5 million. As of December 31, 2007, the future minimum commitments by our customers to purchase products, product support or other services through 2012, totaled approximately $39.2 million. These future commitments are not included in our deferred revenue balances.

Revenue relating to such agreements will be recognized during the period in which all revenue recognition criteria are met. The timing and ultimate recognition of any revenue from such customer purchase commitments depend on our customers’ meeting their future purchase commitments and our meeting our associated performance obligations related to those purchase commitments.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents and on-going collection of our accounts receivable. On December 31, 2008 and 2007, we had $122.9 million and $85.2 million, respectively, in cash and cash equivalents. On February 13, 2009, we completed the sale of our equity interest in Alarm.com to Alarm.com Holdings, Inc. As a result of the transaction, we received aggregate consideration of approximately $27.7 million in cash, subject to post-closing purchase price adjustments, if any, which will be determined based on Alarm.com’s working capital on the closing date. Management believes that, despite the significant downturn in general worldwide economic conditions, existing cash and cash anticipated to be generated by operations will be sufficient to meet working capital requirements and anticipated capital expenditures, including the expenditures set forth in the table below, for at least the next twelve months. Based upon our cash position, we do not currently expect to borrow money to finance our operations.

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On March 15, 2005, we entered into a security agreement with a bank under which we posted cash to secure existing letters of credit. These letters of credit are used as security deposits for office leases, including the office lease for our corporate headquarters. We may invest the cash collateral under the security agreement in certain permitted investments. As of December 31, 2008, we had $1.0 million in cash collateral posted under the security agreement, all of which will be invested in money market funds for the foreseeable future.

On July 28, 2005, we announced that our Board of Directors had authorized our repurchase of up to an aggregate of $300.0 million of our class A common stock from time to time on the open market (the “2005 Share Repurchase Program”). On April 29, 2008, our Board of Directors amended the 2005 Share Repurchase Program to increase the amount of class A common stock that we are authorized to repurchase from $300 million to $800 million in the aggregate. The term of the 2005 Share Repurchase Program was also extended to April 29, 2013, although the program may be suspended or discontinued by us at any time. The timing and amount of any shares repurchased will be determined by our management based on its evaluation of market conditions and other factors. The 2005 Share Repurchase Program may be funded using our working capital, as well as proceeds from any credit facilities and other borrowing arrangements which we may enter into in the future. Through December 31, 2008, we repurchased an aggregate of 2,469,473 shares of our class A common stock at an average price per share of $95.69 and an aggregate cost of $236.3 million pursuant to the 2005 Share Repurchase Program.

During 2008, we repurchased an aggregate of 118,408 shares of class A common stock at an average price per share of $70.83 and an aggregate cost of $8.4 million pursuant to the 2005 Share Repurchase Program. During 2007, we repurchased an aggregate of 874,606 shares of class A common stock at an average price of $101.79 and an aggregate cost of $89.0 million under the 2005 Share Repurchase Program.

All of the amounts above relating to average price per share and aggregate cost include broker commissions.

On January 31, 2007, we entered into an agreement to purchase a corporate aircraft for delivery in mid-2009, which we expect to begin operating during the 2009 calendar year. The aggregate purchase price for the aircraft is $46.1 million, payable in installments on various dates related to the completion of manufacturing of the aircraft and the delivery of the aircraft. We have the option to accelerate the delivery date under certain circumstances if the manufacturer is able to offer the aircraft prior to the scheduled delivery date. We expect to meet our payment obligations under this purchase agreement using funds from operations, but may consider using conventional aircraft financing and other borrowing arrangements. To date, we have made payments totaling $32.5 million toward the purchase price of the aircraft. We expect to pay the balance of the purchase price upon delivery of the aircraft, which is expected to occur during the third quarter of 2009.

We lease office space and computer and other equipment under operating lease agreements. In addition to base rent, we are responsible for certain taxes, utilities and maintenance costs, and several leases include options for renewal or purchase. The following table shows future minimum payments under noncancellable operating leases and agreements with initial terms of greater than one year, net of total future minimum rentals to be received under noncancellable sublease agreements, and future payments under the aircraft purchase agreement, based on the currently expected due dates of the various installments (in thousands):

	Year ending December 31,										Thereafter		Total
	2009		2010		2011		2012		2013
Contractual Obligations:
Operating leases:		12,807		7,943		3,699		2,912		2,514		2,351		32,226
Purchase obligations:		13,600		—		—		—		—		—		13,600
Total	$	26,407	$	7,943	$	3,699	$	2,912	$	2,514	$	2,351	$	45,826

As of December 31, 2008, we had $8.4 million of total gross unrecognized tax benefits. The timing of any payments which could result from these unrecognized tax benefits will depend on a number of factors, and accordingly the amount and period of any future payments cannot be estimated. We do not expect a significant tax payment related to these obligations within the next year.

55

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $88.9 million, $97.9 million and $104.4 million during 2008, 2007 and 2006, respectively. The major components of net cash provided by operating activities for 2008 were net income of $41.8 million, a $20.9 million decrease in net deferred tax assets, non-cash depreciation and amortization charges of $6.4 million, a $1.6 million increase in prepaid expenses and other current assets, bad debt expense of $2.0 million, a $10.7 million increase in accounts payable and accrued expenses and a $5.3 million increase in deferred revenue and advance payments, partially offset by a $3.8 million increase in accounts receivable and a $0.5 million of excess tax benefits from share-based arrangements.

Net Cash Provided by (Used in) Investing Activities. Net cash used in investing activities of $42.8 million in 2008 consisted primarily of advance deposits of $25.0 million for the corporate aircraft, $5.2 million in purchases of property and equipment, and $13.6 million of capitalized software development costs.

Net Cash Used in Financing Activities. Net cash used in financing activities was $5.9 million, $82.5 million and $121.4 million during 2008, 2007 and 2006, respectively. Net cash used in financing activities for 2008 resulted primarily from purchases of treasury stock of $8.4 million, offset by proceeds from the sale of class A common stock from the exercise of stock options of $2.1 million and $0.5 million related to the recognition of excess tax benefits from the share-based arrangements. The decrease in net cash used in financing activities during 2008, as compared to 2007, was primarily attributable to an $80.6 million decrease in purchases of treasury stock, partially offset with a $1.2 million decrease in proceeds from class A common stock under the employee purchase plan and a $2.8 million decrease in proceeds of excess tax benefits from stock based payment arrangements.

Off-Balance Sheet Arrangements. On March 15, 2005, we entered into a security agreement with a bank under which we posted cash to secure existing letters of credit. These letters of credit are used as security deposits for office leases, including the office lease for our corporate headquarters. We may invest the cash collateral under the security agreement in certain permitted investments. As of December 31, 2008, we had $1.0 million in cash collateral posted under the security agreement.

As of December 31, 2008, we did not have any off-balance sheet arrangements that had or were reasonably likely to have a current or future material impact on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R will change the accounting for business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R will have an impact on our accounting for business combinations once adopted, but the effect on our consolidated results of operations and financial position will be dependent upon the acquisitions, if any, that we make on or after December 15, 2008.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. SFAS 160 will not have an impact on our consolidated results of operations and financial position.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are

56

presented in conformity with generally accepted accounting principles. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to Interim Auditing Standards Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. SFAS 162 will not have an impact on our consolidated financial position and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to the impact of interest rate changes and foreign currency fluctuations.

Foreign Currency Risk. We face exposure to adverse movements in foreign currency exchange rates. Our international revenues and expenses are denominated in foreign currencies, principally the euro and British pound sterling. The functional currency of each of our foreign subsidiaries is the local currency.

International revenues accounted for 40.4%, 38.0% and 36.8% of our total revenues for the years ended December 31, 2008, 2007, and 2006. We anticipate that international revenues will continue to account for a significant portion of total revenues.

As of December 31, 2008, a 10% adverse change in foreign exchange rates versus the U.S. dollar would have decreased our aggregate reported cash and cash equivalents, restricted cash and investments, and short-term investments by 1.1%.

We attempt to minimize our foreign currency risk by converting our excess foreign currency held in foreign jurisdictions to U.S. dollar denominated cash and investment accounts. To date, we have not hedged the risks associated with foreign exchange exposure. Although we may do so in the future, we cannot be sure that any hedging techniques will be successful or that our business, results of operations, financial condition and cash flows will not be materially adversely affected by exchange rate fluctuations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, together with the related notes and the report of independent registered public accounting firm, are set forth on the pages indicated in Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2008. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2008, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

57

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Such internal control includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, our management has determined that, as of December 31, 2008, our internal control over financial reporting is effective based on those criteria.

Grant Thornton LLP has issued an attestation report on our internal control over financial reporting. This report is included in the Report of Independent Public Accounting Firm in Item 15.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference to the information provided under the headings “Executive Officers of the Company,” “Election of Directors — Nominees” and “Corporate Governance and the Board of Directors and its Committees” in our definitive proxy statement to be filed with the Securities and Exchange Commission not later than 120 days after the fiscal year ended December 31, 2008 (the “2009 Proxy Statement”).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the information provided under the headings “Executive and Director Compensation”, “Compensation Committee Report” and “Corporate Governance and the Board of Directors and its Committees — Compensation Committee” in the 2009 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference to the information provided under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive and Director Compensation” in the 2009 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to the information provided under the heading “Corporate Governance and the Board of Directors and its Committees” in the 2009 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference to the information provided under the heading “Independent Registered Public Accounting Firm Fees and Services” in the 2009 Proxy Statement.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10-K:

1. Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	61
Consolidated Financial Statements:
Balance Sheets	63
Statements of Operations	64
Statements of Stockholders’ Equity	65
Statements of Cash Flows	67
Notes to Consolidated Financial Statements	68
2.      Consolidated Financial Statement Schedule
Schedule II — Valuation and Qualifying Accounts	92
3.      Exhibits

(b) Exhibits

We hereby file as part of this Annual Report on Form 10-K the exhibits listed in the Index to Exhibits.

(c) Financial Statement Schedule

The following financial statement schedule is filed herewith:

Schedule II — Valuation and Qualifying Accounts

All other items included in an Annual Report on Form 10-K are omitted because they are not applicable or the answers thereto are none.

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

MicroStrategy Incorporated

We have audited the accompanying consolidated balance sheets of MicroStrategy Incorporated (a Delaware corporation) as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2). We also have audited MicroStrategy Incorporated’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MicroStrategy Incorporated’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on MicroStrategy Incorporated’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MicroStrategy Incorporated as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule when considered in relationship to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

61

In our opinion, MicroStrategy Incorporated maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by COSO.

/s/    GRANT THORNTON LLP

McLean, Virginia

February 23, 2009

62

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	December 31, 2008			December 31, 2007
Assets
Current assets:
Cash and cash equivalents	$	122,915		$	85,194
Restricted cash and investments		619			2,982
Accounts receivable, net		49,670			49,392
Prepaid expenses and other current assets		9,518			12,106
Deferred tax assets, net		26,743			29,652
Assets held-for-sale		4,964			4,272
		214,429			183,598
Property and equipment, net		8,978			9,473
Capitalized software development costs, net		14,823			2,340
Deposits and other assets		36,804			11,433
Deferred tax assets, net		17,105			35,347
Total assets	$	292,139		$	242,191
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	27,697		$	22,083
Accrued compensation and employee benefits		42,634			38,604
Deferred revenue and advance payments		66,495			64,234
Liabilities held-for-sale		6,325			3,436
Total current liabilities		143,151			128,357
Deferred revenue and advance payments		1,679			1,368
Other long-term liabilities		9,268			9,137
Total liabilities		154,098			138,862
Commitments and Contingencies
Stockholders’ Equity
Preferred stock undesignated, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding		—			—
Class A common stock, $0.001 par value; 330,000 shares authorized; 14,167 shares issued and 9,120 shares outstanding, and 14,113 shares issued and 9,184 shares outstanding, respectively		14			14
Class B common stock, $0.001 par value; 165,000 shares authorized; 2,770 issued and outstanding		3			3
Additional paid-in capital		450,953			448,229
Treasury stock, at cost, 5,047 and 4,929 shares, respectively		(366,191	)		(357,804	)
Accumulated other comprehensive income		1,471			2,929
Retained earnings		51,791			9,958
Total stockholders’ equity		138,041			103,329
Total liabilities and stockholders’ equity	$	292,139		$	242,191

The accompanying notes are an integral part of these Consolidated Financial Statements.

63

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2008		2007			2006
Revenues:
Product licenses	$	95,924	$	100,344		$	107,383
Product support and other services		264,469		235,029			202,903
Total revenues		360,393		335,373			310,286
Cost of revenues:
Product licenses		1,877		3,055			2,763
Product support and other services		61,529		47,486			38,789
Total cost of revenues		63,406		50,541			41,552
Gross profit		296,987		284,832			268,734
Operating expenses:
Sales and marketing		137,683		110,436			87,410
Research and development		30,571		35,171			33,068
General and administrative		60,933		49,514			45,813
Total operating expenses		229,187		195,121			166,291
Income from continuing operations before financing and other income and income taxes		67,800		89,711			102,443
Financing and other income:
Interest income, net		2,266		3,674			2,820
Other income (expense), net		705		(866	)		(1,571	)
Total financing and other income		2,971		2,808			1,249
Income from continuing operations before taxes		70,771		92,519			103,692
Provision for income taxes		29,003		33,311			31,520
Income from continuing operations		41,768		59,208			72,172
Income (loss) from discontinued operations, net of tax provision (benefit) ($534, ($591) and ($1,035), respectively)		65		(740	)		(1,296	)
Net Income	$	41,833	$	58,468		$	70,876
Basic earnings (loss) per share (1):
From continuing operations	$	3.51	$	4.80		$	5.56
From discontinued operations	$	0.01	$	(0.06	)	$	(0.10	)
Basic earnings per share	$	3.52	$	4.74		$	5.46
Weighted average shares outstanding used in computing basic earnings per share		11,886		12,325			12,987
Diluted earnings (loss) per share (1):
From continuing operations	$	3.39	$	4.61		$	5.29
From discontinued operations	$	0.01	$	(0.06	)	$	(0.09	)
Diluted earnings per share	$	3.40	$	4.55		$	5.20
Weighted average shares outstanding used in computing diluted earnings per share		12,303		12,853			13,633

(1) Basic and fully diluted earnings per share for class A and class B common stock are the same.

The accompanying notes are an integral part of these Consolidated Financial Statements.

64

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Class A Common Stock			Class B Common Stock				Additional Paid-in Capital		Treasury Stock
	Shares	Amount		Shares		Amount				Shares		Amount
Balance at January 1, 2006	13,270	$	13	3,258		$	3	$	428,062	(2,675	)	$	(136,817	)
Net income	—		—	—			—		—	—			—
Change in unrealized gain on investments, net of applicable taxes	—		—	—			—		—	—			—
Foreign currency translation adjustment	—		—	—			—		—	—			—
Comprehensive income	—		—	—			—		—	—			—
Conversion of class B to class A common stock	482		—	(482	)		—		—	—			—
Issuance of class A common stock under stock option plans	220		1	(1	)		—		6,095	—			—
Purchases of treasury stock	—		—	—			—		—	(1,379	)		(131,959	)
Tax effect of stock option exercises	—		—	—			—		5,270	—			—
Stock option compensation expense									1,341
Balance at December 31, 2006	13,972	$	14	2,775		$	3	$	440,768	(4,054	)	$	(268,776	)
Net income	—		—	—			—		—	—			—
Change in unrealized gain on investments, net of applicable taxes	—		—	—			—		—	—			—
Foreign currency translation adjustment	—		—	—			—		—	—			—
Comprehensive income	—		—	—			—		—	—			—
Adoption of FIN 48	—		—	—			—		—	—			—
Conversion of class B to class A common stock	5		—	(5	)		—		—	—			—
Issuance of class A common stock under stock option plans	136		—	—			—		3,291	—			—
Purchases of treasury stock	—		—	—			—		—	(875	)		(89,028	)
Tax effect of stock option exercises	—		—	—			—		3,622	—			—
Stock option compensation expense									548
Balance at December 31, 2007	14,113	$	14	2,770		$	3	$	448,229	(4,929	)	$	(357,804	)
Net income	—		—	—			—		—	—			—
Change in unrealized gain on investments, net of applicable taxes	—		—	—			—		—	—			—
Foreign currency translation adjustment	—		—	—			—		—	—			—
Comprehensive income	—		—	—			—		—	—			—
Issuance of class A common stock under stock option plans	54		—	—			—		2,104	—			—
Purchases of treasury stock	—		—	—			—		—	(118	)		(8,387	)
Tax effect of stock option exercises	—		—	—			—		563	—			—
Stock option compensation expense									57
Balance at December 31, 2008	14,167	$	14	2,770		$	3	$	450,953	(5,047	)	$	(366,191	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

65

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(continued)

	Comprehensive Income (Loss)
	Unrealized Gain (Loss) on Short-term Investments			Currency Translation Adjustment			Retained Earnings (Accumulated Deficit)			Total
Balance at January 1, 2006	$	18		$	2,300		$	(112,857	)	$	180,722
Net income		—			—			70,876			70,876
Change in unrealized gain on investments, net of applicable taxes		(19	)		—			—			(19	)
Foreign currency translation adjustment		—			824			—			823
Comprehensive income		—			—			—			71,681
Conversion of class B to class A common stock		—			—			—			—
Issuance of class A common stock under stock option plans		—			—			—			6,096
Purchases of treasury stock		—			—			—			(131,959	)
Tax effect of stock option exercises		—			—			—			5,270
Stock option compensation expense		—			—			—			1,341
Balance at December 31, 2006	$	(1	)	$	3,124		$	(41,981	)	$	133,151
Net income		—			—			58,468			58,468
Change in unrealized gain on investments, net of applicable taxes		(8	)		—			—			(8	)
Foreign currency translation adjustment		—			(186	)		—			(186	)
Comprehensive income		—			—			—			58,274
Adoption of FIN 48		—			—			(6,529	)		(6,529	)
Conversion of class B to class A common stock		—			—			—			—
Issuance of class A common stock under stock option plans		—			—			—			3,291
Purchases of treasury stock		—			—			—			(89,028	)
Tax effect of stock option exercises		—			—			—			3,622
Stock option compensation expense		—			—			—			548
Balance at December 31, 2007	$	(9	)	$	2,938		$	9,958		$	103,329
Net income		—			—			41,833			41,833
Change in unrealized gain on investments, net of applicable taxes		(5	)		—			—			(5	)
Foreign currency translation adjustment		—			(1,453	)		—			(1,453	)
Comprehensive income		—			—			—			40,375
Issuance of class A common stock under stock option plans		—			—			—			2,104
Purchases of treasury stock		—			—			—			(8,387	)
Tax effect of stock option exercises		—			—			—			563
Stock option compensation expense		—			—			—			57
Balance at December 31, 2008	$	(14	)	$	1,485		$	51,791		$	138,041

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2008			2007			2006
Operating activities:
Net income	$	41,833		$	58,468		$	70,876
Plus: Loss (income) from discontinued operations, net		(65	)	$	740		$	1,296
Income from continuing operations		41,768		$	59,208		$	72,172
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,399			7,557			7,595
Bad debt expense		2,029			1,370			1,020
Deferred taxes		20,925			26,137			26,528
Stock-based compensation		46			528			1,321
Excess tax benefits from stock-based payment arrangements		(422	)		(3,270	)		(4,479	)
Other, net		72			160			158
Changes in operating assets and liabilities:
Accounts receivable		(3,862	)		4,879			(10,165	)
Prepaid expenses and other current assets		1,643			(3,301	)		(2,087	)
Deposits and other assets		157			(1,434	)		(117	)
Accounts payable and accrued expenses, accrued compensation and employee benefits		10,676			3,382			7,867
Deferred revenue and advance payments		5,278			4,119			7,449
Other long-term liabilities		190			1,244			(706	)
Net cash provided by operating activities from continuing operations		84,899			100,579			106,556
Net cash provided by (used in) operating activities from discontinued operations		4,019			(2,683	)		(2,139	)
Net cash provided by operating activities		88,918			97,896			104,417
Investing activities:
Proceeds from sales and maturities of investments		—			—			112,666
Purchases of short-term investments		—			—			(58,900	)
Advance deposits on purchases of property and equipment		(25,000	)		(7,500	)		—
Purchases of property and equipment		(5,167	)		(3,426	)		(4,483	)
Capitalized software development costs		(13,575	)		(2,650	)		(310	)
Decrease in restricted cash and investments		1,100			931			1,372
Net cash (used in) provided by investing activities from continuing operations		(42,642	)		(12,645	)		50,345
Net cash (used in) investing activities from discontinued operations		(160	)		(50	)		(13	)
Net cash (used in) provided by investing activities		(42,802	)		(12,695	)		50,332
Financing activities:
Proceeds from sale of class A common stock under exercise of employee stock options		2,104			3,293			6,096
Excess tax benefits from stock-based payment arrangements		422			3,270			4,479
Purchases of treasury stock		(8,387	)		(89,028	)		(131,959	)
Net cash used in financing activities from continuing activities		(5,861	)		(82,465	)		(121,384	)
Net cash used in financing activities		(5,861	)		(82,465	)		(121,384	)
Effect of foreign exchange rate changes on cash and cash equivalents		(2,534	)		3,478			3,297
Net increase in cash and cash equivalents		37,721			6,214			36,662
Cash and cash equivalents, beginning of period		85,194			78,980			42,318
Cash and cash equivalents, end of period	$	122,915		$	85,194		$	78,980
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	98		$	23		$	30
Cash paid during the year for income taxes	$	5,787		$	5,217		$	5,012

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization

MicroStrategy Incorporated (the “Company” or “MicroStrategy”) is a worldwide provider of business intelligence software that enables companies to report, analyze and monitor the data stored across their enterprise to reveal the trends and insights needed to make better business decisions. MicroStrategy’s single, integrated platform is designed to support various styles of business intelligence through an easy-to-use interface. MicroStrategy provides sophisticated analytical performance to every business user in the format that suits them best, from high-level dashboards, to custom reports, to advanced analysis via e-mail, web, fax, wireless and voice communication channels. MicroStrategy engineers its software for reliability, scalability, security, and ease of administration for organizations of all sizes.

MicroStrategy’s current software platform, MicroStrategy 8, enables users to query and analyze the most detailed, transaction-level databases, turning data into business intelligence and delivering boardroom quality reports and alerts about the users’ business processes. The web-based architecture of MicroStrategy 8 provides reporting, security, performance and standards that are critical for web deployment. MicroStrategy’s products can be deployed on company intranets to provide employees with information to make better, more cost-effective business decisions. With extranet deployments, enterprises can use the MicroStrategy software platform to build stronger relationships by linking customers and suppliers via the Internet. MicroStrategy facilitates customer success with a comprehensive offering of consulting, education, technical support and technical advisory services for its customers and strategic partners.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company must classify a business line as discontinued operations once the Company has committed to a plan to sell the business, as determined pursuant to Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment of Long-Lived Assets”, or SFAS 144. In March 2008, the Company committed to a plan to sell its Alarm.com business, which focuses outside of the business intelligence software and services market. Alarm.com is a provider of web-enabled residential and commercial security and activity monitoring technology. Historical financial information presented in the consolidated financial statements and notes to consolidated financial statements have been reclassified to conform to the current year presentation.

(b) Use of Estimates

The preparation of the consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to revenue recognition, allowance for doubtful accounts, investments, software development costs, intangible assets, commissions, income taxes, including the carrying value of deferred tax assets, and litigation and contingencies, including liabilities that the Company deems not probable of assertion. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results and outcomes could differ from these estimates and assumptions.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(c) Cash and Cash Equivalents and Restricted Cash and Investments

Cash equivalents include money market instruments and commercial paper. The Company generally considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted cash and investments consists of cash and investment balances restricted in use by contractual obligations with third parties.

On March 15, 2005, the Company entered into a security agreement with a bank under which the Company posted cash to secure existing letters of credit. These letters of credit are used as security deposits for office leases, including the office lease for the Company’s corporate headquarters. The Company may invest the cash collateral under the security agreement in certain permitted investments. As of December 31, 2008 and 2007, the Company had $1.0 million and $1.9 million, respectively, in cash collateral posted under the security agreement, all invested in money market funds that are included in restricted cash and investments in the accompanying balance sheets.

(d) Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows: three years for computer equipment and purchased software, five years for office equipment and capital automobile leases, and ten years for office furniture. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the term of the lease, whichever is shorter.

Expenditures for maintenance and repairs are charged to expense as incurred. When assets are retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

Eligible internally developed software costs incurred are capitalized subsequent to the completion of the preliminary project stage. Such costs include external direct material and service costs, employee payroll and payroll-related costs. After all substantial testing and deployment is completed and the software is ready for its intended use, capitalization ceases and internally developed software costs are amortized using the straight-line method over the estimated useful life of the software, generally three years.

The Company reviews long-lived assets, including intangible assets, for impairment annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If an asset is impaired, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset.

(e) Software Development Costs

Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. Capitalized software development costs include direct labor costs and fringe benefit costs attributed to programmers, software engineers and quality control and field certifiers working on products after they reach technological feasibility but before they are generally available to customers for sale. Technological feasibility is considered to be achieved when a product design and working model of the software product have been completed. Capitalized software development costs are amortized over the estimated product life of three years, on a straight-line basis.

69

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitalized software development costs, net of accumulated amortization, were $14.8 million and $2.3 million as of December 31, 2008 and 2007, respectively. Amortization expense related to software development costs was $1.1 million, $2.2 million and $2.1 million for the years ended December 31, 2008, 2007 and 2006, respectively, and is included in cost of product licenses revenues. During the years ended December 31, 2008, 2007, and 2006, the Company capitalized software development costs of $13.6 million, $2.7 million and $0.3 million, respectively. The Company analyzes the net realizable value of capitalized software development costs on at least an annual basis and has determined that there is no indication of impairment of the capitalized software development costs as future sales are adequate to support amortization costs.

(f) Loss Contingencies and Legal Costs

The Company accrues loss contingencies that are believed to be probable and can be reasonably estimated. As events evolve during the administration and litigation process and additional information becomes known, the Company reassesses its estimates related to loss contingencies. Legal costs are expensed in the period in which the costs are incurred.

(g) Deferred Revenue and Advance Payments

Deferred revenue and advance payments related to product support and other services result from payments received prior to the performance of services for consulting, education and technical support. Deferred revenue and advance payments related to product licenses result primarily from multiple element arrangements that include future deliverables. Deferred revenue comprises deferred product licenses revenue or deferred product support and other services revenue based on the objective fair value of the multiple elements of the arrangement, except for software licenses for which the Company does not have an objective measure of fair value. The Company offsets its accounts receivable and deferred revenue for any billed and unpaid items included in deferred revenue and advance payments.

The Company has also entered into certain additional agreements that include future minimum commitments by the Company’s customers to purchase products, product support or other services through 2013 totaling approximately $52.5 million. As of December 31, 2007, the future minimum commitments by the Company’s customers to purchase products, product support or other services through 2012, totaled approximately $39.2 million. These future commitments are not included in deferred revenue balances. Revenue relating to such agreements will be recognized during the period in which all revenue recognition criteria are met. The timing and ultimate recognition of any revenue from such customer purchase commitments depend on the customers’ meeting their future purchase commitments and the Company’s ability to meet its associated performance obligations related to those purchase commitments.

(h) Revenue Recognition

MicroStrategy’s software revenue recognition policies are in accordance with the American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended. In the case of software arrangements that require significant production, modification or customization of software, the Company follows the guidance in SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” The Company also follows the guidance provided by Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” and SAB No. 104, “Revenue Recognition” where applicable.

The Company recognizes revenue from sales of software licenses to end users upon:

1) persuasive evidence of an arrangement, as provided by agreements, contracts, purchase orders, or other arrangements, generally executed by both parties (other than certain customer specific instances in

70

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which the Company has a customary and historical business practice of accepting orders without signed agreements);

2) existence of a fixed or determinable fee;

3) delivery of the software; and

4) determination that collection of a fixed or determinable fee is reasonably assured.

For reseller transactions, we generally require evidence of sell-through to the end-user prior to recognition of revenue, in addition to the four criteria listed above.

When the fees for software upgrades and enhancements, technical support, consulting and education are bundled with the license fee, they are unbundled for revenue recognition purposes, using the vendor specific objective evidence of the fair value (“VSOE”) of the elements.

Product support or post-contract support (PCS) revenue is derived from providing technical software support and software updates and upgrades to customers. PCS revenue is recognized ratably over the term of the contract, which in most cases is one year. The Company’s VSOE for PCS, which includes updates, upgrades, and enhancements, is determined based upon the optional stated renewal fee for PCS in the contract, which is the price the customer is required to pay when PCS is renewed (sold separately) from software. Additionally, the optional stated renewal fee used to establish VSOE for PCS in a software transaction must be above the Company’s minimum substantive VSOE rate for PCS. If a stated renewal rate is non-substantive, VSOE of PCS has not been established and the Company recognizes all revenue elements under the arrangement ratably over the PCS period. A minimum substantive VSOE rate is determined based upon an analysis of historical sales of PCS. For a renewal rate to be non-substantive, the Company believes it must be significantly lower than its minimum VSOE rate.

Revenue from consulting, education and other services is recognized as the services are performed. The Company’s VSOE for services other than PCS is determined based upon an analysis of its historical sales of each element when sold separately from software. For example, it sells various levels of consulting services such as associate, consultant, senior consultant, manager, and senior manager.

In accordance with SOP 97-2, for new offerings of services other than PCS or service offerings that have not had a sufficient history of sales activity, the Company initially establishes VSOE based on the list price as determined by management with the relevant authority. Each service offering has a single list price in each country where sold.

If VSOE exists for all undelivered elements and there is no such evidence of fair value established for delivered elements, the arrangement fee is first allocated to the elements where evidence of fair value has been established and the residual amount is allocated to the delivered elements. If evidence of fair value for any undelivered element of an arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value exists for undelivered elements or until all elements of the arrangement are delivered, subject to certain limited exceptions set forth in SOP 97-2.

When a software license arrangement requires the Company to provide significant production, customization or modification of the software, or when the customer considers these services essential to the functionality of the software product, both the product licenses revenue and consulting services revenue are recognized using the percentage of completion method. Under percentage of completion accounting, both product licenses and consulting services revenue are recognized as work progresses based on labor hours

71

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

incurred. Any expected losses on contracts in progress are expensed in the period in which the losses become probable and reasonably estimable. There were no contracts accounted for under the percentage of completion method for the years ended December 31, 2008, 2007 and 2006.

If an arrangement includes acceptance criteria, revenue is not recognized until the Company can objectively demonstrate that the software or service can meet the acceptance criteria, or the acceptance period lapses, whichever occurs earlier. If a software license arrangement obligates the Company to deliver specified future products or upgrades, revenue is recognized when the specified future product or upgrades are delivered, or when the obligation to deliver specified future products expires, whichever occurs earlier. If a software license arrangement obligates the Company to deliver unspecified future products, then revenue is recognized on the subscription basis, ratably over the term of the contract.

License revenue derived from sales to resellers or original equipment manufacturers (“OEM”) who purchase the Company’s products for future resale is recognized upon sufficient evidence that the products have been sold to the ultimate end users provided all other revenue recognition criteria have been met. The Company’s standard software license and reseller agreements do not include any return rights other than the right to return non-conforming products for repair or replacement under its standard product warranties, which the Company accounts for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5. During the last three fiscal years, the Company has not experienced any product returns related to warranty claims.

The Company’s standard software license agreements do not include any price protection or similar rights. The Company offers price protection to certain government agencies as required by applicable laws and regulations. For example, transactions under its General Services Administration Federal Supply Schedule contract must comply with the Price Reductions clause. In addition, certain government agencies have the right to cancel contracts for “convenience”. During the last three fiscal years, contracts cancelled for convenience were not significant.

During the last three fiscal years, the Company has not paid any amounts with regards to a return, price protection or similar rights clause. Therefore no allowance for returns, price protection or similar rights has been recorded in the Company’s financial statements from continuing operations for the last three fiscal years.

Amounts collected prior to satisfying the above revenue recognition criteria are included in deferred revenue and advance payments in the accompanying consolidated balance sheets.

The application of SOP 97-2, as amended, requires judgment, including a determination that collectibility is reasonably assured, the fee is fixed and determinable, whether a software arrangement includes multiple elements, and if so, whether VSOE exists for those elements. Judgment is also required to assess whether future releases of certain software represent new products or upgrades and enhancements to existing products.

(i) Advertising Costs

Advertising production costs are expensed the first time the advertisement takes place. Media placement costs are expensed in the month the advertising appears. Advertising costs were $1.8 million, $0.5 million, and $1.1 million for the years ended December 31, 2008, 2007, and 2006, respectively. As of December 31, 2008 and 2007, the Company had no prepaid advertising costs.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(j) Income Taxes

The Company is subject to federal, state, and local income taxes in many foreign countries and recognizes deferred taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”) issued by the Financial Accounting Standards Board (“FASB”). Deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable. FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”) clarifies the accounting for uncertain income tax positions recognized in an enterprise’s financial statements in accordance with SFAS 109. It provides that a company should use a more-likely-than-not recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. The Company is required to evaluate its tax positions taken pursuant to the guidelines contained in FIN 48. The Company recognizes accrued interest related to unrecognized tax benefits in the tax expense account. Penalties, if incurred, would also be recognized as a component of income tax expense.

The Company provides a valuation allowance to reduce deferred tax assets to their estimated realizable value, when appropriate.

(k) Basic and Diluted Earnings Per Share

Basic earnings per share is determined by dividing the net income attributable to common stockholders by the weighted average number of common shares and participating securities outstanding during the period. Participating securities are included in the basic earnings per share calculation when dilutive. Diluted earnings per share is determined by dividing the net income attributable to common stockholders by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares are included in the diluted earnings per share calculation when dilutive. Potential common shares consisting of common stock issuable upon exercise of outstanding employee stock options and warrants are computed using the treasury stock method. Potential common shares also consisted of common stock issuable upon the conversion of preferred stock.

The Company has two classes of common stock: class A common stock and class B common stock. Holders of class A common stock generally have the same rights, including rights to dividends, as holders of class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share. Each share of class B common stock is convertible at any time, at the option of the holder, into one share of class A common stock. As such, basic and fully diluted earnings per share for class A and class B common stock are the same. The Company has never declared or paid any cash dividends on either class A or class B common stock.

(l) Foreign Currency Translation

The functional currency of the Company’s international operations is the local currency. Accordingly, all assets and liabilities of these subsidiaries are translated using exchange rates in effect at the end of the period and revenue and costs are translated using weighted average exchange rates for the period. The related translation adjustments are reported in accumulated other comprehensive income in stockholders’ equity. Transaction gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in the results of operations.

Transaction gains and losses arising from transactions denominated in foreign currencies resulted in a net gain in 2008 of $0.8 million and a net loss of $0.9 million and $1.5 million in 2007 and 2006, respectively, and are included in other income (expense) on the accompanying statements of operations.

73

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(m) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, accounts receivable and investments. The Company places its cash equivalents with high credit-quality financial institutions and invests its excess cash primarily in money market instruments. The Company has established guidelines relative to credit ratings and maturities that seek to maintain safety and liquidity.

The Company sells products and services to various companies across several industries throughout the world in the ordinary course of business. The Company routinely assesses the financial strength of its customers and maintains allowances for anticipated losses. As of December 31, 2008 and 2007, no individual customer accounted for 10% or more of net accounts receivable or 10% or more of revenue.

(n) Fair Value of Financial Instruments

The carrying amounts of the Company’s cash, cash equivalents, accounts receivable and accounts payable approximate fair value. The fair market value for marketable securities is based on quoted market prices.

(o) Recent Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R will change the accounting for business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R will have an impact on the Company’s accounting for business combinations once adopted, but the effect on its consolidated results of operations and financial position will be dependent upon the acquisitions, if any, that the Company makes on or after December 15, 2008.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. SFAS 160 will not have an impact on the Company’s consolidated results of operations and financial position.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to Interim Auditing Standards Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. SFAS 162 will not have an impact on the Company’s consolidated financial position and results of operations.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Accounts Receivable

Accounts receivable, net of allowances, consist of the following, as of December 31, (in thousands):

	2008			2007
Billed and billable	$	115,316		$	106,605
Less: billed and unpaid deferred revenue		(62,648	)		(55,434	)
		52,668			51,171
Less: allowance for doubtful accounts		(2,998	)		(1,779	)
	$	49,670		$	49,392

The Company offsets its accounts receivable and deferred revenue for any billed and unpaid items included in deferred revenue and advance payments.

(4) Property and Equipment

Property and equipment consist of the following, as of December 31, (in thousands):

	2008			2007
Computer equipment and purchased software	$	30,205		$	28,801
Furniture and equipment		13,443			13,687
Leasehold improvements		11,106			10,716
Internally developed software		4,444			4,444
		59,198			57,648
Less: accumulated depreciation and amortization		(50,220	)		(48,175	)
	$	8,978		$	9,473

Depreciation and amortization expense related to property and equipment was $5.3 million, $5.3 million and $5.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) Deferred Revenue and Advance Payments

Deferred revenue and advance payments from customers consist of the following, as of December 31, (in thousands):

	2008			2007
Current:
Deferred product licenses revenue	$	6,024		$	3,523
Deferred product support revenue		105,124			99,885
Deferred other services revenue		13,249			15,692
		124,396			119,100
Less: billed and unpaid deferred revenue		(57,901	)		(54,866	)
	$	66,495		$	64,234
Non-current:
Deferred product licenses revenue	$	696		$	290
Deferred product support revenue		5,690			1,587
Deferred other services revenue		40			59
		6,426			1,936
Less: billed and unpaid deferred revenue		(4,747	)		(568	)
	$	1,679		$	1,368

The Company offsets its accounts receivable and deferred revenue for any billed and unpaid items included in deferred revenue and advance payments.

(6) Litigation

On November 8, 2007 Diagnostic Systems Corp. (DSC), a subsidiary of Acacia Technology Group, filed a complaint for patent infringement against MicroStrategy and a number of other unrelated defendants in the United States District Court for the Central District of California, Southern Division. The case has been consolidated with Case No. SA CV 07-896 AG (MLGx) pending against other unrelated defendants. The consolidated complaint accuses MicroStrategy of infringing U.S. Patent No. 5,537,590 directly, contributorily and by inducement by making, using, selling and offering for sale in the United States MicroStrategy 8 Business Intelligence Platform, when used with an appropriate database. The consolidated complaint accuses MicroStrategy of willful infringement and seeks damages, a finding that the case is exceptional and an award of attorneys’ fees, and preliminary and permanent injunctive relief. In its initial disclosures pursuant to Federal Rule of Civil Procedure 26(a) served on December 28, 2007, DSC declined to disclose the amount of its alleged damages, but disclosed that its alleged damages are based on a reasonable royalty theory. MicroStrategy answered the consolidated complaint on December 28, 2007, denied infringement, asserted affirmative defenses of non-infringement, invalidity and unenforceability, among others, and counter-claimed for declaratory judgment that the ‘590 patent is not infringed, is invalid, and is unenforceable. The Court has not yet set a trial date. This case had been stayed in its entirety pending resolution of a writ of mandamus filed by DSC in the United States Court of Appeals for the Federal Circuit challenging an order by the District Court compelling DSC to produce documents to defendants in discovery that DSC alleges are privileged. The Federal Circuit denied DSC’s request for a writ of mandamus at the end of 2008, and the District Court has lifted the stay on the litigation. A revised schedule for the litigation has not yet been set by the Court. The outcome of this litigation is not presently determinable. Accordingly, no provision for this matter has been made in the accompanying consolidated financial statements.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 10, 2003, MicroStrategy filed a complaint for patent infringement against Crystal Decisions, Inc. in the United States District Court for the District of Delaware. The lawsuit alleged that Crystal Decisions willfully infringed three patents issued to MicroStrategy relating to: (i) asynchronous control of report generation using a web browser (the ‘033 patent); (ii) management of an automatic OLAP report broadcast system (the ‘796 patent); and (iii) providing business intelligence web content with reduced client-side processing (the ‘432 patent). Following the filing of the complaint, Crystal Decisions was acquired by Business Objects Americas, Inc. Business Objects Americas, Inc. answered the complaint, denying infringement and seeking a declaration that the patents in suit are invalid and not infringed by Business Objects Americas, Inc. MicroStrategy filed a motion for summary judgment of infringement of the ‘432, ‘796, and ‘033 patents on October 13, 2005. Business Objects filed motions for summary judgment of non-infringement and invalidity of the ‘432, ‘796, and ‘033 patents on October 13, 2005. The Court granted Business Objects’ motions for summary judgment of non-infringement of the ‘033 patent and of invalidity of the ‘432 and ‘796 patents. The Court denied Business Objects’ motion for summary judgment of invalidity of the ‘033 patent and denied as moot Business Objects’ motion for summary judgment of non-infringement of the ‘432 and ‘796 patents. On February 23, 2006, the Court entered judgment in favor of Business Objects and against MicroStrategy. MicroStrategy filed a notice of appeal to the Federal Circuit on March 24, 2006. On June 25, 2007, the Federal Circuit affirmed the District Court’s judgment in favor of Business Objects and against MicroStrategy on each of the ‘432, ‘796, and ‘033 patents. MicroStrategy did not file a request for rehearing before the Federal Circuit or file a petition for a writ of certiorari before the United States Supreme Court.

On March 9, 2006, Business Objects filed a motion seeking reimbursement from MicroStrategy of Business Objects’ attorneys’ fees and costs in the amount of approximately $4.7 million. On March 25, 2008, the Court issued a memorandum opinion and an order. The Court awarded partial fees and expenses to Business Objects as the prevailing party. Business Objects was awarded reasonable fees and expenses after March 14, 2005 defending against the ‘796 patent, the ‘033 patent and claims 1, 2, 4, and 5 of the ‘432 patent. Business Objects’ motion for fees and expenses related to claims 6, 9, 10 and 13 of the ‘432 patent was denied. Business Objects was required to submit a detailed summary of the hours spent after March 14, 2005, the hourly rate charged, and the expenses incurred defending against the ‘796 patent, the ‘033 patent, and claims 1, 2, 4 and 5 of the ‘432 patent. On April 15, 2008, Business Objects submitted its fee petition seeking $2.3 million. On May 15, 2008, MicroStrategy submitted its opposition to the petition. On November 20, 2008, the Court awarded Business Objects attorneys’ fees and costs of $2,245,263.87 for its defense of the ‘796 patent, the ‘033 patent and claims 1, 2, 4 and 5 of the ‘432 patent after March 14, 2005 and $138,399.02 for the preparation of the petition. The Company has filed a notice of appeal of the order. During the first quarter of 2008, the Company recorded a $2.3 million accrued liability related to this claim. The $2.3 million accrual is included in accounts payable and accrued expense in its consolidated balance sheets, and has been recorded as a general and administrative expense in the Company’s consolidated statements of operations. The ultimate liability to the Company resulting from this proceeding may differ materially from the accrued amount.

The Company also is involved in various other legal proceedings arising in the normal course of business. Although the outcomes of these other legal proceedings are inherently difficult to predict, management does not expect the resolution of these other legal proceedings to have a material adverse effect on its financial position, results of operations or cash flows.

(7) Commitments and Contingencies

On January 31, 2007, the Company entered into an agreement to purchase a corporate aircraft for delivery in mid-2009, which it expects to begin operating during the 2009 calendar year. The aggregate purchase price for the aircraft is $46.1 million, payable in installments on various dates related to the completion of manufacturing of the aircraft and the delivery of the aircraft. The Company has the option to accelerate the delivery date under

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certain circumstances if the manufacturer is able to offer the aircraft prior to the scheduled delivery date. The Company expects to meet its payment obligations under this purchase commitment using funds from operations, but may consider using conventional aircraft financing or other lending arrangements.

The Company made payments of $5.0 million, $2.5 million and $25.0 million with regards to this aircraft in January 2007, September 2007 and October 2008, respectively, and recorded the amount of the payments in deposits and other assets.

From time to time, the Company enters into certain types of contracts that require it to indemnify parties against third party claims. These contracts primarily relate to agreements under which the Company has agreed to indemnify customers and partners for claims arising from intellectual property infringement. The conditions of these obligations vary and generally a maximum obligation is explicitly stated. Because the conditions of these obligations vary and the maximum is not always explicitly stated, the overall maximum amount of the Company’s indemnification obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and as such has not recorded an indemnification liability on its balance sheets as of December 31, 2008 or 2007. The Company carries coverage under certain insurance policies for certain of these liabilities; however, this coverage may not be sufficient.

On February 13, 2009, MicroStrategy consummated the sale of its equity interest in its majority-owned Alarm.com Incorporated subsidiary (“Alarm.com”). The sale is subject to a Purchase Agreement that contains customary seller representations, warranties, covenants and indemnification provisions, including obligations to provide indemnification for specified intellectual property matters.

The Company leases office space and computer and other equipment under operating lease agreements. In addition to base rent, the Company is responsible for certain taxes, utilities and maintenance costs and several leases include options for renewal or purchase. The following table shows future minimum payments under noncancellable operating leases and agreements with initial terms of greater than one year, net of total future minimum rentals to be received under noncancellable sublease agreements, and future payments under the aircraft purchase agreement, based on the currently expected due dates of the various installments (in thousands):

Year	Amount
2009	$	26,407
2010		7,943
2011		3,699
2012		2,912
2013		2,514
Thereafter		2,351
	$	45,826

Total rental expenses for the years ended December 31, 2008, 2007, and 2006 were $16.2 million, $14.5 million, and $12.9 million, respectively.

The Company has contingent liabilities that, in management’s judgment, are not probable of assertion. If such unasserted contingent liabilities were to be asserted, or become probable of assertion, the Company may be required to record significant expenses and liabilities in the period in which these liabilities are asserted or become probable of assertion.

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(8) Income Taxes

U.S. and international components of income from operations before income taxes were comprised of the following, for the years ended December 31, (in thousands):

	2008		2007		2006
U.S.	$	49,209	$	66,364	$	72,213
Foreign		21,562		26,155		31,479
Total	$	70,771	$	92,519	$	103,692

For the years ended December 31, the provision (benefit) for income taxes from operations consists of the following, (in thousands):

	2008		2007		2006
Current:
Federal	$	1,636	$	1,243	$	(1,517	)
State		967		1,131		583
Foreign		5,760		4,041		4,090
	$	8,363	$	6,415	$	3,156
Deferred:
Federal	$	14,067	$	22,773	$	24,636
State		4,711		3,687		3,830
Foreign		1,862		436		(102	)
	$	20,640	$	26,896	$	28,364
Total provision	$	29,003	$	33,311	$	31,520

For the years ended December 31, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rate to the Company’s income from operations before income taxes as follows:

	2008		2007		2006
Income tax expense at federal statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal tax effect	3.1	%	2.7	%	2.6	%
Impact of international operations	-4.6	%	-6.4	%	-10.0	%
Change in valuation allowance	1.4	%	1.8	%	2.0	%
Deferred tax adjustments and rate changes	2.6	%	1.0	%	0.1	%
Other permanent differences and federal credits	3.5	%	1.9	%	0.7	%
Total	41.0	%	36.0	%	30.4	%

The Company intends to indefinitely reinvest its undistributed earnings of certain foreign subsidiaries, in accordance with APB 23, “Accounting for Income Taxes, Special Areas.” Therefore, the annualized effective tax rate applied to the Company’s pre-tax income does not include any provision for U.S. federal and state income taxes on the amount of the undistributed foreign earnings. The Company has not provided for U.S. federal income taxes or foreign withholding taxes on $57.5 million of undistributed earnings of its foreign subsidiaries at December 31, 2008, because such earnings are intended to be reinvested indefinitely. It is not practicable to

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determine the amount of applicable taxes that would be due if such earnings were distributed. U.S. federal tax laws, however, require the Company to include in its U.S. taxable income certain investment income earned outside of the U.S. in excess of certain limits (“Subpart F deemed dividends”). Because Subpart F deemed dividends are already required to be recognized in the Company’s U.S. federal income tax return, the Company regularly repatriates to the U.S. Subpart F deemed dividends and no additional tax is incurred on the distribution. Previously taxed foreign income of $1.0 million and $3.0 million were repatriated in 2008 and 2007, respectively. No income was repatriated in 2006.

Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows, as of December 31, (in thousands):

	2008			2007
Deferred tax assets, net:
Net operating loss carryforwards	$	24,134		$	46,973
Tax credit/capital loss carryforwards		10,133			8,804
Amortization		8,105			9,560
Deferred revenue adjustment		1,440			1,120
Allowances and other accruals		11,981			3,662
Depreciation		3,390			—
Restructuring and other		2,332			3,180
		61,515			73,299
Valuation allowance		(5,670	)		(6,679	)
Deferred tax assets, net of valuation allowance		55,845			66,620
Deferred tax liabilities:
Prepaid expenses and other		1,662			216
Capitalized software development costs		5,781			914
Method changes		4,554			—
Depreciation		—			491
Total deferred tax liabilities		11,997			1,621
Total net deferred tax asset	$	43,848		$	64,999

The change in unrecognized tax benefits under FIN 48 is shown in the table below (in thousands).

	2008
Unrecognized tax benefits at January 1, 2008	$	7,762
Decrease related to positions taken in prior period		(680	)
Increase related to positions taken in current period		1,356
Unrecognized tax benefits at December 31, 2008	$	8,438

If recognized, the entire balance of unrecognized tax benefits would impact the effective tax rate. Over the next 12 months, the amount of the net liability for unrecognized tax benefits shown above is expected to increase by $1.4 million related to tax complexities of international operations. The amount of interest expense and penalties related to the above unrecognized tax benefits is not material.

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The Company files tax returns in numerous foreign countries as well as the U.S. and its tax returns may be subject to audit by tax authorities in all countries in which it files. Each country has its own statute of limitations for making assessment of additional tax liabilities. Due to the Company’s net operating loss carryforward position in the U.S., its tax years from 1999 forward may be adjusted by the Internal Revenue Service even though the general three year statute of limitations has expired for certain years. The Company’s major foreign tax jurisdictions and the tax years that remain subject to examination are Germany for tax years 2000 to 2008, Spain for tax years 2005 to 2008, and the United Kingdom for tax years 2003 to 2008.

The Company is currently under examination in Germany and the United Kingdom. To date there have been no material assessments related to any of these audits.

The Company has domestic net operating loss carryforwards of $50.5 million and $102.2 million for 2008 and 2007, respectively, that begin to expire in 2023. The Company has $15.8 million and $22.0 million of foreign net operating loss carryforwards as of December 31, 2008 and 2007, respectively, of which $2.2 million expired in 2008. The Company has federal research and development tax credit carryforward tax assets of $4.6 million and $4.5 million, which begin to expire in 2018, domestic foreign tax credit assets of $3.2 million and $2.6 million which begin to expire in 2014, and $1.3 million and $1.1 million of alternative minimum tax credit carryforward tax assets, which have no expiration date for 2008 and 2007, respectively. The timing and ability of the Company to use these losses and credits may be limited by Internal Revenue Code provisions regarding changes in ownership of the Company as discussed below.

The Company’s valuation allowances of $5.7 million and $6.7 million at December 31, 2008 and December 31, 2007, respectively, primarily related to certain foreign net operating loss carryforward tax assets that the Company expects to expire unused.

In determining the Company’s provision for income taxes, net deferred tax assets, liabilities and valuation allowances, management is required to make judgments and estimates related to projections of domestic and foreign profitability, the timing and extent of the utilization of both net operating loss carryforwards and capital loss carryforwards, applicable tax rates, transfer pricing methodologies and prudent and feasible tax planning strategies. As a multinational company, the Company is required to calculate and provide for estimated income tax liabilities for each of the tax jurisdictions in which it operates. This process involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Changes in the estimated level of annual pre-tax income, changes in tax laws particularly related to the utilization of net operating losses in various jurisdictions, and changes resulting from tax audits can all affect the overall effective income tax rate which, in turn, impacts the overall level of income tax expense and net income.

Judgments and estimates related to the Company’s projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections. The timing and manner in which the Company will utilize the net operating loss carryforwards, research and development tax credit carryforward tax assets, alternative minimum tax credit carryforward tax assets, and foreign tax credit carryforward tax assets in any year, or in total, may be limited by provisions of the Internal Revenue Code regarding changes in the Company’s ownership. Currently, the Company expects to use the tax assets, subject to Internal Revenue Code limitations, within the carryforward period.

Pursuant to the provisions of §382 of the Internal Revenue Code, an “ownership change” involving 5% or greater shareholders occurred in May 2003. Section 382 provides an annual limitation on the amount of Federal net operating losses and tax credits that may be used in the event of an ownership change. The limitation is based

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on, among other things, the value of the company as of the change date multiplied by a U.S. federal long-term tax exempt interest rate. The Company does not currently expect the limitations under the §382 ownership change rules to impact the Company’s ability to use its net operating loss carryforwards or tax credits. Accordingly, the Company has not established a valuation allowance related to the §382 limitation related to the Company’s remaining net operating loss carryforward deferred tax asset or other tax credit assets.

(9) Share-Based Compensation

The Company adopted SFAS No. 123 (revised) (“SFAS 123R”), “Share-Based Payment” as of January 1, 2006 using the modified prospective method. SFAS 123R eliminates the intrinsic value method that was previously used by the Company as an alternative method of accounting for share-based awards. SFAS 123R also clarifies earlier guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods. In addition, SFAS 123R amends SFAS No. 95, “Statement of Cash Flows,” to require that excess tax benefits be reported as a financing cash inflow and a reduction of taxes paid within operating cash flows. Under the modified prospective method, the Company has not restated its prior period financial statements for the related share-based compensation amounts. The Company has applied SFAS 123R for any portion of awards that were granted and have not fully vested prior to December 31, 2005 and any new awards granted after January 1, 2006.

Prior to adoption of SFAS 123R, the Company used the graded vesting method for determining compensation expense, and has carried that method over and continues to apply the graded vesting method for any portion of awards that were granted and have not fully vested prior to December 31, 2005. Upon adoption of SFAS 123R on January 1, 2006, the Company elected the straight-line method for any share-based awards that may be granted subsequent to adoption.

The Company has share-based compensation plans under which directors, officers, and other eligible employees have previously received stock options awards. All stock options granted under the Company’s stock plans have terms of five to ten years and generally vest ratably over 5 years. Upon exercise, the Company generally issues new shares in the amount of the award exercised. The Company had 2.4 million shares of class A common stock authorized for option grants as of December 31, 2008.

In addition, as of December 31, 2008, a subsidiary of the Company maintained a share-based compensation plan for its employees that is based upon the equity of the subsidiary. The share-based awards and related expense under SFAS 123R for this subsidiary have not been significant through December 31, 2008.

Since the adoption of SFAS 123R and through December 31, 2008, the Company has not granted any new share-based awards. In addition, the Company has not issued any material stock option or other share-based compensation awards since the first quarter of 2004, and does not have any current plans to issue additional stock option awards on its equity. Certain subsidiaries of the Company may issue equity awards or equity-based awards on equity of the applicable subsidiary in the future.

The fair value of each grant has been estimated using the Black-Scholes option-valuation model, and the related compensation expense is amortized over the requisite service period (generally the vesting period) using the graded-vesting method that recognizes compensation cost for each separately vesting tranche of the award as though the award were, in substance, multiple awards. During years ended December 31, 2008, 2007 and 2006, the Company recognized total share-based compensation expense of $57,000, $0.5 million and $1.3 million, respectively, and an insignificant amount of related income tax benefits in the Consolidated Statement of Operations.

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MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 26, 2006, the Company’s Board of Directors approved an amendment to the stock option granted on June 7, 2001 to F. David Fowler, a former member of the Company's Board of Directors until his retirement from the Board on May 31, 2006. The option provided Mr. Fowler the right to purchase an aggregate of 10,000 shares of the Company's class A common stock, vesting in five equal annual installments beginning on the first anniversary of the grant date. The amendment provided that the final 2,000 share installment of this award, which was scheduled to vest on June 7, 2006, instead vested in full as of May 26, 2006. On May 26, 2006 the Company recognized $0.1 million in share-based compensation to reflect the amendment of this award. All other terms and conditions applicable to the stock option remain unchanged.

The Company’s share-based compensation expense is included in the following areas in the Consolidated Statement of Operations for the periods indicated (in thousands):

	2008		2007		2006
Cost of services	$	1	$	7	$	18
Sales and marketing		11		135		288
Research and development		7		75		188
General and administrative		28		311		813
Income (loss) from discontinued operations, net of tax provision (benefit)		10		20		34
Total share-based compensation expense	$	57	$	548	$	1,341

At December 31, 2008, all of the Company’s outstanding stock options have fully vested and the Company will not incur any share-based compensation expense in future periods relating to these outstanding options. The windfall tax benefits realized from the exercise of stock options was $0.4 million, $3.3 million and $4.5 million during the years ended December 31, 2008, 2007 and 2006, respectively.

A summary of the status of MicroStrategy’s stock option plans is presented (in thousands, except per share data):

	Options Outstanding									Options Exercisable
			Price per Share
	Shares		Range		Weighted Average		Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
Balance, January 1, 2006	1,559		$	2.50  -  3,130.00	$	90.22				919	$	138.52
Granted	—			—    -          —		—
Exercised	(219	)		2.50  -     118.75		27.83	$	16,759
Canceled	(67	)		11.91  -  1,698.75		133.42
Balance, December 31, 2006	1,273		$	2.50  -  3,130.00	$	98.63	$	90,482	(1)	922	$	128.08	$	57,937
Granted	—			—    -          —		—
Exercised	(136	)		4.70  -     107.50		24.29	$	11,607
Canceled	(24	)		7.50  -  1,880.00		286.61
Balance, December 31, 2007	1,113		$	2.50  -  3,130.00	$	103.64	$	61,879	(1)	942	$	118.51	$	49,320
Granted	—			—    -          —		—
Exercised	(55	)		5.00  -       61.15		38.59	$	1,992
Canceled	(31	)		23.00  -  2,920.00		267.33
Balance, December 31, 2008	1,027		$	2.50  -  3,130.00	$	103.63	$	13,413	(1)	1,027	$	103.63	$	13,413

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(1) The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option on in-the-money options only. The aggregate intrinsic value is based upon the closing price of $37.13, $95.10 and $114.01 for the Company’s class A common stock on the Nasdaq Global Market on December 31, 2008, 2007 and 2006, respectively.

	Options Outstanding at December 31, 2008				Options Exercisable at December 31, 2008
Range of Exercise           Prices	Number of Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
$     2.50 -        5.00	68	3.6	$	4.70	68	$	4.70
5.01 -      10.00	2	3.8		7.62	2		7.62
10.01 -      20.00	3	3.2		13.68	3		13.68
20.01 -      35.00	698	3.9		21.26	698		21.26
35.01 -      60.00	1	3.2		39.55	1		39.55
60.01 -    125.00	15	1.1		100.92	15		100.92
125.01 -    250.00	128	1.6		202.35	128		202.35
250.01 -    500.00	87	1.4		384.02	87		384.02
500.01 - 1,000.00	11	1.0		793.11	11		793.11
1,000.01 - 3,130.00	14	1.1		1,508.58	14		1,508.58
	1,027	3.3	$	103.63	1,027	$	103.63

(10) Comprehensive Income

Comprehensive income includes foreign currency translation adjustments and unrealized gains and losses on short-term investments, net of related tax effects that have been excluded from net income and reflected in stockholders’ equity as accumulated other comprehensive income.

The Company’s comprehensive income consisted of the following for the periods indicated (in thousands):

	Years Ended December 31,
	2008			2007			2006
Net income	$	41,833		$	58,468		$	70,876
Foreign currency translation adjustment		(1,453	)		(186	)		824
Unrealized loss on short-term investments, net of applicable taxes		(5	)		(8	)		(19	)
Comprehensive income	$	40,375		$	58,274		$	71,681

(11) Basic and Diluted Earnings per Share

Potential common shares are included in the diluted earnings per share calculation when dilutive. Potential common shares consisting of common stock issuable upon exercise of outstanding employee stock options and warrants are computed using the treasury stock method.

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The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, (in thousands, except per share data):

	Years Ended December 31,
	2008		2007			2006
Numerator:
Income (loss) from:
Continuing operations, net of tax	$	41,768	$	59,208		$	72,172
Discontinued operations, net of tax		65		(740	)		(1,296	)
Net income	$	41,833	$	58,468		$	70,876
Denominator:
Weighted average common shares of class A common stock		9,116		9,555			9,819
Weighted average common shares of class B common stock		2,770		2,770			3,168
Total weighted average common stock shares outstanding		11,886		12,325			12,987
Effect of dilutive securities:
Employee stock options		417		528			646
Adjusted weighted average shares		12,303		12,853			13,633
Earnings per share:
Basic earnings (loss) per share
From continuing operations	$	3.51	$	4.80		$	5.56
From discontinued operations		0.01		(0.06	)		(0.10	)
Basic earnings per share	$	3.52	$	4.74		$	5.46
Diluted earnings (loss) per share:
From continuing operations	$	3.39	$	4.61		$	5.29
From discontinued operations		0.01		(0.06	)		(0.09	)
Diluted earnings per share	$	3.40	$	4.55		$	5.20

Stock options that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS, because to do so would have been antidilutive, were 256,000, 272,000, and 282,000 for the years ended December 31, 2008, 2007, and 2006, respectively.

(12) Stockholders’ Equity

(a) Treasury Stock

On July 28, 2005, the Company announced that its Board of Directors had authorized the Company’s repurchase of up to an aggregate of $300.0 million of its class A common stock from time to time on the open market (the “2005 Share Repurchase Program”). On April 29, 2008, the Company’s Board of Directors amended the 2005 Share Repurchase Program to increase the amount of class A common stock that the Company is authorized to repurchase from $300 million to $800 million in the aggregate. The term of the 2005 Share Repurchase Program was also extended to April 29, 2013, although the program may be suspended or discontinued by the Company at any time. The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. The 2005 Share Repurchase Program may be funded using the Company’s working capital, as well as proceeds from any credit facilities and other borrowing arrangements which the Company may enter into in the future. Through

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December 31, 2008, the Company repurchased an aggregate of 2,469,473 shares of class A common stock at an average price per share of $95.69 and an aggregate cost of $236.3 million pursuant to the 2005 Share Repurchase Program.

On July 27, 2004, the Company announced that its Board of Directors had authorized the Company’s repurchase of up to $35.0 million of its class A common stock (the “2004 Share Repurchase Program”). On April 26, 2005, the Company’s Board of Directors modified the 2004 Share Repurchase Program to increase, from $35.0 million to $130.0 million, the aggregate amount of class A common stock that the Company was authorized to repurchase. The Company repurchased an aggregate of 2,577,752 shares of class A common stock at an average price per share of $50.39 and an aggregate cost of $129.9 million under the 2004 Share Repurchase Program. Since repurchases under the 2004 Share Repurchase Program reached the aggregate authorized limit, the 2004 Share Repurchase Program was completed in the second quarter of 2005.

During 2008, under the 2005 Share Repurchase Program, the Company repurchased an aggregate of 118,408 shares of class A common stock at an average price per share of $70.83 and at an aggregate cost of $8.4 million. During 2007, under the 2005 Share Repurchase Program, the Company repurchased an aggregate of 874,606 shares of class A common stock at an average price per share of $101.79 and at an aggregate cost of $89.0 million. During 2006, under the 2005 Share Repurchase Program, the Company repurchased an aggregate of 1,379,266 shares of class A common stock at an average price per share of $95.67 and at an aggregate cost of $132.0 million.

All of the amounts above relating to average price per share and aggregate cost include broker commissions.

(b) Warrants

Pursuant to settlement agreements relating to a private securities class action lawsuit and shareholder derivative lawsuit against the Company in 2000, the Company issued warrants to purchase 189,698 shares of class A common stock at an exercise price of $400.00 per share, all of which were outstanding as of December 31, 2006. These warrants expired in June 2007.

(13) Employee Benefit Plan

The Company sponsors a benefit plan to provide retirement and incidental benefits for its employees, known as the MicroStrategy 401(k) Savings Plan (the “Plan”). Participants may make voluntary contributions to the Plan of up to 20% of their annual base pre-tax compensation, cash bonuses and commissions not to exceed the federally determined maximum allowable contribution amounts. The Plan permits for discretionary company contributions. Effective April 1, 2008, the Company determined to make a matching contribution to each plan participant of 50% of the first 6% of a participant’s contributions, up to a maximum of $3,000 per year. A participant vests in the matching contributions in increments based on the participant’s years of employment by the Company, becoming fully vested after completing six years of employment. The Company made contributions to the Plan of $1.3 million during the year ended December 31, 2008. No contributions were made during 2007 or 2006.

(14) Discontinued Operations

In March 2008, in connection with its consideration of strategic alternatives relating to its non-core Alarm.com business, the Company committed to a plan to sell this business. The Company made the decision to sell Alarm.com in order to focus its resources on its core competency of business intelligence software and

86

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

services. Accordingly, the financial results for Alarm.com were reclassified as discontinued operations in the quarter ended March 31, 2008.

On February 13, 2009, the Company completed the sale of its equity interest in Alarm.com for aggregate consideration to the Company of approximately $27.7 million in cash. The purchase price is subject to post-closing adjustments that will be based on Alarm.com’s working capital as of the closing date of the transaction. As of December 31, 2008, the associated assets and liabilities of the Alarm.com business were classified as held-for-sale in accordance with SFAS 144, and are presented in the following table.

(in thousands)	December 31, 2008			December 31, 2007
Assets:
Accounts Receivable	$	4,522		$	3,625
Prepaid Expenses & Other Current Assets		222			576
Property and equipment, net		220			71
Total assets	$	4,964		$	4,272
Liabilities:
Accounts payable and accrued expenses	$	1,868		$	1,385
Accrued compensation and employee benefits		1,008			610
Deferred revenue and advance payments		3,449			1,441
Total liabilities	$	6,325		$	3,436
Net assets and liabilities of disposal group	$	(1,361	)	$	836

The following table summarizes the revenues and pre-tax income generated by the Alarm.com business during the years ended December 31, (amounts in thousands):

(in thousands)	2008		2007			2006
Revenues	$	20,676	$	15,301		$	3,537
Pre-tax income (loss)	$	599	$	(1,331	)	$	(2,331	)

87

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(15) Segment Information

The Company operates in one reportable segment with two business units — business intelligence software and services and other. The business unit “Other” includes the Company’s Angel.com business. The following summary discloses total revenues and long-lived assets, excluding long-term investments and long-term deferred tax assets, according to geographic region (in thousands):

	Business Intelligence Software and Services						Other Domestic		Consolidated
Geographic regions:	Domestic		EMEA		Other Regions
Year ended December 31, 2008
Total revenues	$	204,016	$	113,861	$	31,707	$	10,809	$	360,393
Long-lived assets		54,113		3,498		2,181		813		60,605
Year ended December 31, 2007
Total revenues	$	200,813	$	101,441	$	26,007	$	7,112	$	335,373
Long-lived assets		17,311		3,683		1,771		481		23,246
Year ended December 31, 2006
Total revenues	$	191,237	$	88,707	$	25,355	$	4,988	$	310,287
Long-lived assets		10,179		3,030		1,700		497		15,406

The domestic region consists of the United States and Canada. The EMEA region includes operations in Europe, the Middle East and Africa. The other regions include all other foreign countries, generally comprising Latin America and the Asia Pacific region. For the years ended December 31, 2008, 2007, and 2006, no individual foreign country accounted for 10% or more of consolidated total revenues.

Domestic intercompany software fee charges to international operations of $44.3 million, $44.5 million and $48.2 million for 2008, 2007 and 2006, respectively, have been excluded from the above tables and eliminated in the consolidated financial statements.

For the years ended December 31, 2008, 2007, and 2006, no individual customer accounted for 10% or more of consolidated total revenues.

For the years ended December 31, 2008 and 2007, total assets in Germany exceeded 10% of consolidated assets. For the year ended December 31, 2006, no individual country outside the United States accounted for 10% or more of the Company’s total consolidated assets.

88

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) Selected Quarterly Financial Data (Unaudited)

The following tables contain unaudited Statement of Operations information for each quarter of 2008 and 2007. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	Quarter Ended											Year
	March 31			June 30		September 30			December 31
	(in thousands, except per share data)
2008
Revenues	$	85,904		$	88,856	$	90,628		$	95,005		$	360,393
Gross profit		71,398			72,747		73,902			78,940			296,987
Net income from continuing operations		8,961			7,898		11,072			13,837			41,768
Income (loss) from discontinued operations, net of tax		(663	)		228		52			448			65
Net income		8,298			8,126		11,124			14,285			41,833
Basic earnings (loss) per share:
From continuing operations		0.75			0.66		0.93			1.16			3.51
From discontinued operations		(0.05	)		0.02		0.01			0.04			0.01
Basic earnings per share		0.70			0.68		0.94			1.20			3.52
Weighted average shares outstanding used in computing basic earnings per share		11,927			11,870		11,887			11,889			11,886
Diluted earnings (loss) per share:
From continuing operations		0.72			0.64		0.90			1.13			3.39
From discontinued operations		(0.05	)		0.02		0.00			0.04			0.01
Diluted earnings per share		0.67			0.66		0.90			1.17			3.40
Weighted average shares outstanding used in computing diluted earnings per share		12,381			12,324		12,306			12,226			12,303
2007
Revenues	$	70,862		$	78,052	$	91,232		$	95,227		$	335,373
Gross profit		58,903			65,427		78,735			81,767			284,832
Net income from continuing operations		9,798			11,536		19,402			18,472			59,208
Income (loss) from discontinued operations, net of tax		48			77		(67	)		(798	)		(740	)
Net income		9,846			11,613		19,335			17,674			58,468
Basic earnings (loss) per share:
From continuing operations		0.78			0.93		1.58			1.54			4.80
From discontinued operations		0.00			0.01		(0.01	)		(0.07	)		(0.06	)
Basic earnings per share		0.78			0.94		1.57			1.47			4.74
Weighted average shares outstanding used in computing basic earnings per share		12,567			12,404		12,286			12,055			12,325
Diluted earnings (loss) per share:
From continuing operations		0.75			0.89		1.52			1.47			4.61
From discontinued operations		0.00			0.01		(0.01	)		(0.06	)		(0.06	)
Diluted earnings per share		0.75			0.90		1.51			1.41			4.55
Weighted average shares outstanding used in computing diluted earnings per share		13,159			12,940		12,771			12,556			12,853

89

MICROSTRATEGY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(17) Subsequent Events

On February 13, 2009, the Company completed the sale of their equity interest in Alarm.com for aggregate consideration to the Company of approximately $27.7 million in cash. The purchase price is subject to post-closing adjustments that will be based on Alarm.com’s working capital as of the closing date of the transaction.

90

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MICROSTRATEGY INCORPORATED (Registrant)
By:	/s/    MICHAEL J. SAYLOR
Name:	Michael J. Saylor
Title:	Chairman of the Board of Directors, President and Chief Executive Officer
Date:	February 23, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date
/s/    MICHAEL J. SAYLOR          Michael J. Saylor	Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)	February 23, 2009
/s/    ARTHUR S. LOCKE, III          Arthur S. Locke, III	Executive Vice President, Finance & Chief Financial Officer (Principal Financial and Accounting Officer)	February 23, 2009
/s/    SANJU K. BANSAL         Sanju K. Bansal	Vice Chairman of the Board of Directors, Executive Vice President & Chief Operating Officer	February 23, 2009
/s/    MATTHEW W. CALKINS          Matthew W. Calkins	Director	February 23, 2009
/s/    ROBERT H. EPSTEIN         Robert H. Epstein	Director	February 23, 2009
/s/    DAVID W. LARUE         David W. Larue	Director	February 23, 2009
/s/    JARROD M. PATTEN         Jarrod M. Patten	Director	February 23, 2009
/s/    CARL J. RICKERTSEN         Carl J. Rickertsen	Director	February 23, 2009
/s/    THOMAS P. SPAHR         Thomas P. Spahr	Director	February 23, 2009

91

SCHEDULE II (NEEDS TO BE UPDATED)

VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2008, 2007, and 2006

(in thousands)

	Balance at the beginning of the period	Additions (1)	Deductions		Balance at the end of the period
Allowance for doubtful accounts:
December 31, 2008	1,779	2,029	(810	)	2,998
December 31, 2007	1,841	1,370	(1,432	)	1,779
December 31, 2006	1,515	1020	(694	)	1,841
Deferred tax valuation allowance:
December 31, 2008	6,679	942	(1,951	)	5,670
December 31, 2007	7,728	2,736	(3,785	)	6,679
December 31, 2006	8,130	2,162	(2,564	)	7,728

(1) Reductions in/charges to revenues and expenses.

92

INDEX TO EXHIBITS

Exhibit Number	Description
3.1	Second Restated Certificate of Incorporation of the registrant (filed as Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (File No. 000-24435) and incorporated by reference herein).
3.2	Amended and Restated By-Laws of the registrant (filed as Exhibit 3.2 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 000-24435) and incorporated by reference herein).
4.1	Form of Certificate of Class A Common Stock of the registrant (filed as Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003 (File No. 000-24435) and incorporated by reference herein).
10.1	Amended and Restated 1996 Stock Plan of the registrant (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998 (File No. 000-24435) and incorporated by reference herein).*
10.2	Amended and Restated 1997 Stock Option Plan for French Employees of the registrant (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2001 (File No. 000-24435) and incorporated by reference herein).
10.3	1997 Director Option Plan of the registrant, as amended by Amendment No. 1 thereto (filed as Exhibit 10.3 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-24435) and incorporated by reference herein).*
10.4	Amendment No. 2 to the registrant’s 1997 Director Option Plan (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 (File No. 000-24435) and incorporated by reference herein).*
10.5	Form of Second Amended and Restated 1999 Stock Option Plan of the registrant (filed as Exhibit 10.7 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).*
10.6	Form of Stock Option Agreement entered into by non-employee directors under the registrant’s Second Amended and Restated 1999 Stock Option Plan (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K (File No. 000-24435) filed on November 9, 2004 and incorporated by reference herein).*
10.7	Form of Stock Option Agreement entered into by executive officers under the registrant’s Second Amended and Restated 1999 Stock Option Plan (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K (File No. 000-24435) filed on November 9, 2004 and incorporated by reference herein).*
10.8	Stock Option Agreement, dated July 26, 2002, between Jonathan F. Klein and the registrant, providing for the grant of an incentive stock option (filed as Exhibit 10.10 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).*
10.9	Stock Option Agreement, dated July 26, 2002, between Jonathan F. Klein and the registrant, providing for the grant of a nonstatutory stock option (filed as Exhibit 10.11 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).*
10.10	Stock Option Agreement, dated July 26, 2002, between Jeffrey A. Bedell and the registrant, providing for the grant of an incentive stock option (filed as Exhibit 10.12 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).*

93

Exhibit Number	Description
10.11	Stock Option Agreement, dated July 26, 2002, between Jeffrey A. Bedell and the registrant, providing for the grant of a nonstatutory stock option (filed as Exhibit 10.13 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).*
10.12	Summary of Compensation for Named Executive Officers.*
10.13	Summary of Compensation for Non-Employee Directors.*
10.14	Sublease Agreement, dated February 25, 2005, by and between the Company and Alcantara LLC (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K (File No. 000-24435) filed on February 25, 2005 and incorporated by reference herein).*
10.15	Deed of Lease, dated January 7, 2000, between Tysons Corner Property LLC and the registrant (filed as Exhibit 10.18 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-24435) and incorporated by reference herein).
10.16	First Amendment to Lease, dated August 9, 2000, between Tysons Corner Property LLC and the registrant (filed as Exhibit 10.11 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 000-24435) and incorporated by reference herein).
10.17	Second Amendment to Lease, dated October 31, 2002, between Tysons Corner Property LLC and the registrant (filed as Exhibit 10.19 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-24435) and incorporated by reference herein).
10.18	Third Amendment of Deed of Lease for Second Additional Space, dated September 20, 2006, between Tysons Corner Property LLC and the registrant (filed as Exhibit 10.18 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 000-24435) and incorporated by reference herein).
10.19	Material Terms for Payment of Certain Executive Incentive Compensation (filed as Exhibit 10.21 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 000-24435) and incorporated by reference herein).*
10.20	Aircraft Purchase Agreement, dated January 31, 2007, by and between the Registrant and Bombardier, Inc. (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K (File No. 000-24435) filed on February 1, 2007 and incorporated by reference herein).
10.21	Executive Vice President Compensation Plan 2008 (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (File No. 000-24435) filed on May 2, 2008 and incorporated by reference herein).*
10.22	Summary of Designated Company Vehicles Policy (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (File No. 000-24435) filed on August 3, 2007 and incorporated by reference herein).*
10.23	Executive Vice President, Worldwide Sales and Operations Bonus Plan Q3 and Q4 2008 (filed as Exhibit 99.1 to the registrant’s Current Report on Form 8-K (File No. 000-24435) filed on December 15, 2008 and incorporated by reference herein).*
10.24†	Purchase Agreement, dated February 13, 2009, by and among the registrant, Backbone Partners, LLC, David B. Sherwood, Jr. and Alarm.com Holdings, Inc.
21.1	Subsidiaries of the registrant.
23.1	Consent of Grant Thornton LLP.
31.1	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Chairman of the Board of Directors, President, and Chief Executive Officer.

94

Exhibit Number	Description
31.2	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Executive Vice President, Finance & Chief Financial Officer.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contracts and compensatory plans or arrangements.

† Certain portions of this Exhibit were omitted by means of redacting a portion of the text. This Exhibit has been filed separately with the Secretary of the Commission with such text pursuant to our Application for Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

95

EX-10.12

Exhibit 10.12

Summary of 2009 Compensation for Named Executive Officers

Base Salary

As of February 23, 2009, the base salary of each of the “named executive officers”, as defined in Item 402 of Regulation S-K, of MicroStrategy Incorporated (the “Company”), was as follows:

Michael J. Saylor, Chairman of the Board, President and Chief Executive Officer	$	875,000
Sanju K. Bansal, Vice Chairman of the Board, Executive Vice President and Chief Operating Officer	$	325,000
Jonathan F. Klein, Executive Vice President, Law and General Counsel	$	400,000
Arthur S. Locke, III, Executive Vice President, Finance and Chief Financial Officer	$	400,000
Paul N. Zolfaghari, Executive Vice President, Worldwide Sales and Operations	$	400,000

Cash Bonus Compensation

The Compensation Committee is authorized to develop, adopt and implement compensation arrangements, including cash bonus awards, for Mr. Saylor. The Compensation Committee established a formula (“2008 Bonus Formula”) for determining the bonus amount with respect to Mr. Saylor’s performance for 2008, based on a performance goal relating to the Company’s diluted earnings per share for 2008. The Compensation Committee has the right to use discretion to award a cash bonus amount lower than the amount calculated using the 2008 Bonus Formula. The Compensation Committee has not yet determined Mr. Saylor’s award pursuant to the 2008 Bonus Formula and has not yet established the terms of any cash bonus plan or award for Mr. Saylor for 2009.

The Chief Executive Officer is authorized to develop, adopt and implement compensation arrangements, including cash bonus awards, for Messrs. Bansal, Klein, Locke and Zolfaghari.

Cash bonus awards for 2008 for Messrs. Bansal, Klein and Locke were determined by the Chief Executive Officer based on a subjective evaluation of the executive officer’s performance in the context of general economic and industry conditions and Company performance during 2008. The Chief Executive Officer has not yet determined the terms for any cash bonus plan or award for Messrs. Bansal, Klein, Locke or Zolfaghari for 2009.

Mr. Zolfaghari was awarded cash bonuses for 2008 in accordance with the Executive Vice President Compensation Plan 2008 filed with the Company’s Form 10-Q for the quarterly period ended March 31, 2008 and the Executive Vice President, Worldwide Sales and Operations Bonus Plan Q3 and Q4 2008 disclosed in the Company’s Form 8-K filed on December 15, 2008 and a supplemental bonus plan adopted by the Chief Executive Officer in March 2008. The CEO has not yet determined the terms for any cash bonus plan or award for Mr. Zolfaghari for 2009.

Other Compensation

The Compensation Committee may also, from time to time, award each of the named executive officers compensation in the form of stock options granted under the Company’s Second Amended and Restated 1999 Stock Option Plan.

On February 25, 2005, the Company entered into an agreement with Alcantara LLC, a Delaware limited liability company (“Alcantara”), of which Mr. Saylor is the sole member. Under the agreement, the Company is (i) providing to Alcantara use of approximately 150 square feet of office space within the Company’s leased space at 1861 International Drive, McLean, Virginia, (ii) providing to Alcantara various related services, and (iii) providing to Mr. Saylor gross-up payments in respect of taxes that he may incur as a result of the arrangement. The agreement does not require any rental or other payments from Alcantara or Mr. Saylor. The Company has filed a copy of this agreement as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

The Company also pays Mr. Saylor’s monthly dues at a private club that offers dining services and hosts business, professional and social community events.

The Company is authorized to make available, from time to time, tickets to sporting, charity, dining, entertainment or similar events as well as use of corporate suites, club memberships or similar facilities that the company may acquire (“Corporate Development Programs”), for personal use by Company personnel to the extent a Corporate Development Program is not at such time being used exclusively by the Company for business purposes. Eligible personnel include members of the Company’s Board of Directors, executive officers of the Company, and other employees of the Company and its subsidiaries. Any such personal use may be deemed compensation to such persons.

The Company has adopted a policy authorizing the Company to make available, from time to time, any designated vehicle that the Company owns or may acquire (“Designated Vehicles”) for personal use by eligible Company personnel, to the extent the Designated Vehicle is not at such time being used exclusively by the Company for business purposes. Eligible personnel include the Chief Executive Officer and any employees and members of the Company’s Board of Directors authorized by the Chief Executive Officer to use Designated Vehicles. Any such personal use may be deemed compensation to such persons.

The Company is also authorized to acquire the services of one or more drivers for vehicles other than a Company vehicle (such services, “Alternative Car Services”) for personal use by eligible Company personnel. Eligible personnel include the Chief Executive Officer and any employees and members of the Company’s Board of Directors authorized by the Chief Executive Officer to use Alternative Car Services. Any such personal use may be deemed compensation to such persons. The Company has established a policy that the aggregate compensation to all Company personnel as a result of use of Alternative Car Services, together with all associated tax gross-up payments, may not exceed $100,000 in any fiscal year.

From time to time, the Board of Directors may hold meetings and other related activities in various locations for which the Company’s payment of the expenses of Company participants and Company participants’ guests may be deemed compensation to Company participants (“Meeting Activities”).

Each year the Company sponsors a “President’s Club” trip for Company sales and services personnel who have met specified performance criteria as well as certain executive officers and their guests (“President’s Club Events”). Participation in President’s Club Events by Company personnel may be deemed compensation to such persons.

In addition, the Company may hold, host or otherwise arrange parties, outings or other similar entertainment events at which Mr. Saylor and Mr. Bansal are permitted to entertain personal guests (“Entertainment Events”) and are paid a tax gross-up for taxes they may incur as a result of such event, as described below. The Company has established a policy that the aggregate incremental cost to the Company of such Entertainment Events (to the extent that they are not Corporate Development Programs) attributable to each of Mr. Saylor and Mr. Bansal, including all tax gross-up payments, may not exceed $50,000 in any fiscal year.

To the extent that personal use of Corporate Development Programs, Designated Vehicles or Alternative Car Services or participation in President’s Club Events, Entertainment Events or Meeting Activities is deemed compensation to an executive officer, the Company pays to (or withholds and pays to the appropriate taxing authority on behalf of) such executive officer a “tax gross-up” in cash, which would approximate the amount of the individual’s (i) federal and state income and payroll taxes on the taxable income associated with such participation or personal use plus (ii) federal and state income and payroll taxes on the taxes that the individual may incur as a result of the payment of taxes by the Company, subject to the aggregate amount limitations described above, if applicable.

EX-10.13

Exhibit 10.13

Summary of 2009 Compensation for Non-employee Directors

Each non-employee director (“Outside Director”) receives a fee of $15,000 for each quarterly meeting of the Board of Directors which the Outside Director attends in person. An Outside Director may be paid such fee for attending a quarterly board meeting via telephonic conference call if the Outside Director has good reason for the Outside Director’s failure to attend such meeting in person as determined by the Chairman of the Board, but such payment is limited to one occurrence in any given fiscal year. Each Outside Director who is a member of the Audit Committee also receives a fee of $6,000 for each quarterly meeting of such committee which the Outside Director attends in person. Each Outside Director who is a member of the Compensation Committee also receives a fee of $3,000, which is paid quarterly, provided that, in order to be eligible to receive the fee with respect to a fiscal quarter, the Outside Director must have served on the Compensation Committee on the last day of such fiscal quarter. Each Outside Director may receive fees up to $12,000 in any fiscal quarter for additional services delegated by the Board of Directors to such Outside Director in the Outside Director’s capacity as a member of the Audit Committee, the Compensation Committee, the Board of Directors or any other committees of the Board of Directors, provided that any such fee paid with respect to a particular service must be approved by the Board of Directors following the completion of such service by the Outside Director.

Each Outside Director is reimbursed for all reasonable out-of-pocket expenses incurred by him or her in attending meetings of the Board of Directors and any committee thereof and otherwise in performing his or her duties as an Outside Director, subject to compliance with our standard documentation policies regarding reimbursement of business expenses. From time to time, the Board of Directors may hold meetings and other related activities in various locations for which the Company’s payment of the expenses of Outside Directors and their guests may be deemed compensation to Outside Directors (“Meeting Activities”). In addition, the Company may hold, host or otherwise arrange parties, outings or other similar entertainment events for which the Company’s payment of the expenses of Outside Directors and their guests may be deemed compensation to Outside Directors (“Entertainment Events”).

The Company is so authorized to make available, from time to time, tickets to sporting, charity, dining, entertainment or similar events as well as use of corporate suites, club memberships or similar facilities that the company may acquire (“Corporate Development Programs”), for personal use by Company personnel to the extent a Corporate Development Program is not at such time being used exclusively by the Company for business purposes. Eligible personnel include members of the Board of Directors of the Company, executive officers of the Company, and other employees of the Company and its subsidiaries. Any such personal use may be deemed compensation to such persons.

The Company has adopted a policy authorizing the Company to make available, from time to time, any designated vehicle that the Company owns or may acquire (“Designated Vehicles”) for personal use by eligible Company personnel, to the extent the Designated Vehicle is not at such time being used exclusively by the Company for business purposes. Eligible personnel include the Chief Executive Officer and any employees and members of the Company’s Board of Directors authorized by the Chief Executive Officer to use Designated Vehicles. Any such personal use may be deemed compensation to such persons.

Further, the Company is authorized to acquire the services of one or more drivers for vehicles other than a Company vehicle (such services, “Alternative Car Services”) for personal use by eligible Company personnel. Eligible personnel include the Chief Executive Officer and any employees and members of the Company’s Board of Directors authorized by the Chief Executive Officer to use Alternative Car Services. Any such personal use may be deemed compensation to such persons. The Company has established a policy that the aggregate compensation to all Company personnel as a result of use of Alternative Car Services, together with all associated tax gross-up payments, may not exceed $100,000 in any fiscal year.

To the extent that participation in Meeting Activities or Entertainment Events or personal use of Corporate Development Programs, Designated Vehicles or Alternative Car Services is deemed compensation to an Outside Director, the Company pays to (or withholds and pays to the appropriate taxing authority on behalf of) such Outside Director a “tax gross-up” in cash, which would approximate the amount of the individual’s (i) federal and state

income and payroll taxes on the taxable income associated with such participation or personal use plus (ii) federal and state income and payroll taxes on the taxes that the individual may incur as a result of the payment of taxes by the Company, subject to the aggregate amount limitations described above, if applicable.

EX-10.24

Exhibit 10.24

PURCHASE AGREEMENT

BY AND AMONG

MICROSTRATEGY INCORPORATED

AND

THE INDIVIDUALS SET FORTH ON

EXHIBIT A HERETO

(the “Sellers”)

and

ALARM.COM HOLDINGS, INC.

(“Buyer”)

February 13, 2009

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

TABLE OF CONTENTS

		Page
ARTICLE I . STOCK PURCHASE		2
Section 1.1	Sale and Purchase of Options.	2
Section 1.2	Sale of the Company to Buyer.	2
Section 1.3	The Closing.	4
Section 1.4	Stock Options.	6
Section 1.5	Indebtedness.	6
Section 1.6	Stockholders’ Representative.	6
Section 1.7	Working Capital Adjustment.	6
Section 1.8	Eon Settlement.	9
Section 1.9	Further Assurances.	9
ARTICLE II . REPRESENTATIONS AND WARRANTIES OF SELLERS WITH RESPECT TO THE COMPANY		10
Section 2.1	Organization and Qualification.	10
Section 2.2	Capitalization and Ownership of the Company.	11
Section 2.3	Noncontravention.	12
Section 2.4	Financial Statements.	12
Section 2.5	Absence of Certain Changes.	13
Section 2.6	Undisclosed Liabilities.	15
Section 2.7	Tax Matters.	15
Section 2.8	Property.	17
Section 2.9	Real Property.	17
Section 2.10	Intellectual Property.	17
Section 2.11	Contracts.	19
Section 2.12	Litigation.	20
Section 2.13	Labor Matters.	21
Section 2.14	Employee Benefits.	21
Section 2.15	Legal Compliance.	22
Section 2.16	Permits.	22
Section 2.17	Environmental Matters.	23
Section 2.18	Business Relationships with Affiliates.	23
Section 2.19	Sufficiency of Assets.	23
Section 2.20	Brokers’ Fees.	23
ARTICLE III . REPRESENTATIONS AND WARRANTIES OF THE SELLERS		23
Section 3.1	Valid Title.	24
Section 3.2	Authority.	24
Section 3.3	Broker’s Fees.	24
Section 3.4	Litigation.	24
Section 3.5	Noncontravention.	24
Section 3.6	Affiliate Transactions.	25
ARTICLE IV . REPRESENTATIONS AND WARRANTIES OF BUYER		25
Section 4.1	Organization.	25
Section 4.2	Authorization of Transaction.	25

Section 4.3	Noncontravention.	26
Section 4.4	Broker’s Fees.	26
Section 4.5	Litigation.	26
Section 4.6	Investment Intent.	27
ARTICLE V . PRE-CLOSING COVENANTS		27
Section 5.1	Efforts.	27
Section 5.2	Operation of Business.	27
Section 5.3	Access.	27
Section 5.4	Resignations.	28
Section 5.5	Deposit.	28
ARTICLE VI . CONDITIONS PRECEDENT TO CLOSING		28
Section 6.1	Conditions to Obligations of Buyer.	28
Section 6.2	Conditions to Obligations of each Seller.	30
ARTICLE VII . INDEMNIFICATION		30
Section 7.1	Indemnification by the Sellers.	30
Section 7.2	Indemnification by Buyer.	32
Section 7.3	Claims for Indemnification.	32
Section 7.4	Survival.	34
Section 7.5	Limitations.	35
Section 7.6	Waiver, Release and Discharge.	38
Section 7.7	Treatment of Indemnification Payments.	38
Section 7.8	Satisfaction of Indemnification Obligations.	39
ARTICLE VIII . RESERVED		39
ARTICLE IX . TAX MATTERS		39
Section 9.1	Preparation and Filing of Tax Returns; Payment of Taxes.	39
Section 9.2	Allocation of Certain Taxes.	40
Section 9.3	Refunds and Carrybacks.	40
Section 9.4	Cooperation on Tax Matters; Tax Audits.	41
Section 9.5	Section 338(h)(10) Election.	41
ARTICLE X . FURTHER AGREEMENTS		42
Section 10.1	Access to Information; Record Retention; Cooperation.	42
Section 10.2	Disclosure Generally.	43
Section 10.3	Acknowledgments by Buyer.	44
Section 10.4	Certain Employee Benefits Matters.	44
Section 10.5	No Use of Name.	46
Section 10.6	Non-Competition, Non-Solicitation and Confidentiality.	46
ARTICLE XI . MISCELLANEOUS		49
Section 11.1	Press Releases and Announcements.	49
Section 11.2	No Third Party Beneficiaries.	49
Section 11.3	Entire Agreement.	50
Section 11.4	Succession and Assignment.	50
Section 11.5	Counterparts.	50
Section 11.6	Headings.	50
Section 11.7	Notices.	50
Section 11.8	Governing Law.	52
Section 11.9	Amendments and Waivers.	52

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Section 11.10	Severability.	52
Section 11.11	Expenses.	53
Section 11.12	Specific Performance.	53
Section 11.13	Construction.	53
Section 11.14	Waiver of Jury Trial.	54
Section 11.15	Incorporation of Exhibits and Schedules.	54
Section 11.16	Facsimile Signature.	54

Disclosure Schedule

Other Schedules

Schedule 10.5 – Retained Marks

Exhibits

Exhibit A	–	Ownership and Purchase Price Allocation
Exhibit B	–	Form of Transition Services Agreement
Exhibit C	–	Form of Sublease Agreement
Exhibit D	–	Form of Software License Agreement
Exhibit E	–	Form of Intellectual Property Amendment
Exhibit F	–	Form of Dealer and Supplier Assignment Agreement
Exhibit G-1	–	Form of Backbone Partners Promissory Note
Exhibit G-2	–	Form of Sherwood Promissory Note
Exhibit H	–	Standard-Form Employee NDA

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TABLE OF DEFINED TERMS

Defined Term	Section
Affiliate	1.7
Affiliated Group	2.7(a)
Affiliated Period	2.7(a)
Agreed Amount	7.3(b)
Agreement	Preamble
Applicable Limitation Date	7.4(a)
Backbone Partners	1.2(b)
Balance Sheet Date	2.4
Business	Recitals
Business Benefit Plans	2.14(b)
Business Day	1.3(a)
Buyer	Preamble
Buyer Confidential Information	10.6(d)
Buyer Material Adverse Effect	4.3(b)
Buyer Parties	7.1(a)
Buyer Released Parties	7.6
Buyer’s 401(k) Plan	10.4(b)
Cash Sellers	1.2(b)
Claim Notice	7.3(b)
Claimed Amount	7.3(b)
Class B Common Stock	Recitals
Class A Common Stock	Recitals
Closing	1.3(a)
Closing Date	1.3(a)
Closing Statement	1.3(b)(i)
Closing Working Capital Amount	1.7(a)
Closing Working Capital Statement	1.7(a)
COBRA	10.4(d)
Code	2.7(c)
Company	Recitals
Company Benefit Plans	2.14(b)
Company Intellectual Property	2.10(b)
Company Material Adverse Effect	2.1(a)
Company Software	2.10(f)
Competitive Business	10.6(a)
Consents	6.1(a)
Covered Employee	10.6(b)
Damages	7.1(a); 7.3(a)
Dealer/Supplier NDA	1.3(b)(xi)
Demand Note	1.2(a)(ii)
Deposit	5.5
Disclosure Schedule	ARTICLE II

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Defined Term	Section
Dispute Notice	1.7(b)
Employee Benefit Plan	2.14(b)
Employees	2.14(a)
Environmental Laws	2.17
Eon	1.7
Eon Adjustment Amount	1.8
Eon License	1.7
Eon Settlement Amount	1.7
Equity Commitment Letters	4.7
Equity Financing	4.7
ERISA	2.14(b)
ERISA Affiliate	2.14(b)
Estimated Closing Working Capital Amount	1.7
Final Closing Working Capital Amount	1.7(b)
Final Closing Working Capital Statement	1.7(b)
Financial Statements	2.4
Fundamental Representations	7.4(a)
General Basket	7.5(d)(ii)
General Cap	7.5(d)(i)
Governmental Entity	2.3(b)
Income Taxes	2.7(a)
Indebtedness	1.2(a)(ii)
Indemnified Party	7.3(a)
Indemnifying Party	7.3(a)
Information	10.1(a)
Intellectual Property	2.10(a)
Lebowitz Claim	7.1(a)(vii)
Letter of Credit	5.5
Liability	2.6
Material Contracts	2.11(b)
MicroStrategy	Preamble
MicroStrategy Benefit Plans	2.14(b)
MicroStrategy Employee	10.6(c)
MicroStrategy Entities	10.6(c)(i)
Most Recent Balance Sheet	2.4
Multiemployer Plan	2.14(b)
Neutral Accountant	1.7(c)
Option	1.1
Option Plan	1.1
Order	2.12
Other Insiders	2.18
Party, Parties	Preamble
Permits	2.16
Permitted Security Interest	2.8

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Defined Term	Section
Preferred Shares	1.2(b)
Pro Rata Portion	7.1(a)
Purchase Price	1.2(a)(iii)
Purchase Price Allocation	9.5(b)
Retained Cash	1.2(a)(iv)
Retained Marks	10.5
Rollover Sellers	1.2(b)
Rollover Shares	1.2(b)
Section 1060 Allocation	9.5(b)
Section 338(h)(10) Election	9.5(a)
Securities Act	2.1(b)(iii)
Security Interest	1.2(b)
Seller Insider	3.6
Sellers	Preamble
Seller’s 401(k) Plan	10.4(b)
Seller Transaction Expenses	1.2(a)( v)
Series A Convertible Preferred Stock	1.2(b)
Shares	Recitals
Sherwood	1.2(b)
Software License Agreement	1.3(b)
Special Indemnity Amount	7.5(d)(iii)
Standard-Form Employee NDA	2.11(d)
Statute of Limitations Representation	7.4(a)
Stock Purchase Agreement	1.3(b)
Sublease	1.3(b)
Subsidiary	2.1(b)(i)
Subsidiary Interests	2.1(b)(i)
Target Working Capital	1.2(a)(vi)
Tax Audit	9.4(b)
Tax Benefits	7.5(f)
Tax Returns	2.7(a)
Taxes	2.7(a)
Taxing Authority	9.4(a)
Third Party Claim	7.3(a)
Transition Services Agreement	1.3(b)
Unaudited Financial Statements	2.4
Working Capital	1.7

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PURCHASE AGREEMENT

This PURCHASE AGREEMENT (this “Agreement”) is entered into as of February 13, 2009 by and among MicroStrategy Incorporated, a Delaware corporation (“MicroStrategy”), the individual and the limited liability company set forth on Exhibit A hereto (together with MicroStrategy, the “Sellers”), and Alarm.com Holdings, Inc., a Delaware corporation (“Buyer”). The Sellers and Buyer are sometimes referred to herein individually as a “Party” and together as the “Parties.”

RECITALS

1. Alarm.com Incorporated, a Delaware corporation (the “Company”), is engaged, among other matters, in the business of providing web-enabled security and activity monitoring technology (such business, as conducted by the Company on the date hereof, being referred to herein as the “Business”);

2. MicroStrategy owns 263,923 shares of Class B common stock, par value $0.001 per share, of the Company (“Class B Common Stock”) and the other Sellers own in aggregate 36,641 shares of Class A common stock, par value $0.001 per share, of the Company (“Class A Common Stock”), collectively representing all of the issued and outstanding capital stock of the Company (the “Shares”); and

3. The Sellers and Buyer desire to enter into transactions pursuant to which the equity interests of the Company shall be transferred to Buyer, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I. STOCK PURCHASE

Section 1.1 Sale and Purchase of Options.

On the terms and subject to the conditions of this Agreement, immediately prior to the Closing, MicroStrategy shall cause the Company to purchase each outstanding option to purchase Class A Common Stock of the Company (an “Option”), whether vested or unvested, under the Company’s 2003 Stock Incentive Plan, as amended (the “Option Plan”), from each holder thereof and shall cause the Company to cancel such Options in exchange for a cash payment to the holders of such Options.

Section 1.2 Sale of the Company to Buyer.

(a) For purposes of this Agreement:

(i) “Estimated Purchase Price” means (a) $31,600,000 minus (b) the amount, if any, by which the Target Working Capital exceeds the Estimated Closing Working

Capital Amount, minus (c) the amount of any Indebtedness of the Company and the Subsidiary as of the Closing Date, minus (d) the amount of any Seller Transaction Expenses (except to the extent paid directly by the Sellers at or prior to the Closing), plus (e) the amount, if any, by which the Target Working Capital is less than the Estimated Closing Working Capital Amount, plus (f) the amount of the Retained Cash;

(ii) “Indebtedness” means any indebtedness of the Company and the Subsidiary, including (i) all obligations for borrowed money and all obligations issued in substitution for or exchange of obligations for borrowed money (including the Demand Revolving Note, dated May 19, 2008, by and between MicroStrategy (as lender) and the Company (as borrower) (the “Demand Note”) and any other Liabilities owed or payable to MicroStrategy), (ii) all obligations evidenced by any note, bond, debenture or other debt security (including uncashed checks), (iii) all obligations for the deferred purchase price of property or services with respect to which a person is liable, contingently or otherwise, as obligor or otherwise, (iv) any commitment by which a person assures a creditor against loss (including, without limitation, contingent reimbursement Liability with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a person (including, without limitation, guarantees in the form of an agreement to repurchase or reimburse), (vi) any Liabilities under capitalized leases with respect to which a person is liable, contingently or otherwise, as obligor, guarantor or otherwise, including, without limitation, any lease termination payments or charges, (vii) any indebtedness secured by a Lien on a person’s assets, (viii) any amounts owed to any person under any pension plan, noncompetition or similar arrangements or to any former employee who entered into a consulting arrangement in connection with the termination of such person’s employment with the Company, (ix) any change-of-control or similar payment or increased cost which is triggered in whole or in part by the transactions contemplated by this Agreement, (x) any Liability under deferred compensation plans, phantom stock plans, bonus plans, or for severance payments or similar arrangements made payable in whole or in part as a result of the transactions contemplated herein, (xi) any off-balance sheet financing, (xii) the gross amount paid or payable with respect to any employee bonus or retention arrangement or other compensation payable to any person as a result of the announcement or consummation of the transactions contemplated by this Agreement, and (xiii) any accrued and unpaid interest on, and any prepayment premiums, penalties or similar contractual charges (or breakage fees) in respect of, any of the foregoing obligations computed as though payment is being made in respect thereof on the Closing Date;

(iii) “Purchase Price” means (a) $31,600,000, minus (b) the amount, if any, by which the Target Working Capital exceeds the Final Closing Working Capital Amount, minus (c) the amount of any Indebtedness of the Company and the Subsidiary as of the Closing Date, minus (d) the amount of any Seller Transaction Expenses (except to the extent paid directly by the Sellers at or prior to the Closing), plus (e) the amount, if any, by which the Target Working Capital is less than the Final Closing Working Capital Amount, plus (f) the amount of the Retained Cash;

(iv) “Retained Cash” means book balance cash (actual cash-on-hand less the face amount of checks in transit plus the amount of deposits in transit to the extent that the corresponding account receivable, if any, has been eliminated from the Closing Working

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Capital Amount) to be retained by the Company and not distributed prior to the Closing in an amount (not to exceed $500,000) determined by Buyer not less than two (2) Business Days prior to the Closing;

(v) “Seller Transaction Expenses” means all out-of-pocket expenses (including, without limitation, all fees and expenses of outside counsel, investment bankers, brokers, financial advisors, banks, other financial institutions, accountants, experts and consultants) incurred, paid or payable by the Company or the Subsidiary in connection with or related to the investigation, authorization, preparation, negotiation, execution and performance of this Agreement or the transactions contemplated by this Agreement and all other matters contemplated by this Agreement and the closing thereof; and

(vi) “Target Working Capital” means $866,287.

(b) Subject to the terms and conditions of this Agreement, on the Closing Date and immediately after the completion of the transactions set forth in Section 1.1 of this Agreement, (i) MicroStrategy and David B. Sherwood, Jr. (“Sherwood”), only with respect to the Shares listed opposite his name on Exhibit A as “Cash Shares” (each a “Cash Seller” and collectively, the “Cash Sellers”), shall sell, convey, assign, transfer and deliver to Buyer, free and clear of any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law) (a “Security Interest”), and Buyer shall purchase and acquire from each Cash Seller, in the case of MicroStrategy all of the Shares owned, and in the case of Sherwood all of the Shares being sold, by such Cash Seller, as set forth opposite such Cash Seller’s name on Exhibit A, (ii) Buyer shall pay to the Cash Sellers in cash, by wire transfer of immediately available funds, the portion of the Estimated Purchase Price attributable to the Shares being sold by such Cash Sellers determined in accordance with Exhibit A, to be allocated among the Cash Sellers as set forth on Exhibit A, (iii) Backbone Partners, LLC, a Delaware limited liability company (“Backbone Partners”), with respect to all of the Shares owned by Backbone Partners and/or Stephen S. Trundle, and Sherwood only with respect to the Shares listed opposite such person or entity’s name on Exhibit A as “Rollover Shares” (collectively, the “Rollover Shares”; Backbone Partners and Sherwood, only with respect to his Rollover Shares, are referred to herein as the “Rollover Sellers”), shall each contribute all of the Rollover Shares owned by such Rollover Seller, as set forth opposite such Rollover Seller’s name on Exhibit A and pursuant to the Stock Purchase Agreement, to Buyer free and clear of any Security Interest and (iv) in exchange for such contribution and pursuant to the Stock Purchase Agreement, Buyer shall (A) issue to such Rollover Seller a whole number of shares (the “Preferred Shares”) of Series A Convertible Preferred Stock of Buyer (“Series A Convertible Preferred Stock”) having an aggregate liquidation preference as near as possible to (without exceeding) the portion of the Estimated Purchase Price attributable to the Shares owned by such Rollover Seller determined in accordance with Exhibit A, having the rights, preferences and privileges set forth in the Amended and Restated Certificate of Incorporation of Buyer, free and clear of any Security Interest (other than pursuant to applicable securities laws or a stockholders or similar agreement among, inter alia, Buyer and the Rollover Sellers), and (B) distribute to such Rollover Seller an amount of cash equal to any excess of such Rollover Seller’s portion of the Estimated Purchase Price over the aggregate liquidation preference of the Preferred Shares issued to him.

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(c) Notwithstanding anything herein to the contrary, Buyer shall have the option of delaying its purchase of all of the Rollover Shares until after the Closing and upon the execution and delivery by the Rollover Sellers of (i) subscription agreements with respect to Preferred Shares, (ii) a stockholders agreement with respect to the equity interests of Buyer and (iii) a registration rights agreement with respect to Buyer’s common stock, in each case in form and substance reasonably satisfactory to Buyer and each of Buyer’s stockholders. Buyer and the Rollover Sellers shall use their commercially reasonable efforts to enter into the agreements contemplated in the preceding sentence in accordance with the terms of the side letter agreement of even date herewith between Buyer, the Rollover Sellers and certain other investors, and Buyer shall use its commercially reasonable efforts to amend and restate its certificate of incorporation (or the certificate of incorporation of any other entity which Buyer and the Rollover Sellers agree shall hold the equity interests of the Company) in form and substance reasonably satisfactory to its stockholders and the Rollover Sellers, as promptly as possible after the Closing. Once such agreements have been executed and delivered by all parties thereto and Buyer has so amended and restated its certificate of incorporation, Buyer shall promptly purchase all of the Rollover Shares in a single transaction in exchange for the consideration described in Section 1.2(b). Nothing in this Section 1.2(c) shall affect the rights and obligations of MicroStrategy under this Agreement.

Section 1.3 The Closing.

(a) Time and Location. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Wilmer Cutler Pickering Hale and Dorr LLP in Washington, DC or such other location as may be mutually agreed by the Parties, commencing at 10:00 a.m., local time, on February 13, 2009 (the “Closing Date”). For purposes of this Agreement, a “Business Day” shall be any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions located in New York, New York are permitted or required by law, executive order or governmental decree to remain closed.

(b) Actions at the Closing.

At the Closing:

(i) MicroStrategy and Buyer shall jointly prepare a statement (the “Closing Statement”) setting forth (A) the aggregate amount of Indebtedness as of the Closing Date, (B) all Seller Transaction Expenses (except to the extent paid, discharged or otherwise satisfied at or prior to the Closing), (C) the Estimated Closing Working Capital Amount, which Closing Statement shall be used to calculate the Estimated Purchase Price, and (D) the amount of Retained Cash;

(ii) Each Seller shall deliver (or cause to be delivered) to Buyer the various certificates, instruments and documents required to be delivered under Section 6.1;

(iii) Buyer shall deliver (or cause to be delivered) to each Seller the various certificates, instruments and documents required to be delivered under Section 6.2;

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(iv) Each Seller shall deliver to Buyer certificate(s) evidencing the Shares owned by such Seller, duly endorsed or with stock powers duly executed by such Seller; provided that such obligation of the Rollover Sellers may be delayed if Buyer delays its purchase of the Rollover Shares in accordance with Section 1.2(c);

(v) MicroStrategy shall, or shall cause the Company to, deliver to Buyer the certificate of formation, limited liability company operating agreement, minute books, stock books, ledgers and registers, corporate seals and other similar records of the Company and its Subsidiary;

(vi) MicroStrategy and the Company shall execute and deliver to each other a Transition Services Agreement in substantially the form attached hereto as Exhibit B, pursuant to which MicroStrategy shall provide certain transition services to Buyer (the “Transition Services Agreement”);

(vii) MicroStrategy and the Company shall execute and deliver to each other a Sublease Agreement substantially in the form attached hereto as Exhibit C (the “Sublease”);

(viii) MicroStrategy Service Corporation (at the direction of MicroStrategy) and the Company shall execute and deliver to each other a Software License Agreement substantially in the form attached hereto as Exhibit D (the “Software License Agreement”);

(ix) MicroStrategy and the Company shall execute and deliver to each other an amendment to the Intellectual Property Assignment and License Back Agreement dated October 10, 2003 between MicroStrategy and the Company substantially in the form attached hereto as Exhibit E;

(x) MicroStrategy and the Company shall enter into an Assignment Agreement with respect to each nondisclosure or confidentiality agreement to which MicroStrategy and a prospective Company dealer or Company equipment supplier are parties (each, a “Dealer/Supplier NDA”) and are listed on Schedule 1.3(b)(x) substantially in the form attached hereto as Exhibit F;

(xi) Buyer shall pay to each Cash Seller the applicable portion of the Estimated Purchase Price in cash by wire transfer of immediately available funds to one or more accounts designated by such Cash Seller;

(xii) Buyer shall issue to each Rollover Seller the number of Preferred Shares to which such Rollover Seller is entitled in accordance with Section 1.2(b); provided that Buyer’s obligation to so issue Preferred Shares may be delayed in accordance with Section 1.2(c);

(xiii) Buyer shall pay to each Seller the applicable portion of the Eon Adjustment Amount in cash by wire transfer of immediately available funds to one or more accounts designated by such Seller; and

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(xiv) The Parties shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above.

Section 1.4 Stock Options.

MicroStrategy shall take all action required so that, as of the Closing, each outstanding Option, whether vested or unvested, and the Option Plan, shall have been terminated, expired or been cancelled as provided in Section 1.1 of this Agreement, in each case without any further liability on the part of Buyer, the Company or the Subsidiary.

Section 1.5 Indebtedness.

At the Closing, Buyer shall pay on behalf of the Company and the Subsidiary the aggregate amount of the Indebtedness to the persons entitled to receive the same pursuant to the Closing Statement in accordance with the wire instructions provided to Buyer at or prior to Closing.

Section 1.6 Stockholders’ Representative.

(a) In order to efficiently administer the transactions contemplated hereby, the Sellers hereby designate MicroStrategy as their representative.

(b) The Sellers hereby authorize MicroStrategy to give and receive all notices required to be given under this Agreement, and to take any and all additional action as is contemplated to be taken by or on behalf of the Sellers by the terms of this Agreement; provided, however, that MicroStrategy shall promptly provide the other Sellers with copies of any such notices and shall notify the other Sellers promptly after taking any such actions.

(c) Buyer hereby agrees to deliver to MicroStrategy a copy of all notices delivered to any of the Sellers under this Agreement.

(d) All fees and expenses reasonably incurred by MicroStrategy to carry out its duties under this Section 1.6 shall be paid by the Sellers in proportion to their ownership of the Shares.

Section 1.7 Working Capital Adjustment.

Prior to the Closing, MicroStrategy and Buyer shall jointly determine the estimated Working Capital of the Company and the Subsidiary as of the close of business on the day immediately preceding the Closing Date (the “Estimated Closing Working Capital Amount”). For purposes of this Agreement, “Working Capital” shall mean the sum of accounts receivable (net of all related reserves, including those for doubtful accounts, product returns and sales credits), inventory (net of applicable reserves, including those for shrinkage and obsolescence), prepaid assets, less the sum of accounts payable (including payables for goods received but not invoiced), reserves for customer rebates of any kind, accrued expenses (including any salary, bonus, vacation and other benefit accrual for all periods ending on or prior to the Closing Date), but excluding amounts payable under the Demand Note, any obligations of the Company to pay any expenses pursuant to Section 11.11 of this Agreement, the net receivable from Firstline

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Security, Inc. of approximately $4,260,000 (including the associated allowance relating to such receivable) and any Tax assets or Tax accruals and shall be calculated in accordance with U.S. GAAP (with the exception as noted above) and, to the extent consistent with U.S. GAAP, on a basis consistent with the Company’s accounting methods, treatments, principles and procedures used in the preparation of the Unaudited Financial Statements referred to in Section 2.4 of this Agreement. For avoidance of doubt, the Retained Cash shall not be included in the calculation of Working Capital. “Affiliate” means, with respect to any person, any other person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through ownership of voting securities, by contract or otherwise.

The Purchase Price shall be subject to adjustment after the Closing Date as follows:

(a) Within sixty (60) days after the Closing Date, Buyer shall prepare and deliver to MicroStrategy a statement (the “Closing Working Capital Statement”) calculating the Working Capital of the Company and the Subsidiary as of the close of business on the day immediately preceding the Closing Date (the “Closing Working Capital Amount”).

(b) If MicroStrategy in good faith disputes the Closing Working Capital Amount as shown on the Closing Working Capital Statement prepared by Buyer, MicroStrategy shall deliver to Buyer within thirty (30) days after receipt of the Closing Working Capital Statement a statement (the “Dispute Notice”) setting forth MicroStrategy’s calculation of the correct Closing Working Capital Amount and describing in reasonable detail the basis for the determination of such different Closing Working Capital Amount. The Parties shall use reasonable efforts to resolve such differences regarding the determination of the Closing Working Capital Amount for a period of thirty (30) days after Buyer has given the Dispute Notice. If MicroStrategy and Buyer resolve such differences, the Closing Working Capital Amount agreed to by the Parties shall be deemed to be the “Final Closing Working Capital Amount” and the Closing Working Capital Statement agreed to by the Parties shall be deemed to be the “Final Closing Working Capital Statement.”

(c) If MicroStrategy and Buyer do not reach a final resolution on the Closing Working Capital Amount within thirty (30) days after Buyer has given the Dispute Notice, unless MicroStrategy and Buyer mutually agree to continue their efforts to resolve such differences, Ernst & Young LLP (the “Neutral Accountant”) shall resolve such differences, pursuant to an engagement agreement executed by MicroStrategy and Buyer and the Neutral Accountant, in the manner provided below. The Parties shall each be entitled to make a presentation to the Neutral Accountant, pursuant to procedures to be agreed to among MicroStrategy, Buyer and the Neutral Accountant (or, if they cannot agree on such procedures, pursuant to procedures determined by the Neutral Accountant), regarding such Party’s calculation of the Closing Working Capital Amount; and the Neutral Accountant shall be required to resolve the differences between MicroStrategy and Buyer and determine the Closing Working Capital Amount within twenty (20) Business Days thereafter. The Closing Working Capital Amount determined by the Neutral Accountant shall be deemed to be the Final Closing

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Working Capital Amount and the Closing Working Capital Statement, as adjusted to reflect such determination, shall be deemed to be the Final Closing Working Capital Statement. Such determination by the Neutral Accountant shall be conclusive and binding upon the Parties, absent fraud or manifest error.

(d) The Neutral Accountant shall not be authorized or permitted to:

(i) determine any questions or matters whatsoever under or in connection with this Agreement except for the resolution of differences between MicroStrategy and Buyer regarding the determination of the Closing Working Capital Amount in accordance with this Section 1.7;

(ii) resolve any such differences by making an adjustment to the Closing Working Capital Statement that is outside of the range defined by amounts as finally proposed by MicroStrategy and Buyer; or

(iii) apply any accounting methods, treatments, principles or procedures other than as described in Section 1.7.

(e) The fees and expenses of the Neutral Accountant shall be allocated to be paid by Buyer, on the one hand, and/or the Sellers, on the other hand, based upon the percentage which the portion of the contested amount of the matters subject to the Dispute Notice not awarded to each Party bears to the amount actually contested by such Party in the aggregate, as determined by the Neutral Accountant. The Sellers’ portion of the Neutral Accountant’s fees and expenses shall be allocated among the Sellers in proportion to their ownership of the Shares immediately prior to the Closing.

(f) The Parties agree that the procedure set forth in this Section 1.7 for resolving disputes with respect to the Closing Working Capital Amount shall be the sole and exclusive method for resolving any such disputes, provided that this provision shall not prohibit any Party from instituting litigation to enforce the ruling of the Neutral Accountant.

(g) Failure of MicroStrategy to deliver a Dispute Notice within thirty (30) days after receiving the Closing Working Capital Statement shall constitute acceptance of the Closing Working Capital Amount set forth on the Closing Working Capital Statement, whereupon such Closing Working Capital Amount shall be deemed to be the Final Closing Working Capital Amount and the Closing Working Capital Statement shall be deemed to be the Final Closing Working Capital Statement. Delivery by MicroStrategy of a Dispute Notice shall constitute final and binding acceptance by MicroStrategy and Buyer of all portions of the Closing Working Capital Statement other than those specifically identified in the Dispute Notice as being subject to a good faith dispute.

(h) Within five (5) Business Days after the date on which the Final Closing Working Capital Amount is determined pursuant to this Section 1.7:

(i) if the Purchase Price is less than the Estimated Purchase Price, then the Sellers shall pay to Buyer, by wire transfer of immediately available funds into an account or accounts designated by Buyer, an amount in cash equal to the sum of such difference; and

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(ii) if the Purchase Price is greater than the Estimated Purchase Price, then Buyer shall pay to the Sellers into an account or accounts designated by such Sellers, by wire transfer of immediately available funds, an amount in cash equal to the sum of such excess.

Any amounts due to or payable by the Sellers under this Section 1.7(h) shall be allocated among the Sellers in proportion to their ownership of the Shares immediately prior to the Closing. The Sellers shall be severally, and not jointly, liable on a pro rata basis based on the percentage set forth opposite each Seller’s name on Exhibit A for their obligations under this Section 1.7(h). Notwithstanding the foregoing, each Rollover Seller shall have the right to satisfy any payment obligation under Section 1.7(h)(i) either (i) by paying in cash in immediately available funds, (ii) by issuance of a promissory note substantially in the form attached hereto as Exhibit G-1 or G-2, as applicable, for the amount required to be paid, or (iii) after the purchase by Buyer of the Rollover Shares, (A) by instructing Buyer to cancel a whole number of shares of Series A Convertible Preferred Stock owned by such Rollover Seller having an aggregate liquidation preference as near as possible to (without exceeding) the amount of such payment obligation (it being understood that if such Rollover Seller is unable to fully satisfy his or its payment obligations through cancellation of shares and elects not to fully satisfy such obligations by issuance of a promissory note, he or it shall be obligated to satisfy any remaining balance through the payment of cash in immediately available funds) and (B) paying in cash in immediately available funds any shortfall. In addition, Buyer shall have the right to satisfy any obligation to deliver additional consideration to each Rollover Seller under Section 1.7(h)(ii) either (i) by paying in cash in immediately available funds or (ii) after the purchase by Buyer of the Rollover Shares, (A) by issuing to such Rollover Seller an additional whole number of shares of Series A Convertible Preferred Stock having an aggregate liquidation preference as near as possible to (without exceeding) the amount of such payment obligation and (B) paying in cash in immediately available funds any remaining shortfall.

Section 1.8 Eon Settlement.

“Eon Settlement Amount” means the amount the Company agrees to pay to Eon Corp IP Holdings, LLC or any of its Affiliates (collectively, “Eon”) in exchange for a release of claims and a license to certain Intellectual Property of Eon in form and substance reasonably satisfactory to Buyer (the “Eon License”). Buyer shall pay to Sellers at the Closing such Seller’s applicable portion of an amount equal to 50% of the Eon Settlement Amount; provided that such payment shall not exceed $100,000 in the aggregate (the “Eon Adjustment Amount”).

Section 1.9 Further Assurances.

At any time and from time to time after the Closing Date, as and when requested by any Party hereto and at such Party’s expense, the other Party shall promptly execute and deliver, or cause to be executed and delivered, all such documents, instruments and certificates and shall take, or cause to be taken, all such further or other actions as are necessary to evidence and effectuate the transactions contemplated by this Agreement.

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ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLERS WITH

RESPECT TO THE COMPANY

Each of the Sellers represents and warrants to Buyer that the statements contained in this ARTICLE II are true and correct as of the date hereof and as of the Closing Date, except as set forth in the disclosure schedule attached hereto (the “Disclosure Schedule”). The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this ARTICLE II. The disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this ARTICLE II to the extent it is reasonably clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

Section 2.1 Organization and Qualification.

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to conduct business under the laws of each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities requires such qualification, except for any such failures to be qualified that would not reasonably be expected to result in a Company Material Adverse Effect. The Company has all requisite corporate power and authority to carry on the Business as it is currently conducted and to own and use the properties now owned and used by it. The Company is not in default under or in violation of any provision of its certificate of incorporation or by-laws, or other such governing documents, as applicable. The Sellers have delivered to Buyer correct and complete copies of the certificate of formation and limited liability company agreement, certificate of incorporation and by-laws, or other such governing documents, as applicable for the Company. The minute books (containing the records of the meetings of the stockholders, the board of directors, and any committees of the board of directors to the extent such meetings were held), the stock certificate books, and stock record books for the Company are correct and complete. For purposes of this Agreement, “Company Material Adverse Effect” means any change, effect or circumstance that would reasonably be expected (i) to be materially adverse to the business, assets, financial condition or results of operations of the Company and the Subsidiary, taken as a whole, or (ii) materially impairs the ability of the Sellers to consummate the transactions contemplated by this Agreement; provided, however, that a “Company Material Adverse Effect” shall not include any adverse change, effect or circumstance to the extent resulting from or arising out of (I) the actions contemplated by the Parties pursuant to this Agreement, including any actions taken (or omitted to be taken) at the express written request of Buyer, (II) the announcement of this Agreement or the transactions contemplated by this Agreement, (III) changes in the industry of the Company or the Subsidiary generally which do not materially disproportionately affect the Company or the Subsidiary, (IV) changes in national or international general economic, political, legal or regulatory conditions or changes in currency exchange rates which do not materially disproportionately affect the Company or the Subsidiary, (V) changes in U.S. GAAP, (VI) national or international political conditions or instability, including the engagement by the United States in hostilities, whether or not pursuant to a declaration of emergency or war, or the occurrence of any military or terrorist attack upon the United States or any other nation (in each case, which does not materially disproportionately affect the Company or the Subsidiary).

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(b) Subsidiaries.

(i) Section 2.1(b) of the Disclosure Schedule sets forth (i) the name and jurisdiction of organization of the sole subsidiary of the Company (the “Subsidiary”), and (ii) with respect to the Subsidiary, the number of authorized, issued and outstanding equity interests (the “Subsidiary Interests”).

(ii) The Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to conduct business under the laws of each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities requires such qualification, except for any such failures to be qualified that would not reasonably be expected to result in a Company Material Adverse Effect. The Subsidiary has all requisite corporate power and authority to carry on the business in which it is engaged and to own and use the properties now owned and used by it. The Company has made available to Buyer complete and accurate copies of the Subsidiary’s organizational documents, as amended to date. The books and records relating to corporate or limited liability company matters and equity interests for the Subsidiary are correct and complete.

(iii) The Subsidiary Interests constitute all of the issued and outstanding equity interests of the Subsidiary and are owned of record and beneficially by the Company, free and clear of all Security Interests. The Subsidiary Interests have been duly authorized and validly issued and are fully paid and nonassessable. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Subsidiary is a party or which are binding upon the Subsidiary providing for the issuance, disposition or acquisition of any of its equity interests. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Subsidiary. There are no agreements, voting trusts, proxies or understandings with respect to the voting, or registration under the Securities Act of 1933, as amended (the “Securities Act”), to which the Subsidiary is a party. The Subsidiary is not in default under or in violation of any provision of any of its organizational documents. Except for the Subsidiary, the Company does not own or control, directly or indirectly, any shares of capital stock of any other corporation or any interest in any partnership, limited liability company, joint venture or other business enterprise.

Section 2.2 Capitalization and Ownership of the Company.

The authorized capital stock of the Company consists of 335,564 shares of Class A Common Stock, of which 36,641 shares are issued and outstanding and 263,923 shares of Class B Common Stock, all of which are issued and outstanding. The Shares constitute all of the issued and outstanding shares of capital stock of the Company and, immediately prior to the transactions contemplated by Section 1.2 of this Agreement, are owned of record by the Sellers as set forth on Section 2.2 of the Disclosure Schedule. The Shares have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth on Section 2.2 of the Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, agreements, puts, calls, rights to subscribe or commitments to which the Company is a party or which are binding upon the Company providing for the issuance, disposition or acquisition of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. Except as set forth on Section 2.2 of the Disclosure Schedule, there are no agreements, voting trusts, proxies or understandings with respect to the voting, or registration under the Securities Act, of the Shares.

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Section 2.3 Noncontravention.

Neither the execution and delivery of this Agreement by the Sellers, nor the consummation by the Sellers of the transactions contemplated hereby, will:

(a) conflict with or violate any provision of the charter or bylaws, certificate of formation or limited liability company agreement, or other organizational documents of the Company or the Subsidiary;

(b) require on the part of the Company or the Subsidiary any filing with, or any permit, authorization, consent or approval of, any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency (a “Governmental Entity”);

(c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement, mortgage or instrument to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary is bound or to which any of their respective assets is subject;

(d) result in the creation of any Security Interest upon the Shares or any of the Company’s or the Subsidiary’s assets; or

(e) violate any order, writ, injunction or decree specifically naming, or statute, rule or regulation applicable to, the Company or the Subsidiary or any of or their respective properties or assets.

Section 2.4 Financial Statements.

The Company has provided to Buyer copies of the unaudited consolidated balance sheets of the Company as of December 31, 2007 and December 31, 2008, and the consolidated statements of operations and cash flows of the Company for the fiscal years ended December 31, 2007 and December 31, 2008 (collectively, the “Unaudited Financial Statements”). The consolidated balance sheet as of December 31, 2008 is referred to herein as the “Most Recent Balance Sheet” and the date of such Most Recent Balance Sheet, December 31, 2008, is referred to herein as the “Balance Sheet Date”. Except as set forth on the Disclosure Schedule, such Unaudited Financial Statements (a) have been derived from and are consistent with the financial books and records of the Company and the Subsidiary, (b) have been prepared in accordance with U.S. GAAP (except, in the case of the Unaudited Financial Statements as of, and for the fiscal year ended, December 31, 2008, for the absence of footnote disclosure and subject to year-end adjustments (none of which shall be material)) and (c) fairly present, in all material respects, the financial condition and consolidated results of operations and cash flows of the Company as of the respective dates thereof and for the periods referred to therein.

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Section 2.5 Absence of Certain Changes.

Since the Balance Sheet Date, there have not been any adverse changes in the financial condition or results of operations of the Company and the Subsidiary, taken as a whole, except for any adverse changes that would not reasonably be expected to result in a Company Material Adverse Effect. Without limiting the generality of the foregoing, except as contemplated by this Agreement (including those matters contemplated by Section 5.2 of this Agreement or listed on Schedule 5.2), since the Balance Sheet Date, neither the Company nor the Subsidiary has:

(a) suffered any material damage, destruction or other casualty loss (whether or not covered by insurance or reinsurance) affecting the Business, property or assets of the Company or the Subsidiary;

(b) sold, assigned or transferred any tangible or intangible assets of the Company or the Subsidiary in a single transaction or series of related transactions in an amount in excess of $50,000;

(c) changed the Company’s or the Subsidiary’s authorized or issued capital stock, or issued any notes, bonds or other debt securities or securities convertible or exercisable into or exchangeable for any capital stock, or any warrants, options or other rights to acquire any capital stock;

(d) declared or paid any dividends or made any distributions on the capital stock of the Company or the Subsidiary (other than the distribution of the freely available cash balances of the Company (other than the Retained Cash) immediately prior to the transactions contemplated hereby) or redeemed or purchased any shares of capital stock or other equity securities of the Company or the Subsidiary;

(e) borrowed any amount or incurred or become subject to any Indebtedness or other long-term Liabilities, other than borrowings under the Demand Note in the ordinary course of business and in the requisite amount necessary to effect the purchase of Options pursuant to Section 1.1;

(f) made any loans or advances to, or guarantees for the benefit of, any person (other than advances to employees for travel and business expenses incurred in the ordinary course of business which do not exceed $10,000 in the aggregate);

(g) discharged or satisfied any Security Interest or paid any Liability (other than Liabilities paid in the ordinary course of business), prepaid any amount of Indebtedness or subjected any portion of its properties or assets to any Security Interest;

(h) waived any rights of material value to the Company or the Subsidiary;

(i) disclosed any confidential information that it intended to maintain as confidential (other than pursuant to agreements requiring the person to whom the disclosure was made to maintain the confidentiality of and preserving all rights of the Company or the Subsidiary in such confidential information, subject to customary exceptions and time limitations);

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(j) except as required by law, granted any rights to severance benefits, “stay pay” or termination pay to any director, officer or other employee of the Company or the Subsidiary or increased benefits payable or potentially payable to any such director, officer or other employee of the Company or the Subsidiary under any previously existing severance benefits, “stay-pay” or termination pay arrangements (in each case, other than grants or increases for which Buyer will not be obligated following the Closing);

(k) made any other change in employment terms for any of its directors, officers, and employees outside the ordinary course of business or entered into any transaction with a Seller Insider or Other Insider (as defined below);

(l) conducted its cash management customs and practices other than in the ordinary course of business (including, without limitation, with respect to maintenance of working capital balances and inventory levels, collection of accounts receivable, payment of accounts payable, accrued liabilities and other Liabilities and pricing and credit policies);

(m) except in the ordinary course of business in accordance with the Company’s capital expenditure budget attached to Section 2.5(m) of the Disclosure Schedule, made any capital expenditures or commitments therefor with respect to the Company or the Subsidiary in an amount in excess of $25,000 in the aggregate;

(n) entered into, amended or terminated any Material Contract or entered into any other material transaction, other than in the ordinary course of business, or materially changed any business practice;

(o) acquired any entity or business (whether by the acquisition of stock, the acquisition of assets, merger or otherwise);

(p) amended the charter or by-laws of the Company;

(q) amended the organizational documents of the Subsidiary;

(r) other than in the ordinary course of business consistent with past practice, made, granted or promised any bonus or any wage, salary or compensation increase in excess of $5,000 per year to any director, officer, employee, sales representative or consultant (except as otherwise expressly provided for in employment agreements or previously established plans, in each case which has been disclosed in the Disclosure Schedules attached hereto) or made, granted or promised any increase in any Employee Benefit Plan or arrangement (other than an amendment required by law or which would not materially increase the cost of the plan or arrangement to the Company or the Subsidiary), or amended or terminated any existing Employee Benefit Plan or arrangement or adopted any new Employee Benefit Plan or arrangement, resulting in a material increase in the costs of maintaining such plan or arrangement;

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(s) materially changed any insurance coverage or policies;

(t) materially changed the accounting principles, methods or practices of the Company, except in each case to conform to changes in U.S. GAAP or applicable local generally accepted accounting principles; or

(u) entered into any agreement or commitment to take any of the actions set forth in paragraphs (a) through (t) of this Section 2.5.

Section 2.6 Undisclosed Liabilities.

To the knowledge of the Company, neither the Company nor the Subsidiary has any material liability, debt, obligation, deficiency, Tax, penalty, assessment, fine, claim, cause of action or other loss, fee, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted (“Liability”), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) Liabilities which have arisen since the date of the Most Recent Balance Sheet in the ordinary course of business consistent with past practice (none of which is for a breach of contract, tort or violation of law), (c) performance obligations under contracts required to be performed in accordance with their terms (other than in respect of claims for breach of contract) and (d) Liabilities to the extent resulting from or arising out of in connection with any breach of the representations and warranties set forth in Section 2.10(g) of this Agreement.

Section 2.7 Tax Matters.

(a) The Company and the Subsidiary have filed or have had filed on their behalf all income or other material Tax Returns that they were required to file (separately or as part of a consolidated, combined or unitary group) with respect to the Company and the Subsidiary, and all such Tax Returns were correct and complete in all material respects. The Company and the Subsidiary have paid (or have had paid on their behalf) all Taxes (whether or not shown to be due on any such Tax Returns) which have become due and payable. MicroStrategy has filed all Income Tax Returns that it was required to file with respect to any Affiliated Period and all such Tax Returns were true, correct and complete in all material respects. MicroStrategy has paid (or has had paid on its behalf) all Taxes that were shown to be due and payable with respect to all Affiliated Periods on such Tax Returns. All Taxes that the Company or the Subsidiary are or were required by law and pursuant to this Agreement to withhold or collect and that were or are due have been duly withheld or collected and, to the extent required, have been paid or will be paid to the proper Governmental Entity. For purposes of this Agreement, “Taxes” means all taxes of any kind whatsoever, including income, gross receipts, ad valorem, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof. For purposes of this Agreement, “Tax Returns” means all reports, returns, declarations, statements, forms or other information required to be supplied to a taxing authority in connection

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with Taxes. “Affiliated Group” shall mean a group of corporations with which the Company has filed (or was required to file) consolidated, combined, unitary or similar Tax Returns. “Affiliated Period” shall mean any period in which the Company was a member of an Affiliated Group. “Income Taxes” shall mean any Taxes imposed upon or measured by net income.

(b) No examination or audit of any Tax Return of the Company or the Subsidiary or any Income Tax Return of an Affiliated Group for an Affiliated Period by any Governmental Entity is currently in progress or, to the knowledge of MicroStrategy, threatened or contemplated. None of the Company, the Subsidiary or MicroStrategy has been notified in writing by any jurisdiction that the jurisdiction believes that the Company or any Affiliated Group (for an Affiliated Period) was required to file any Tax Return that was not filed.

(c) Neither the Company nor the Subsidiary has made any election under Section 341(f) of the Internal Revenue Code of 1986, as amended (the “Code”) (or any corresponding provision of state or local income Tax law).

(d) Neither the Company nor the Subsidiary has distributed to its stockholders or security holders stock or securities of a controlled corporation, nor has stock or securities of the Company or the Subsidiary been distributed, in a transaction to which Section 355 of the Code applies (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement.

(e) There are no adjustments under Section 481 of the Code (or any similar adjustments under any provision of the Code or the corresponding foreign, state or local Tax laws) that are required to be taken into account by the Company in any period ending after the Closing Date by reason of a change in method of accounting in any taxable period ending on or before the Closing Date.

(f) Neither the Company nor the Subsidiary has been a member of a group with which it has filed or been included in a combined, consolidated or unitary income Tax Return other than a group the common parent of which was MicroStrategy. Neither the Company nor the Subsidiary is liable for the Taxes of any taxpayer other than MicroStrategy (and the members of MicroStrategy’s Affiliated Group) under Reg. § 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise for any taxable period beginning before the Closing Date.

(g) Neither the Company nor the Subsidiary is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Code § 280G (or any corresponding provision of state, local or foreign income Tax law).

(h) Neither the Company nor the Subsidiary has consented to extend the time, or is the beneficiary of any extension of time, in which any Tax may be assessed or collected by any taxing authority.

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(i) Neither the Company nor the Subsidiary is a party to or bound by any Tax allocation or Tax sharing agreement with any person other than the Company and the Subsidiary, and none has any current or potential contractual obligation to indemnify any other person with respect to Taxes.

Section 2.8 Property.

Each of the Company and the Subsidiary has good title to, a valid leasehold interest in or a valid license to use, all of the real, personal and tangible property pertaining to the Business, free and clear of all Security Interests other than other than (i) mechanic’s, materialmen’s, landlord’s and similar liens incurred in the ordinary course of business, (ii) liens arising in the ordinary course of business under worker’s compensation, unemployment insurance, social security, retirement and similar legislation, (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business, (iv) liens for Taxes not yet due and payable, (v) liens for Taxes which are being contested in good faith and by appropriate proceedings and (vi) liens relating to capitalized lease financings or purchase money financings that have been entered into in the ordinary course of business (a “Permitted Security Interest”).

Section 2.9 Real Property.

(a) Neither the Company nor the Subsidiary owns any real property.

(b) Section 2.9 of the Disclosure Schedule lists all real property leased or subleased by the Company or the Subsidiary. The Company has made available to Buyer correct and complete copies of the leases and subleases (as amended to date) listed therein. With respect to each such lease and sublease:

(i) the lease or sublease is legal, valid, binding, enforceable and in full force and effect;

(ii) none of the Company or the Subsidiary, or, to the Company’s knowledge, any other party to the lease or sublease, is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder;

(iii) there are no disputes, oral agreements or forbearance programs to which the Company or the Subsidiary is a party in effect as to any lease or sublease; and

(iv) neither the Company nor the Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered, including by sublease, any interest in any leasehold or subleasehold.

Section 2.10 Intellectual Property.

(a) Section 2.10 of the Disclosure Schedule lists all patents, patent registrations, patent applications, trademarks, trademark registrations, trademark applications, trade names (together with the goodwill associated therewith), copyrights, copyright applications

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and copyright registrations of the Company or the Subsidiary. “Intellectual Property” means all of the following in any jurisdiction throughout the world: (i) patents, patent applications and patent disclosures; (ii) trademarks, service marks, trade dress, trade names, corporate names, logos and slogans (and all translations, adaptations, derivations and combinations of the foregoing) and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations and applications for any of the foregoing; (v) trade secrets and confidential information (including inventions, ideas, formulae, compositions, know how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial, business and marketing plans, and customer and supplier lists and related information); (vi) computer software and software systems (including data, source code and object code, databases and related documentation); and (vii) all other intellectual property.

(b) Neither the Company nor the Subsidiary has been named in any pending suit, action or proceeding which involves a claim of infringement of any Intellectual Property of any third party. To the Company’s knowledge, no third party has infringed, misappropriated, diluted or otherwise conflicted with any Intellectual Property owned by the Company (the “Company Intellectual Property”).

(c) Other than rights and licenses granted in the ordinary course of business, neither the Company nor the Subsidiary has granted to any third party any license or right to the commercial use of any of the Company Intellectual Property.

(d) No loss or expiration of any of the Company Intellectual Property is pending or, to the Company’s knowledge, threatened.

(e) The Company and the Subsidiary have taken all commercially reasonable measures to establish and preserve their respective ownership rights in all Company Intellectual Property, and have not disclosed or allowed to be disclosed any of their trade secrets or confidential information to any third party that they intended to maintain as confidential other than pursuant to a written confidentiality agreement, and have entered into written confidentiality agreements with all of their employees and all of their independent contractors having access to trade secrets or confidential information acknowledging the confidentiality of such trade secrets and confidential information.

(f) The computer software owned by and distributed or maintained by the Company and the Subsidiary (the “Company Software”) does not contain any open source or freeware and is not governed, in whole or in part, by the terms of the GNU General Public License or any other license requiring the Company to disclose source code to any of the Company Software. The Company Software has not been licensed or otherwise provided to any third party, except for licenses to end users entered into in the ordinary course of business.

(g) The Company or the Subsidiary owns, or is licensed or otherwise possesses valid rights to use, all Intellectual Property used in connection with the Business (for avoidance of doubt, other than in respect of the failure to have a valid license to use any patent that has not been issued as of the date hereof, to the extent the same constitutes “Intellectual Property” of a third party, except to the extent the Company has knowledge of such unissued

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patent and an attorney principally engaged by the Company to analyze its intellectual property matters or other person authorized by the Company to analyze intellectual property matters (an “Authorized IP Reviewer”) has made an informed determination that the Company is reasonably likely to be infringing on such unissued patent were it to issue). Neither the Company nor the Subsidiary infringes, misappropriates, dilutes or otherwise violates any Intellectual Property of any third party (for avoidance of doubt, other than any patent that has not been issued as of the date hereof, to the extent the same constitutes “Intellectual Property” of a third party, except to the extent the Company has knowledge of such unissued patent and an Authorized IP Reviewer has made an informed determination that the Company is reasonably likely to be infringing on such unissued patent were it to issue). Notwithstanding the foregoing and for the avoidance of doubt, the Company shall have no obligation to investigate or review unissued patents or to conduct any infringement analysis on any unissued patents.

Section 2.11 Contracts.

(a) Section 2.11(a) of the Disclosure Schedule lists all of the following contracts or agreements to which the Company or the Subsidiary is a party as of the date of this Agreement:

(i) agreement for the lease of personal property from or to third parties providing for lease payments the remaining unpaid balance of which is in excess of $25,000, other than agreements that can be terminated by the Company or the Subsidiary, as applicable, on sixty (60) or fewer days’ notice without payment by the Company or the Subsidiary of any penalty;

(ii) agreement (or group of related written agreements) for the purchase of products or services under which the undelivered balance of such products and services is in excess of $25,000, other than any such contracts and agreements that can be terminated by the Company or the Subsidiary, as applicable, on sixty (60) or fewer days’ notice without payment by the Company or the Subsidiary of any penalty;

(iii) agreement establishing a partnership or joint venture;

(iv) agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) any Indebtedness or under which it has imposed a Security Interest on any of its material assets, tangible or intangible, except for any Permitted Security Interest;

(v) agreement that prohibits the Company or the Subsidiary from freely engaging in any commercial activity anywhere in the world;

(vi) agreement for the employment of any individual on a full-time or part-time basis providing base annual compensation at a rate in excess of $100,000 during the year ended December 31, 2008;

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(vii) severance, “stay pay” or termination agreement with any officer or other employee (other than agreements for which Buyer will not be obligated following the Closing);

(viii) agreement for the sale of any assets or properties that involves a payment to be made to the Company or any Affiliate thereof in excess of $100,000, other than agreements for the sale of goods and services in the ordinary course of business;

(ix) agreement for the acquisition of any operating business or the capital stock of any other person; and

(x) agreement that relates to Intellectual Property (other than a license granted to the Company or the Subsidiary for commercially available software licensed on standard terms with a total replacement cost of less than $25,000).

(b) The Company has made available to Buyer a correct and complete copy of each contract and agreement required to be listed in Section 2.11(a) of the Disclosure Schedule, each dealer agreement and dealer program agreement of the Company, each Employee’s Standard-Form Employee NDA and each other confidentiality, non-competition, proprietary rights or similar agreement between MicroStrategy and an Employee or any other person who has been an employee of the Company since October 10, 2003 (the “Material Contracts”). Each Material Contract is a legal, valid, binding and enforceable obligation of the Company or the Subsidiary, as applicable, and, to the Company’s knowledge, of each other party thereto (except as the foregoing may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief, and other equitable remedies and those providing for equitable defenses), there exists no material defaults of the Company or the Subsidiary, as applicable, or, to the Company’s knowledge, any other party thereto, and no event has occurred that with notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration, under the agreement and no party thereto has repudiated any provision of such contract.

(c) Each Dealer/Supplier NDA of the Company and the Subsidiary is listed on Schedule 1.3(b)(x).

Section 2.12 Litigation.

Section 2.12 of the Disclosure Schedule lists, as of the date of this Agreement, each (a) material judgment, order, decree, stipulation or injunction of any Governmental Entity (an “Order”) to which the Company or the Subsidiary is subject and (b) each action, suit or proceeding pending by or before any Governmental Entity to which the Company is a party. No other action, suit or proceeding has been threatened against the Company or the Subsidiary in writing. No other action, suit or proceeding has been threatened against the Company or the Subsidiary (other than in writing) that may reasonably be expected to result in a Company Material Adverse Effect. Each of the Company and the Subsidiary is in compliance with each Order to which the Company or the Subsidiary is subject.

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Section 2.13 Labor Matters.

Neither the Company nor the Subsidiary is a party to, or bound by, any collective bargaining agreement. Neither the Company nor the Subsidiary has experienced since January 1, 2007, any material strikes, grievances, claims of unfair labor practices or other collective bargaining disputes.

Section 2.14 Employee Benefits.

(a) Section 2.14(a) of the Disclosure Schedule sets forth a list of all employees of the Company (“Employees”) and the date of hire of each such Employee.

(b) Section 2.14(b) of the Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans sponsored or maintained by the Company or the Subsidiary (the “Company Benefit Plans”) or MicroStrategy or any ERISA Affiliate for the benefit of the Employees (the “MicroStrategy Benefit Plans,” and together with the Company Benefit Plans, the “Business Benefit Plans”). For purposes of this Agreement, “Employee Benefit Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) other than a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) (a “Multiemployer Plan”), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement, policy, practice or arrangement involving direct or indirect compensation, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation. For purposes of this Agreement, “ERISA Affiliate” means any entity that is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code), (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (iii) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes the Company and the Subsidiary. MicroStrategy has provided Buyer with copies of the Business Benefit Plans.

(c) Since January 1, 2005, each Business Benefit Plan has been administered in accordance with its terms in all material respects and MicroStrategy, the Company and the Subsidiary have met their obligations with respect to such Business Benefit Plan in all material respects. MicroStrategy, the Company, the Subsidiary and the Business Benefit Plans are in compliance with ERISA, the Code and the terms of such Business Benefit Plans in all material respects. The Business Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Business Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code. There are no pending or, to the Company’s knowledge, threatened actions or proceedings with respect to any Company Benefit Plan or the Employees’ participation in the MicroStrategy Benefit Plans. All material contributions, premiums and other payments required to be made to the Company Benefit Plans have been made timely and all contributions, premiums and other payments not yet due to the Company Benefit Plans have been properly accrued. No Company Benefit Plan has any unfunded liabilities that are not accrued. All Company Benefit Plans that provide health and

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welfare benefits are fully insured. There have been no non-exempt “prohibited transactions” (within the meaning of Section 406 of ERISA or Section 4875 of the Code), or breaches of fiduciary duty that could result in any material liability for Buyer or the Company, with respect to any Business Benefit Plan. None of the Company, the Subsidiary or any ERISA Affiliate is a party to, contributes or is obligated to contribute to, or has any liability with respect to, any Multiemployer Plan or to any Employee Benefit Plan covered by Title IV of ERISA. No post-employment welfare benefits cover employees of the Company or the Subsidiary other than health coverage required to be continued under Section 4980B of the Code or other applicable laws.

(d) The consummation of the transactions contemplated by this Agreement will not result in the payment of, accelerate the time of the payment or vesting of, or increase the amount of, or result in the forfeiture of, compensation or benefits under any Business Benefit Plan, other than with respect to the Option Plan or with respect to plans for which none of the Company, the Subsidiary or Buyer will have any liability. Each Business Benefit Plan that is a “nonqualified deferred compensation plan” (as defined under Section 409A(d)(1) of the Code) has been maintained in good faith compliance with Section 409A of the Code and the regulations thereunder and no amounts under any such plan is or has been subject to the interest and additional tax set forth under Section 409A(a)(1)(B) of the Code.

Section 2.15 Legal Compliance.

The Company and the Subsidiary are in compliance with all applicable laws of any federal, state or foreign government, or any Governmental Entity, except where the failure to comply therewith would not reasonably be expected to result in a Company Material Adverse Effect. As of the date hereof, neither the Company nor the Subsidiary has received written notice of any pending action, suit, proceeding, hearing, investigation, claim, demand or notice alleging any failure to so comply, and to the Company’s knowledge, none of the foregoing is pending. As of the Closing Date, neither the Company nor the Subsidiary shall have received written notice of any pending action, suit, proceeding, hearing, investigation, claim, demand or notice alleging any failure to so comply and to the Company’s knowledge, none of the foregoing shall be pending, in each case other than those which may not reasonably be expected to result in a Company Material Adverse Effect.

Section 2.16 Permits.

Each of the Company and the Subsidiary owns, holds or possesses all material permits, licenses, franchises or authorizations from any Governmental Authority (collectively, the “Permits”) that are necessary to entitle each to own or lease, operate and use its assets and to carry on and conduct the Business as currently conducted. Neither the Company nor the Subsidiary is in violation of or default under any Permit and no Permit will be revoked, terminated prior to its normal expiration date or not renewed solely as a result of the consummation of the transactions contemplated by this Agreement.

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Section 2.17 Environmental Matters.

There are no actions pending against the Company or the Subsidiary alleging a violation of any laws, judicial decisions, judgments, orders, codes, injunctions, permits and Contracts with Governmental Entities, in each case, applicable to the Company or the Subsidiary, relating to human health, hazardous materials and the preservation of the environment (collectively, “Environmental Laws”), and each of the Company and the Subsidiary is in material compliance with all applicable Environmental Laws and possesses all material permits, authorizations, licenses, exemptions and other governmental authorizations required for its current operations under applicable Environmental Laws.

Section 2.18 Business Relationships with Affiliates.

Section 2.18 of the Disclosure Schedule lists any agreements or arrangements with any officer, director or employee of the Company or the Subsidiary (other than a Seller or a Seller Insider (as defined in Section 3.6)) or any individual related by marriage or adoption to any such person or any entity in which any such person owns any beneficial interest (other than through ownership of less than 5% of the stock of a publicly held company or shares of a mutual fund) (collectively, the “Other Insiders”) to which the Company is a party or which pertains to the Business. No Other Insider (a) owns any property or right, tangible or intangible, which is used in and material to the Company or the Subsidiary, (b) has any material claim or cause of action against the Company or the Subsidiary, or (c) owes any money to, or is owed any money by, the Company or the Subsidiary.

Section 2.19 Sufficiency of Assets.

The assets of the Company and the Subsidiary, together with the facilities leased pursuant to the Sublease, the services to be provided to the Company pursuant to the Transition Services Agreement and the Intellectual Property licensed pursuant to the Software License Agreement, constitute all the material assets and services used by the Company and the Subsidiary in operating the Business as it is currently operated, and, during the term of the Sublease and the Transition Services Agreement, will enable the Company and the Subsidiary to operate the Business in the same manner as operated prior to the Closing.

Section 2.20 Brokers’ Fees.

Except for the fees payable to Imperial Capital, LLC (which fees shall constitute Seller Transaction Expenses), neither the Company nor the Subsidiary has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each of the Sellers, severally and not jointly, represents and warrants to Buyer as to such Seller and only to such Seller, that the statements contained in this ARTICLE III are true and correct as of the date hereof and as of the Closing Date, except as set forth in the Disclosure Schedule.

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Section 3.1 Valid Title.

Such Seller owns of record and beneficially all of the Shares identified as owned by such Seller on Section 2.2 to the Disclosure Schedule, and such Seller shall deliver to Buyer good title to the Shares, free and clear of any Security Interest, other than applicable federal and state securities law restrictions on transfer. Except as set forth on Section 2.2 of the Disclosure Schedule, there are no agreements, voting trusts or proxies with respect to the voting, or registration under the Securities Act of such Seller’s Shares, and, other than this Agreement, there are no agreements providing for the disposition or acquisition of such Seller’s Shares.

Section 3.2 Authority.

To the extent applicable, such Seller has all requisite corporate power and authority (to the extent applicable) to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery of this Agreement by such Seller and the performance by such Seller of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on behalf or such Seller. This Agreement has been duly and validly executed and delivered by such Seller and, assuming this Agreement constitutes the valid and binding agreement of Buyer, constitutes a valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses.

Section 3.3 Broker’s Fees.

Such Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

Section 3.4 Litigation.

There are no actions, suits, claims or legal, administrative or arbitratorial proceedings pending against, or, to such Seller’s knowledge, threatened against, such Seller which would adversely affect such Seller’s performance under this Agreement or the consummation of the transactions contemplated by this Agreement.

Section 3.5 Noncontravention.

Neither the execution and delivery of this Agreement by such Seller, nor the consummation by such Seller of the transactions contemplated hereby, will:

(a) conflict with or violate any provision of the charter or bylaws or other organizational documents of such Seller;

(b) require on the part of such Seller any filing with, or any permit, authorization, consent or approval of, any Governmental Entity, except for any filing, permit, authorization, consent or approval which if not obtained or made would not reasonably be expected to result in a Company Material Adverse Effect or a material adverse effect on the ability of such Seller to consummate the transactions contemplated by this Agreement;

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(c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement, mortgage or instrument to which such Seller is a party or by which the Shares of such Seller are bound or to which any of such Shares is subject, except for any conflict, breach, default, acceleration, right to accelerate, termination, modification, cancellation, notice, consent or waiver that would not reasonably be expected to result in a Company Material Adverse Effect;

(d) result in the creation of any Security Interest upon the Shares; or

(e) violate any order, writ, injunction or decree specifically naming, or statute, rule or regulation applicable to, such Seller or any of the Shares held by such Seller.

Section 3.6 Affiliate Transactions.

Section 3.6 of the Disclosure Schedule lists any agreements or arrangements with such Seller or any of its Affiliates or any individual related by marriage or adoption to any such person or any entity in which any such person owns any beneficial interest (other than through ownership of less than 5% of the stock of a publicly held company or shares of a mutual fund) (a “Seller Insider”) to which the Company is a party or which pertains to the Business. Neither such Seller nor any of its Seller Insiders (i) owns any property or right, tangible or intangible, which is used in and material to the Company or the Subsidiary, (ii) has any material claim or cause of action against the Company or the Subsidiary, or (iii) owes any money to, or is owed any money by, the Company or the Subsidiary, other than for earned and unpaid salary or bonuses, benefits under any Company Benefit Plan or any employment-related expenses incurred in the ordinary course of business.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to each Seller as of the date hereof and as of the Closing Date that:

Section 4.1 Organization.

Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation.

Section 4.2 Authorization of Transaction.

Buyer has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by Buyer and the performance by Buyer of this Agreement and its obligations hereunder and the consummation by Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Buyer. This

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Agreement has been duly and validly executed and delivered by Buyer and, assuming this Agreement constitutes the valid and binding obligation of Seller, constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses.

Section 4.3 Noncontravention.

Neither the execution and delivery of this Agreement by Buyer, nor the consummation by Buyer of the transactions contemplated hereby, will:

(a) conflict with or violate any provision of the charter or bylaws of Buyer;

(b) require on the part of Buyer any filing with, or permit, authorization, consent or approval of, any Governmental Entity, except for any filing, permit, authorization, consent or approval which if not obtained or made would not reasonably be expected to result in a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement (a “Buyer Material Adverse Effect”);

(c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party any right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness or Security Interest to which Buyer is a party or by which Buyer is bound or to which any of its assets are subject, except for any conflict, breach, default, acceleration, right to accelerate, termination, modification, cancellation, notice, consent or waiver which would not reasonably be expected to result in a Buyer Material Adverse Effect; or

(d) violate any order, writ, injunction or decree specifically naming, or statute, rule or regulation applicable to, Buyer or any of its properties or assets, except for any violation that would not reasonably be expected to result in a Buyer Material Adverse Effect.

Section 4.4 Broker’s Fees.

Buyer has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which any Seller may become liable.

Section 4.5 Litigation.

There are no actions, suits, claims or legal, administrative or arbitratorial proceedings pending against, or, to Buyer’s knowledge, threatened against, Buyer which would adversely affect Buyer’s performance under this Agreement or the consummation of the transactions contemplated by this Agreement.

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Section 4.6 Investment Intent.

Buyer is acquiring the Shares for investment for its own account and not with a view to the distribution of any part thereof. Buyer acknowledges that the Shares have not been registered under U.S. federal or any applicable state securities laws or the laws of any other jurisdiction and cannot be resold without registration under such laws or an exemption therefrom. Buyer further acknowledges that (a) it has knowledge and experience in financial and business matters, that it is capable of evaluating the merits and risks of an investment in the Shares, and that it can bear the economic risk of an investment in the Shares and (b) it has had the opportunity to conduct an independent due diligence review of the Company.

ARTICLE V. PRE-CLOSING COVENANTS

Section 5.1 Efforts.

Each of the Parties shall use commercially reasonable efforts to take all actions and to do all things necessary, proper or advisable to satisfy the conditions to Closing set forth herein and to consummate the transactions contemplated by this Agreement, including to obtain all waivers, permits, consents, approvals or other authorizations from Governmental Entities, to effect all registrations, filings and notices with or to Governmental Entities and to otherwise comply with all applicable laws and regulations in connection with the consummation of the transactions contemplated by this Agreement. The Sellers shall bear any out-of-pocket costs associated with obtaining such waivers, permits, consents, approvals or other authorizations.

Section 5.2 Operation of Business.

Except as contemplated by this Agreement, or as set forth on Schedule 5.2 attached hereto, during the period from the date of this Agreement until the Closing Date, the Sellers shall cause the Company and the Subsidiary to conduct the operations of the Business in the ordinary course of business consistent with past practice. Without limiting the generality of the foregoing, the Sellers shall not, without the prior written consent of Buyer, permit the Company or the Subsidiary to take any action which, if taken prior to the date of this Agreement, would be required to be described on Schedule 2.5 attached hereto.

Section 5.3 Access.

Subject to compliance with applicable laws and regulations, and contractual obligations of the Company regarding proprietary information of third parties, the Sellers shall cause the Company to permit the representatives of Buyer listed on Schedule 5.3 attached hereto to have reasonable access (at reasonable times, on reasonable prior written notice and in a manner so as not to interfere with the normal business operations of the Company or other businesses of the Company or its Affiliates) to its premises, properties, financial and accounting records, contracts, and other records and documents, for reasonable business purposes. Buyer agrees and acknowledges that it shall be bound by the confidentiality obligations contained in each of the letter agreements, dated December 12, 2008, by and between MicroStrategy and Capital Partners Management Company, as amended, and dated May 16, 2008 by and between MicroStrategy and Egis Capital Partners LLC, to the same extent as if Buyer were a party to such

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agreements. Prior to the Closing, Buyer and its representatives shall not contact or communicate with the employees, customers and suppliers of the Company or any of its respective Affiliates in connection with the transactions contemplated by this Agreement, except with the prior written consent of the Sellers, which consent shall not be unreasonably withheld or delayed.

Section 5.4 Resignations.

The Sellers shall cause the individuals serving as directors of the Company other than Stephen S. Trundle to resign from the board of directors of the Company and the Subsidiary effective upon the Closing.

Section 5.5 Deposit.

Buyer shall deposit $100,000 in cash with MicroStrategy on the Closing Date (the “Deposit”) to be held as security by MicroStrategy in connection with the Letter of Credit, dated February 11, 2008, issued in favor of TMobile USA, Inc., a Delaware corporation, on behalf of the Company by Bank of America, N.A. (the “Letter of Credit”). The Deposit shall be held by MicroStrategy in a segregated account and MicroStrategy shall invest and reinvest the Deposit in securities listed or guaranteed by the United States government or certificates of deposit of commercial banks that have, or are members of a group of commercial banks that has, consolidated total assets of not less than $500,000,000.

ARTICLE VI. CONDITIONS PRECEDENT TO CLOSING

Section 6.1 Conditions to Obligations of Buyer.

The obligation of Buyer to consummate the transactions to be consummated at the Closing is subject to the satisfaction (or waiver by Buyer) of the following conditions:

(a) the Company shall have obtained (or caused to be obtained) all of the waivers, permits, consents, approvals or other authorizations and effected all of the registrations, filings and notices listed on Schedule 6.1(a) attached hereto (collectively, the “Consents”);

(b) the representations and warranties of the Sellers set forth in ARTICLE II that are qualified by materiality or Company Material Adverse Effect and the representations and warranties set forth in Section 2.2 shall be true and correct in all respects at and as of the Closing Date as if made as of the Closing Date, except for those representations and warranties that address matters only as of a particular date (which shall be true and correct in all respects as of such date), and the representations and warranties of the Sellers set forth in ARTICLE II other than as set forth in Section 2.10(g) that are not qualified by materiality or Company Material Adverse Effect (other than the representations and warranties set forth in Section 2.2) shall be true and correct in all material respects at and as of the Closing Date as if made as of the Closing Date, except for those representations and warranties that address matters only as of a particular date (which shall be true and correct in all material respects as of such date) and the representations and warranties of the Sellers set forth in Section 2.10(g) shall be true and correct to the knowledge of the Sellers in all material respects at and as of the Closing Date as if made as of the Closing Date;

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(c) the representations and warranties of each of the Sellers set forth in ARTICLE III shall be true and correct in all respects at and as of the Closing Date as if made as of the Closing Date, except for those representations and warranties that address matters only as of a particular date (which shall be true and correct in all respects as of such date);

(d) each of the Sellers shall have performed or complied in all material respects with the agreements and covenants required to be performed or complied with by it under this Agreement as of or prior to the Closing;

(e) each of the Sellers shall have delivered to Buyer a certificate to the effect that each of the conditions specified in clauses (b), (c) and (d) of this Section 6.1 with respect to such Seller is satisfied;

(f) no judgment, order, decree, stipulation or injunction by any Governmental Entity shall be in effect which prevents consummation of the transactions contemplated by this Agreement, and no action, suit or proceeding shall be pending by or before any Governmental Entity which would reasonably be expected to result in a judgment, order, decree, stipulation or injunction that would cause the transactions contemplated by this Agreement to be rescinded following consummation;

(g) Buyer shall have received all of the items required to be delivered to it pursuant to Section 1.3(b);

(h) Buyer shall have received a certificate, in such form as is reasonably satisfactory to Buyer, certifying that each Seller is not a foreign person for purposes of Code Section 1445 or that the purchase is otherwise exempt from withholding under Code Section 1445;

(i) Buyer shall have received reasonably satisfactory evidence that (i) the Company has settled each claim against it by Eon in the United States District Court for the Eastern District of Texas, (ii) that each such claim has been dismissed with prejudice, (iii) the Company has no further or continuing obligation to Eon and (iv) that the Company has received the Eon License;

(j) Buyer shall have received reasonably satisfactory evidence that the Company has purchased (and paid for in full) and cancelled each of the Options in accordance with Sections 1.1 and 1.4 and that the Company has no further or continuing obligation in connection with any of the Options; and

(k) Buyer shall have received such other customary certificates with respect to the Company, the Subsidiary and the Sellers as it shall reasonably request in connection with the Closing.

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Section 6.2 Conditions to Obligations of each Seller.

The obligation of each Seller to consummate (or cause to be consummated) the transactions to be consummated at the Closing is subject to the satisfaction (or waiver by such Seller) of the following conditions:

(a) the representations and warranties of Buyer set forth in ARTICLE IV shall be true and correct in all respects at and as of the Closing Date as if made as of the Closing Date, except (i) for those representations and warranties that address matters only as of a particular date (which shall be true and correct as of such date, subject to clause (ii) below), and (ii) for failures of the representations and warranties to be true and correct as to matters that would not reasonably be expected to result in a Buyer Material Adverse Effect;

(b) Buyer shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with by it under this Agreement as of or prior to the Closing;

(c) Buyer shall have delivered to each Seller a certificate to the effect that each of the conditions specified in clauses (a) and (b) of this Section 6.2 is satisfied;

(d) no judgment, order, decree, stipulation or injunction by any Governmental Entity shall be in effect which prevents consummation of the transactions contemplated by this Agreement, and no action, suit or proceeding shall be pending by or before any Governmental Entity which would reasonably be expected to result in a judgment, order, decree, stipulation or injunction that would cause the transactions contemplated by this Agreement to be rescinded following consummation;

(e) Buyer shall have deposited the Deposit with MicroStrategy;

(f) each Seller shall have received all of the items required to be delivered to it pursuant to Section 1.3(b); and

(g) each Seller shall have received such other customary certificates with respect to Buyer as it shall reasonably request in connection with the Closing.

ARTICLE VII. INDEMNIFICATION

Section 7.1 Indemnification by the Sellers.

(a) Subject to the terms and conditions of this ARTICLE VII, from and after the Closing, each of the Sellers, severally and not jointly, on a pro rata basis based on the percentage set forth opposite such Seller’s name on Exhibit A (such percentage with respect to any Seller, such Seller’s “Pro Rata Portion”) shall indemnify Buyer and (following the Closing) the Company and the Subsidiary and each of their respective officers, directors, employees, agents, representatives, Affiliates, successors and permitted assigns (collectively, the “Buyer Parties”) in respect of, and hold the Buyer Parties harmless against, such Seller’s Pro Rata Portion of any and all losses, debts, obligations and other liabilities, demands, claims, actions, causes of action, monetary damages, fines, Taxes, penalties, costs and expenses (including

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reasonable attorneys’ fee and expenses), whether or not arising out of third party claims (collectively, “Damages”), incurred or suffered by any Buyer Party to the extent resulting from or arising out of or in connection with:

(i) any breach of any representation or warranty of the Sellers contained in ARTICLE II of this Agreement (other than the representations and warranties contained in Section 2.10(g)) or the certificate of the Sellers delivered at the Closing pursuant to Section 6.1(e) (or the assertion by any third party of claims which, if successful, would give rise to any of the foregoing), with the extent of such Damages being determined without regard to any qualification based on materiality or Company Material Adverse Effect contained in any such representation or warranty;

(ii) any breach of any covenant or agreement of the Company contained in this Agreement, or any breach of any covenant or agreement of the Sellers contained in this Agreement to the extent relating to the Sellers’ obligation to cause the Company to comply with such covenant or agreement;

(iii) (1) any Tax of the Company or the Subsidiary for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable period that includes (but does not end on) the Closing Date (allocated in accordance with Section 9.2(b)), (2) any Tax of any member of an affiliated, consolidated, combined or unitary group of which the Company or the Subsidiary (or any predecessor) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation §1.1502-6 or any similar state, local, or foreign law or regulation, (3) any Tax of any person (other than the Company or the Subsidiary) imposed on the Company or the Subsidiary as a transferee or successor, by contract or pursuant to any law, rule, or regulation, which Taxes relate to an event or transaction occurring before the Closing;

(iv) any Indebtedness of the Company or the Subsidiary or any Seller Transaction Expenses, in each case that was not reflected on the Closing Statement or that was not otherwise paid at Closing by the Company or, on behalf of the Company, by the Sellers when due;

(v) any breach of any representation or warranty of the Sellers contained in Section 2.10(g) of this Agreement (or the assertion by any third party of claims which, if successful, would give rise to the foregoing);

(vi) any of the matters set forth in Section 2.10(g) of the Disclosure Schedule (or the assertion by any third party of claims which, if successful, would give rise to the foregoing); or

(vii) the Lebowitz Claim. “Lebowitz Claim” means any request, demand or claim asserted by any person against the Company, whether directly or for indemnification, arising from, relating to or in connection with any Intellectual Property owned by the Mayer Michael Lebowitz Trust, including the matter that is the subject of the litigation pending in the U.S. District Court for the Eastern District of Texas, Tobi Gellman, as Trustee of the Mayer Michael Lebowitz Trust v. ADT Security Services, Inc., et. al., Civil Action No. 2:07-cv-00282-TJW, as such matter may be amended, progress or otherwise develop.

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(b) Subject to the terms and conditions of this ARTICLE VII, from and after the Closing, each of the Sellers, severally and not jointly, shall indemnify the Buyer Parties in respect of, and hold the Buyer Parties harmless against, any Damages incurred or suffered by any Buyer Party to the extent resulting from or arising out of or in connection with:

(i) any breach of any representation or warranty of such Seller contained in ARTICLE III of this Agreement or the certificate of such Seller delivered at the Closing pursuant to Section 6.1(e) (or the assertion by any third party of claims which, if successful, would give rise to any of the foregoing), with the extent of such Damages being determined without regard to any qualification based on materiality or Company Material Adverse Effect contained in any such representation or warranty;

(ii) any breach of any covenant or agreement of such Seller contained in this Agreement; or

(iii) any claim for payment of fees and/or expenses of a broker or finder in connection with the origin, negotiation or execution of this Agreement or the other agreements contemplated hereby or the consummation of the transactions contemplated hereby based upon any alleged agreement, arrangement or understanding between the claimant and the Company or the Subsidiary or any of their respective agents or representatives.

Section 7.2 Indemnification by Buyer.

Subject to the terms and conditions of this ARTICLE VII, from and after the Closing, Buyer shall indemnify each Seller in respect of, and hold each Seller harmless against, any and all Damages incurred or suffered by any Seller or any Affiliate thereof to the extent resulting from or arising out of or in connection with:

(a) any breach of any representation or warranty of Buyer contained in ARTICLE IV of this Agreement or the certificate of Buyer delivered at the Closing pursuant to Section 6.2(c) (or the assertion by any third party of claims which, if successful, would give rise to any of the foregoing); or

(b) any breach of any covenant or agreement of Buyer contained in this Agreement (or the assertion by any third party of claims which, if successful, would give rise to any of the foregoing).

Section 7.3 Claims for Indemnification.

(a) Third-Party Claims. Except with respect to the Lebowitz Claim as described in Section 7.3(c), all claims for indemnification made under this Agreement resulting from, related to or arising out of a third-party claim against an Indemnified Party (a “Third Party Claim”) shall be made in accordance with the following procedures. A person entitled to indemnification under this ARTICLE VII (an “Indemnified Party”) with respect to a Third Party

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Claim shall give prompt written notification to the person from whom indemnification is sought (the “Indemnifying Party”) of the commencement of any action, suit or proceeding relating to a third-party claim for which indemnification may be sought or, if earlier, upon the assertion of any such claim by a third party; provided that the failure to so notify the Indemnifying Party promptly shall not relieve the Indemnifying Party of its or his liabilities hereunder except to the extent such failure shall have harmed or prejudiced the Indemnifying Party. Within thirty (30) days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such action, suit, proceeding or claim with counsel reasonably satisfactory to the Indemnified Party; provided that the Indemnifying Party shall only be permitted to assume such defense so long as (i) such Third Party Claim involves only monetary damages and does not seek an injunction or other equitable relief (and does not involve criminal or quasi criminal allegations or a claim to which the Indemnified Party reasonably believes an adverse determination would be detrimental to or injure the Indemnified Party’s reputation or future business prospects), (ii) the aggregate amount claimed pursuant to such Third Party Claim does not exceed two times (2X) the then-remaining amount of the General Cap, (iii) the Indemnifying Party and the Indemnified Party do not have conflicting interests with respect to such action, suit, proceeding or claim and (iv) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. If the Indemnifying Party does not assume control of such defense, the Indemnified Party shall control such defense. The Party not controlling such defense may participate therein at its own expense; provided that if the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding or claim, the Indemnified Party may immediately assume control of the defense (to the extent permitted by judge or arbitrator) and the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith shall be considered “Damages” for purposes of this Agreement; provided, however, that in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one counsel for all Indemnified Parties. The Party controlling such defense shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto. The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim that (i) provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party will not be indemnified in full pursuant to Section 7.1 or 7.2, as applicable, (ii) does not include a complete release of the Indemnified Party from all Liability with respect to such claim with prejudice, or (iii) that imposes any liability or obligation on the Indemnified Party, without the prior written consent of the Indemnified Party. If the Indemnified Party assumes the defense of any action, suit, proceeding or claim which the Indemnifying Party is not entitled to assume pursuant to this Section 7.3(a) (other than the Lebowitz Claim), such Indemnified Party shall not be entitled to agree to any settlement of any such action, suit, proceeding or claim that imposes any liability or obligation on Sellers, without the prior written consent of Sellers, not to be unreasonably withheld or delayed. In the event that such consent is unreasonably withheld or delayed, the Indemnified Party may settle such action, suit, proceeding or claim in a manner that would impose a liability on Sellers, provided that the liability with respect to such settlement shall be subject to the limitations set forth in Section 7.5 to the extent applicable.

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(b) Procedure for Other Claims. An Indemnified Party wishing to assert a claim for indemnification under this ARTICLE VII which is not subject to Section 7.3(a) shall deliver to the Indemnifying Party a written notice (a “Claim Notice”) which contains (i) a description and the amount (the “Claimed Amount”) of any Damages incurred by the Indemnified Party, (ii) a statement that the Indemnified Party is entitled to indemnification under this ARTICLE VII and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages. Within thirty (30) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall: (I) agree that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case such response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or by wire transfer), (II) agree that the Indemnified Party is entitled to receive part, but not all, of the Claimed Amount (the “Agreed Amount”) (in which case such response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer), or (III) contest that the Indemnified Party is entitled to receive any of the Claimed Amount. If the Indemnifying Party in such response contests the payment of all or part of the Claimed Amount, the Indemnifying Party and the Indemnified Party shall use good faith efforts to resolve such dispute. If such dispute is not resolved within sixty (60) days following the delivery by the Indemnifying Party of such response, the Indemnifying Party and the Indemnified Party shall each have the right to submit such dispute to a court of competent jurisdiction.

(c) Lebowitz Claims. Notwithstanding anything contained herein to the contrary, the Company shall have exclusive control of the defense of the Lebowitz Claim; provided, however, that Buyer shall cause the Company to retain counsel reasonably acceptable to MicroStrategy (it be understood and agreed that Hogan & Hartson LLP shall be acceptable to MicroStrategy) and shall conduct the defense of any such claim actively and diligently. If the Company does not assume control of the defense of any such claim or conduct the defense of any such claim actively and diligently, Sellers shall be entitled to assume any such defense as a Third Party Claim under Section 7.3(a). Buyer shall cause the Company to give prompt written notification to Sellers of the commencement of the Lebowitz Claim and shall keep Sellers advised of the status of the Lebowitz Claim and shall consider recommendations made by the Seller with respect thereto; provided that the failure to so notify or advise Sellers shall not relieve Sellers of their liabilities hereunder except to the extent that such failure shall have harmed or prejudiced the Sellers. Buyer shall have the right to settle the Lebowitz Claim without the consent of any Seller; provided that any such settlement that imposes any liability or obligation on Sellers shall be commercially reasonable and entered into in good faith.

Section 7.4 Survival.

(a) The representations and warranties of each of the Sellers and Buyer set forth in this Agreement and the certificates delivered at Closing pursuant to Sections 6.1(e) and 6.2(c) shall survive the Closing. Notwithstanding the foregoing, no Party shall be entitled to recover for any Damages pursuant to Section 7.1(a)(i), Section 7.1(a)(v), Section 7.1(a)(vi), Section 7.1(b)(i) or 7.2(a) unless written notice of a claim thereof is delivered to the applicable Party prior to the Applicable Limitation Date. For purposes of this Agreement, the term

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“Applicable Limitation Date” shall mean the date that is eighteen (18) months following the Closing Date; provided that the Applicable Limitation Date with respect to the following Damages shall be as follows: (i) with respect to any Damages arising from or related to a breach of the representations and warranties of the Sellers set forth in Section 2.17 (Environmental Matters) (the “Statute of Limitations Representation”), the Applicable Limitation Date shall be the 30th day after expiration of the applicable statute of limitations (including any extensions thereto to the extent that such statute of limitations may be tolled), (ii) with respect to any Damages arising from or related to a breach of the representations and warranties of the Sellers set forth in Section 2.1 (Organization and Good Standing), Section 2.2 (Capitalization), Section 2.20 (Broker’s Fees) and ARTICLE III (collectively, the “Fundamental Representations”), there shall be no Applicable Limitation Date (i.e., such representations and warranties shall survive forever), (iii) with respect to any Damages arising from or related to a breach of the representations and warranties of Buyer set forth in Section 4.1 (Organization), Section 4.2 (Authorization of Transactions) or Section 4.4 (Broker’s Fees) there shall be no Applicable Limitation Date (i.e., such representations and warranties shall survive forever) and (iv) Section 2.7 (Tax Matters) shall expire at the Closing (it being understood that Sections 7.1(a)(iii) and Article IX shall in no way be affected by such expiration).

(b) The covenants or other agreements contained in this Agreement shall survive the Closing Date until the expiration of the term of the undertaking set forth in such covenant or agreement (other than the covenants and agreements set forth in Section 5.2 solely to the extent such covenants and agreements relate to the representations and warranties set forth in Section 2.5 which in each case shall not survive the Closing Date).

(c) No Party will be liable hereunder with respect to claims referred to in subsection (a) above with respect to any representation or warranty unless the Party seeking indemnification gives written notice thereof within the Applicable Limitation Date, if any, with respect to such representation or warranty. Notwithstanding any implication to the contrary contained in this Agreement, so long as a Party delivers written notice of a claim no later than the Applicable Limitation Date, the Indemnifying Party shall be required to indemnify hereunder for all Damages which such Parties may incur (subject to, as applicable, the limitations set forth in Section 7.5 below) in respect of the matters which are the subject of such claim, regardless of when incurred.

Section 7.5 Limitations.

(a) Subject to Sections 7.5(b), 10.4(e) and 10.6(e) and except with respect to claims made pursuant to ARTICLE IX, from and after the Closing, the rights of the Indemnified Parties under this ARTICLE VII shall be the sole and exclusive remedies of the Indemnified Parties and their respective Affiliates with respect to claims resulting from any breach of warranty or failure to perform any covenant or agreement contained in this Agreement or otherwise relating to the transactions that are the subject of this Agreement. Subject to Section 7.5(b), from and after the Closing, the rights of the Parties under ARTICLE IX shall be the sole and exclusive remedy of the Parties with respect to the subject matter of ARTICLE IX. Without limiting the generality of the foregoing two sentences, in no event shall Buyer, its successors or permitted assigns be entitled to claim or seek rescission of the transactions consummated under this Agreement.

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(b) Notwithstanding anything in this Agreement to the contrary, in the event any Party to this Agreement perpetrates a fraud on another Party hereto, any Party which suffers any Damages by reason thereof shall be entitled to seek recovery therefore against the person or persons who perpetrated such fraud without regard to any limitation set forth in this Agreement (whether a temporal limitation, a dollar limitation or otherwise).

(c) The representations, warranties, covenants and agreements made herein, together with the indemnification provisions herein, are intended among other things to allocate the economic cost and the risks inherent in the transactions contemplated hereby between the Parties and, accordingly, a Party shall be entitled to the indemnification or other remedies provided in this Agreement by reason of any breach of any such representation, warranty, covenant or agreement by another Party notwithstanding whether any employee, representative or agent of the Party seeking to enforce a remedy knew or had reason to know of such breach and regardless of any investigation by such Party.

(d) Notwithstanding anything to the contrary contained in this Agreement, each of the following limitations shall apply:

(i) the aggregate liability of each Seller for all Damages under any of Section 7.1(a)(i) for breaches of representations and warranties contained in ARTICLE II (other than Section 2.10(g)), Section 7.1(a)(v) for breaches of representations and warranties contained in Section 2.10(g), Section 7.1(a)(vi) with respect to the matters set forth in Section 2.10(g) of the Disclosure Schedule, Section 7.1(a)(vii) with respect to the Lebowitz Claim and Section 7.1(b)(i) for breaches of representations and warranties contained in ARTICLE III of this Agreement shall not exceed in the aggregate such Seller’s Pro Rata Portion of an amount equal to $4,590,000 (the “General Cap”), subject to any amounts to be credited against the General Cap pursuant to Section 7.5(d)(iii); provided that the foregoing limitation shall not apply to any Damages arising from or related to the Sellers’ indemnification obligations arising under the Fundamental Representations or the Statute of Limitations Representations.

(ii) the Sellers shall be liable under Section 7.1(a)(i) for breaches of representations and warranties contained in ARTICLE II and Section 7.1(b)(i) for breaches of representations and warranties contained in ARTICLE III of this Agreement for only that portion of the aggregate Damages that exceeds $153,000 (it being understood that the Sellers shall not be liable, in any event, for the first $153,000 of said Damages under Section 7.1(a)(i) and Section 7.1(b)(i))(the “General Basket”); provided that the foregoing limitation shall not apply to any Damages arising from or related to the Sellers’ indemnification obligations arising under the Fundamental Representations or the Statute of Limitations Representations;

(iii) the Sellers shall be liable under Section 7.1(a)(v) for breaches of representations and warranties contained in Section 2.10(g), under Section 7.1(a)(vi) with respect to the matters set forth in Section 2.10(g) of the Disclosure Schedule and under Section 7.1(a)(vii) with respect to the Lebowitz Claim for 50% of the aggregate Damages up to $4,000,000 in the aggregate (the “Special Indemnity Amount”); provided, however, that the maximum amount for which Sellers shall be liable for the Lebowitz Claim shall be 50% of the aggregate Damages up to $700,000. The Special Indemnity Amount for which the Sellers are liable under this Section 7.1(d)(iii) shall be credited against the General Cap and shall reduce the total amount payable

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under the General Cap. For the avoidance of doubt, if there have been no Damages for which the Sellers have been liable pursuant to Section 7.1(a)(i) for breaches of representations and warranties contained in ARTICLE II (other than Section 2.10(g)) or Section 7.1(b)(i) for breaches of representations and warranties contained in ARTICLE III of this Agreement, and a claim arises for which Sellers are liable under Section 7.1(a)(vi) with respect to the matters set forth in Section 2.10(g) of the Disclosure Schedule, which claim results in Buyer suffering Damages of $5,500,000 in the aggregate, then each Seller shall be obligated to indemnify Buyer for such Seller’s Pro Rata Portion of 50% of the first $4,000,000 of such Damages and the Sellers would not be liable for the remaining $1,500,000 of such Damages and thereafter the General Cap would be reduced to $2,590,000 and the Sellers would no longer have any liability under Section 7.1(a)(v) for breaches of representations and warranties contained in Section 2.10(g), under Section 7.1(a)(vi) with respect to the matters set forth in Section 2.10(g) of the Disclosure Schedule or under Section 7.1(a)(vii) with respect to the Lebowitz Claim; and

(iv) Buyer shall not be entitled to make any claim for indemnification with respect to any matter to the extent the Closing Statement reflects such matter pursuant to Section 1.3(b)(i), and the amount of any Damages for which indemnification is provided under this ARTICLE VII or ARTICLE IX, shall be calculated net of any accruals, reserves or provisions reflected in the Final Closing Working Capital Statement relating thereto.

(e) No Indemnifying Party shall be responsible and liable for any Damages or other amounts under this ARTICLE VII that are (i) consequential, in the nature of lost profits, diminutions in value, special or punitive or (ii) contingent, unless and until such Damages are actual and mature; provided that Damages awarded to third parties in respect of any Third Party Claims shall be considered direct Damages and not consequential, in the nature of lost profits, diminutions in value, special or punitive Damages. Buyer shall (and shall cause the Company to) use commercially reasonable efforts to minimize the Damages for which indemnification is provided to Buyer by Seller under ARTICLE VII.

(f) The amount of any Damages for which indemnification is provided under this ARTICLE VII shall be reduced by any related recoveries which the Indemnified Party actually receives under insurance policies (net of costs of collection and the present value of any premium increases) and any Tax benefits actually received in the year of the Damages giving rise to the indemnification right (measured on a “with and without” basis) (“Tax Benefits”) by the Indemnified Party or any of its Affiliates on account of the matter resulting in such Damages or the payment of such Damages. An Indemnified Party shall use commercially reasonable efforts to pursue, and to cause its Affiliates to pursue, all insurance claims and Tax Benefits to which it may be entitled in connection with any Damages it incurs, and each of Buyer, Seller and the Indemnified Party with respect to any indemnification claim shall cooperate with each other in pursuing insurance claims with respect to any Damages or any indemnification obligations with respect to Damages. If an Indemnified Party (or an Affiliate) receives any insurance payment in connection with any claim for Damages for which it has already received an indemnification payment from the Indemnifying Party, it shall pay to the Indemnifying Party, within ten (10) days of receiving such insurance payment, an amount equal to the excess of (i) the amount previously received by the Indemnified Party under this ARTICLE VI with respect to such claim plus the amount of the insurance payments received (net of costs of collection and the present value of any premium increases), over (ii) the amount of Damages with respect to such claim which the Indemnified Party has become entitled to receive under this ARTICLE VII.

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(g) Notwithstanding the provisions of Section 7.1(a)(v) or Section 7.1(a)(vi) of this Agreement, the Sellers shall not be liable for any Damages under Section 7.1(a)(v) or Section 7.1(a)(vi) to the extent resulting from or arising out of or in connection with the taking of any affirmative actions by Buyer that contribute to a Buyer Party incurring or suffering Damages, including Buyer bringing or threatening to bring a legal action against a third party or any of its Affiliates.

Section 7.6 Waiver, Release and Discharge.

Each Seller does hereby unconditionally and irrevocably release, waive and forever discharge, as of the Closing Date, each of the Company, the Subsidiary and Buyer and each of their past and present directors, officers, employees, agents, stockholders, insurers and Affiliates (the “Buyer Released Parties”), from any and all Liabilities to such Seller of any kind or nature whatsoever, arising directly or indirectly from any act, omission, event or transaction occurring (or any circumstances existing) on or prior to the Closing Date (with the exception of any obligations of the Released Parties pursuant to this Agreement and the other agreements contemplated hereby), including any and all of the foregoing arising out of or relating to (i) such Seller’s capacity as a current or former stockholder, optionholder or agent of the Company or the Subsidiary, (ii) any rights of indemnification or contribution, whether pursuant to the Released Parties’ certificate of incorporation, bylaws, contracts, applicable law or otherwise or (iii) any contract, agreement or other arrangement (except this Agreement and the other Transaction Documents) entered into or established prior to the Closing Date, including any stockholders agreements, employment agreements, previous noncompetition agreements, indemnification or contribution agreements (with the effect that any Liability or obligation of the Company and the Subsidiary under any such contract, agreement or other arrangement, including any provision purporting to survive termination of such contract, agreement or other arrangement and without regard to any notice requirement thereunder, is hereby terminated in its entirety). The Sellers understand and agree that, other than with respect to obligations of the Buyer Released Parties arising under this Agreement, the other agreements contemplated hereby, this is a full and final general release of all Liabilities of any nature whatsoever, whether or not known, suspected or claimed, that could have been asserted in any legal or equitable proceeding against the Buyer Released Parties on or prior to the Closing Date. Notwithstanding the foregoing, nothing contained in this Section 7.6 shall release, waive or discharge any Liability owed by any Buyer Released Party to a Seller for earned and unpaid salary or bonuses, benefits under any Company Benefit Plan or any employment related expenses incurred in the ordinary course of business.

Section 7.7 Treatment of Indemnification Payments.

For purposes of Section 9.5, all indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price.

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Section 7.8 Satisfaction of Indemnification Obligations.

Each of the Cash Sellers shall satisfy any indemnification obligations hereunder in cash in immediately available funds. Each Rollover Seller shall have the right to satisfy his or its indemnification obligations at his or its option, either (i) by paying in cash in immediately available funds, (ii) by issuance of a promissory note substantially in the form attached hereto as Exhibit G-1 or G-2, as applicable, for the amount required to be paid, or (iii) after the purchase by Buyer of the Rollover Shares, by instructing Buyer to cancel a number of shares of Series A Convertible Preferred Stock owned by such Rollover Seller equal to the amount of such indemnification obligations divided by the fair market value per share of the Series A Convertible Preferred Stock determined at the time of payment (it being understood that if such Rollover Seller is unable to fully satisfy his or its indemnification obligations through cancellation of such shares and elects not to fully satisfy such obligations by issuance of a promissory note, he or it shall be obligated to satisfy any remaining balance through the payment of cash in immediately available funds).

ARTICLE VIII. RESERVED

ARTICLE IX. TAX MATTERS

Section 9.1 Preparation and Filing of Tax Returns; Payment of Taxes.

(a) MicroStrategy shall prepare and timely file or shall cause to be prepared and timely filed (i) all Tax Returns for any Income Taxes of the Company and the Subsidiary for all taxable periods that end on or before the Closing Date, and (ii) all other Tax Returns of the Company and the Subsidiary required to be filed (taking into account extensions) prior to the Closing Date. MicroStrategy shall make or cause to be made all payments required with respect to any such Tax Returns. Buyer shall promptly reimburse MicroStrategy for the amount of any such Taxes paid by MicroStrategy to the extent such Taxes are attributable (as determined under Section 9.2 hereof) to periods following the Closing Date.

(b) Buyer shall prepare and timely file or shall cause to be prepared and timely filed all other Tax Returns for the Company and the Subsidiary. Buyer shall make all payments required with respect to any such Tax Returns; provided, however, that MicroStrategy shall promptly reimburse Buyer to the extent any payment Buyer is required to make relates to the operations of the Company or the Subsidiary for any period ending (or deemed pursuant to Section 9.2(b) to end) on or before the Closing Date.

(c) Any Tax Return to be prepared and filed for taxable periods beginning before the Closing Date and ending after the Closing Date shall be prepared on a basis consistent with the last previous similar Tax Return to the extent allowable by law. Buyer shall provide MicroStrategy with a copy of each proposed Tax Return (and such additional information regarding such Tax Return as may reasonably be requested by MicroStrategy) at least 20 days prior to the filing of such Tax Return for review and comment. Buyer shall prepare such Tax Returns by taking into account any reasonable comments of MicroStrategy.

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(d) Buyer and the Sellers shall each be responsible for the payment of one-half (1/2) of any transfer, sales, use, stamp, conveyance, value added, recording, registration, documentary, filing and other non-income Taxes and administrative fees (including notary fees) arising in connection with the consummation of the transactions contemplated by this Agreement.

(e) Each Seller shall pay or cause to be paid any Tax incurred by such Seller directly attributable to the making of the Section 338(h)(10) Election described in Section 9.5. Buyer shall be responsible for the payment of any and all Taxes not incurred in the ordinary course of business attributable to the acts or omissions of Buyer or Buyer’s Affiliates occurring after the Closing on the Closing Date.

Section 9.2 Allocation of Certain Taxes.

(a) Buyer and MicroStrategy agree that if Company is permitted but not required under applicable foreign, state or local Tax laws to treat the Closing Date as the last day of a taxable period, Buyer and MicroStrategy shall treat such day as the last day of a taxable period. Buyer and MicroStrategy agree that they will treat the Company and the Subsidiary as if they ceased to be part of the affiliated group of corporations of which MicroStrategy is a member within the meaning of Section 1504 of the Code, and any comparable or similar provision of state, local or foreign laws or regulations, as of the close of business on the Closing Date.

(b) The Taxes for a taxable period beginning before and ending after the Closing Date shall be allocated to the pre-Closing and post-Closing period as set forth in this Section 9.2(b). The Taxes allocable to the portion of such taxable period ending on the Closing Date shall be deemed to equal (i) in the case of Taxes that (x) are based upon or related to income or receipts or (y) imposed in connection with any sale or other transfer or assignment of property, other than Taxes described in Section 9.1(d), the amount which would be payable if the taxable year ended with the Closing Date, and (ii) in the case of other Taxes imposed on a periodic basis (including property Taxes), the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of calendar days in the period ending with the Closing Date and the denominator of which is the number of calendar days in the entire period. Any remaining Taxes for such a taxable period shall be allocable to the portion of such taxable period beginning on the day after the Closing Date.

Section 9.3 Refunds and Carrybacks.

(a) MicroStrategy shall be entitled to any refunds (including any interest paid thereon) or credits of Taxes attributable to taxable periods ending (or deemed pursuant to Section 9.2(b) to end) on or before the Closing Date, except to the extent attributable to tax attributes arising in any post-Closing period.

(b) Buyer and/or its Affiliates, as the case may be, shall be entitled to any refunds (including any interest paid thereon) or credits of Taxes attributable to taxable periods beginning (or deemed pursuant to Section 9.2(b) to begin) after the Closing Date.

(c) Buyer shall forward to or reimburse MicroStrategy for any refunds (including any interest paid thereon) or credits due MicroStrategy after receipt thereof, and MicroStrategy shall promptly forward to Buyer or reimburse Buyer for any refunds (including any interest paid thereon) or credits due Buyer after receipt thereof.

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Section 9.4 Cooperation on Tax Matters; Tax Audits.

(a) Buyer and MicroStrategy and its respective Affiliates shall cooperate in the preparation of all Tax Returns for any Tax periods for which any such Party could reasonably require the assistance of another such Party in obtaining any necessary information. Such cooperation shall include, but not be limited to, furnishing prior years’ Tax Returns or return preparation packages to the extent related to the Business illustrating previous reporting practices or containing historical information relevant to the preparation of such Tax Returns, and furnishing such other information within such Party’s possession requested by the Party filing such Tax Returns as is relevant to their preparation. Such cooperation and information also shall include provision of powers of attorney for the purpose of signing Tax Returns and defending audits and promptly forwarding copies of appropriate notices and forms or other communications received from or sent to any applicable governmental authority responsible for the imposition of Taxes (the “Taxing Authority”) which relate to the Business, and providing copies of all relevant Tax Returns to the extent related to the Business, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by any Taxing Authority and records concerning the ownership and Tax basis of property, which the requested Party may possess. Buyer and Seller and its respective Affiliates shall make its respective employees and facilities available on a mutually convenient basis to explain any documents or information provided hereunder.

(b) MicroStrategy shall have the right, at their own expense, to control any audit or examination by any Taxing Authority (“Tax Audit”), initiate any claim for refund, contest, resolve and defend against any assessment, notice of deficiency, or other adjustment or proposed adjustment relating to any and all Taxes for any taxable period ending on or before the Closing Date with respect to the Business. Buyer shall have the right, at its own expense, to control any other Tax Audit, initiate any other claim for refund, and contest, resolve and defend against any other assessment, notice of deficiency, or other adjustment or proposed adjustment relating to Taxes with respect to the Business; provided that, with respect to (i) any state, local or foreign Taxes for any taxable period beginning before the Closing Date and ending after the Closing Date and (ii) any item the adjustment of which may cause MicroStrategy to become obligated to make any payment pursuant to Section 9.1(a) hereof, Buyer shall consult with MicroStrategy with respect to the resolution of any issue that would affect MicroStrategy, and not settle any such issue, or file any amended Tax Return relating to such issue, without the prior written consent of MicroStrategy, which consent shall not be unreasonably withheld. Where consent to a settlement is withheld by MicroStrategy pursuant to this Section, MicroStrategy may continue or initiate any further proceedings at its own expense, provided that any liability of Buyer, after giving effect to this Agreement, shall not exceed the liability that would have resulted had MicroStrategy not withheld its consent.

Section 9.5 Section 338(h)(10) Election.

(a) MicroStrategy will join with Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding election under state, local and foreign Tax law)

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with respect to the purchase of the Shares hereunder (a “Section 338(h)(10) Election”). The Company, MicroStrategy and Buyer shall be jointly responsible for preparing and timely filing any forms used to make a Section 338(h)(10) Election, including the joint preparation and filing of IRS Form 8023 and related schedules. Such forms shall be filed timely following the Closing. Each of MicroStrategy and Buyer shall sign prior to or at the Closing all federal and state forms used to make a Section 338(h)(10) Election requiring its signatures, which forms shall be thereafter filed by Buyer as described in the preceding sentence. The Company and MicroStrategy will provide Buyer with any information regarding the Company as is necessary for Buyer to complete IRS Form 8883 and any supplements thereto. Buyer shall complete Form 8883 taking into account the Section 1060 Allocation (defined in Section 9.5(b)). Buyer will provide a copy of the completed Form 8883 to the Company and the Sellers. Buyer shall be responsible for filing the Form 8023. Each of the Company, MicroStrategy and the Buyer shall be responsible for filing the Form 8883 with the appropriate Tax Returns.

(b) Within 90 days of the Closing Date, Buyer shall provide the Sellers with an allocation of the Purchase Price and the liabilities of the Company (plus other relevant items) to the assets of the Company in accordance with Section 1060 of the Code and the Treasury Regulations thereunder (the “Section 1060 Allocation”) for all purposes (including Tax and financial accounting) (the “Purchase Price Allocation”). Buyer shall permit the Sellers to review and comment on the Purchase Price Allocation and shall make such revisions as are reasonably requested by the Sellers. Buyer, the Company, and the Sellers shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with the Purchase Price Allocation.

ARTICLE X. FURTHER AGREEMENTS

Section 10.1 Access to Information; Record Retention; Cooperation.

(a) Access to Information. Subject to compliance with contractual obligations, including the Confidentiality Agreement, and applicable laws and regulations, following the Closing, MicroStrategy and Buyer shall afford each other and their Affiliates, authorized accountants, counsel and other designated representatives reasonable access (including using commercially reasonable efforts to give access to third parties possessing information and providing reasonable access to its own employees who are in possession of relevant information) and duplicating rights during normal business hours in a manner so as to not unreasonably interfere with the conduct of business to all non-privileged records, books, personnel, contracts, instruments, documents, correspondence, computer data and other data and information (collectively, “Information”) within the possession or control of such Party or its Affiliates, relating to the Company or the Subsidiary prior to the Closing, insofar as such access is reasonably required by the other Party. Information may be requested under this Section 10.1(a) for, without limitation, financial reporting and accounting matters, preparing financial statements, preparing, reviewing and analyzing the Closing Working Capital Statement, resolving any differences between the Parties with respect to the Closing Working Capital Statement, preparing and filing of any Tax Returns, prosecuting any claims for refund, defending any Tax claims or assessment, preparing securities law or exchange filings, prosecuting, defending or settling any litigation or insurance claim, performing this Agreement and the transactions contemplated hereby, and all other proper business purposes.

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(b) Access to Personnel. Following the Closing, MicroStrategy and Buyer shall use commercially reasonable efforts to make available to the each other, upon written request, such Party’s and its Affiliates’ officers, employees and agents to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which the requesting Party may from time to time be involved relating to the Company or the Subsidiary prior to the Closing or for any other matter referred to in Section 10.1(a).

(c) Reimbursement. A Party providing Information or personnel to another Party under Section 10.1(a) or (b) shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may reasonably be incurred in providing such Information or personnel; provided, however, that no such reimbursements shall be required for the salary or cost of fringe benefits or similar expenses pertaining to officers and employees of the providing Party or its Affiliates.

(d) Retention of Records. Except as otherwise required by law or agreed to in writing by the Parties, Buyer and MicroStrategy shall each (and each shall cause its Affiliates to) use commercially reasonable efforts to preserve all Information in its possession pertaining to the Company or the Subsidiary prior to the Closing until December 31, 2012. Notwithstanding the foregoing, in lieu of retaining any specific Information, any Party may offer in writing to the other Party to deliver such Information to the other Party and, if such offer is not accepted within ninety (90) days, the offered Information may be disposed of at any time.

(e) Preparation of Company Financial Statements. Without limitation of the provisions of Section 10.1(a), following the Closing, Buyer shall promptly provide to MicroStrategy and its Affiliates all information relating to the Company and the Subsidiary reasonably required for MicroStrategy and its Affiliates to prepare the financial statements of MicroStrategy and its Affiliates (including any financial statements required to be included in any reports filed by MicroStrategy with the Securities and Exchange Commission). During the period of preparation of such financial statements, Buyer shall provide MicroStrategy and its Affiliates (and their auditors) with all reasonable access to the Company and the Subsidiary, each of their respective financial management, including the financial directors of the Company and the Subsidiary, as applicable, and any accountant’s work papers and their books, accounts and records during normal business hours and in a manner so as not to unreasonably interfere with the conduct of business.

Section 10.2 Disclosure Generally.

Any information furnished in any section of the Disclosure Schedule shall be deemed to modify the Sellers’ representations and warranties in other sections of this Agreement to the extent the applicability thereto is reasonably apparent. The inclusion of any information in the Disclosure Schedule (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material to the Company or the Subsidiary, has resulted in or would result in a Company Material Adverse Effect, or is outside the ordinary course of business. For purposes of this Agreement, the terms “to the Company’s knowledge,” “to the knowledge of the Company”,

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“known by the Company” or other words of similar meaning shall mean the actual knowledge of the persons listed on Schedule 10.2 attached hereto, and shall not refer to the knowledge of any other person or entity.

Section 10.3 Acknowledgments by Buyer.

Buyer acknowledges that it has conducted to its satisfaction an independent investigation and verification of the financial condition, results of operations, assets, liabilities, properties and projected operations of the Company, including the Subsidiary, and, in making its determination to proceed with the transactions contemplated by this Agreement, Buyer has relied on the results of its own independent investigation and verification and the representations and warranties of the Sellers expressly and specifically set forth in ARTICLE II and ARTICLE III of this Agreement, including the Disclosure Schedule. Such representations and warranties constitute the sole and exclusive representations and warranties of the Sellers to Buyer in connection with the transactions contemplated hereby (other than the representations and warranties in the other documents referred to herein with respect to the subject matter thereof), and Buyer understands, acknowledges and agrees that all other representations and warranties of any kind or nature, whether express, implied or statutory (including any relating to the future or historical financial condition, results of operations, assets or liabilities of the business and any set forth in the confidential descriptive memorandum previously delivered to Buyer or in the dataroom), are specifically disclaimed by the Sellers. Buyer also acknowledges that its sole and exclusive recourse in respect of the transactions contemplated by this agreement is to assert rights of Buyer pursuant to ARTICLE VII, ARTICLE IX, Section 10.4(e) and Section 10.6(e). The provisions of this Section 10.3 are subject in all respects to Section 7.5(b).

Section 10.4 Certain Employee Benefits Matters.

(a) Employees. Nothing in this Agreement shall limit the ability of Buyer or the Company or any of their Affiliates to terminate the employment of any Employee at any time following the Closing Date for any reason, including without cause.

(b) Cessation of Business Benefit Plan Participation; 401(k) Plan Matters. Except as otherwise required by applicable law or provided under the Transition Services Agreement, the Employees shall cease to participate in or accrue further benefits under the MicroStrategy Benefit Plans immediately prior to the Closing Date but shall continue to participate in or accrue further benefits under the Company Benefit Plans. Effective as of the Closing, all Employees who participate in the defined contribution plan qualified under Section 401 of the Code sponsored by MicroStrategy (the “Seller’s 401(k) Plan”) shall cease to participate in said plan. On the Closing Date or as soon as practicable thereafter, MicroStrategy shall make all employee and employer contributions to the Seller’s 401(k) Plan on behalf of Employees to the extent not previously made for any period prior to the Closing Date. Buyer shall establish a defined contribution plan qualified under Section 401 of the Code and which includes a cash or deferred arrangement which qualifies under Section 401(k) of the Code (the “Buyer’s 401(k) Plan”). As soon as practicable after Buyer establishes Buyer’s 401(k) Plan, MicroStrategy shall cause the transfer of (i) the account balances (whether vested or unvested) of the Employees who participate under Seller’s 401(k) Plan including outstanding loans of such persons and (ii) an amount of assets in cash equal to the aggregate account balances (net of plan

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loans) and promissory notes evidencing outstanding loans of such persons to Buyer’s 401(k) Plan, valued as of the day immediately preceding the date of transfer. MicroStrategy shall ensure that all participant accounts invested in employer securities shall be liquidated prior to the date of transfer. Pending such transfer, the Seller’s 401(k) Plan accounts of the Employees shall be maintained on the same basis as other former employees of MicroStrategy, provided, however, that no plan loans will be placed into default prior to such transfer unless the Seller’s 401(k) Plan requires otherwise or an Employee fails to make an installment payment on a timely basis and provided that the Closing shall not be treated as entitling the Employees to a distribution from the Seller’s 401(k) Plan. Buyer shall, promptly following the establishment of Buyer’s 401(k) Plan, notify MicroStrategy in writing of the identity of Buyer’s 401(k) Plan and shall cause Buyer’s 401(k) Plan to accept the transfers referred to in this Section 10.4(b).

(c) Employment Related Liabilities. Except as provided under the Transition Services Agreement, Buyer or the Company shall assume or retain liability for and shall pay directly to the appropriate Employee any amounts to which any Employee becomes entitled under any severance plan, agreement, or arrangement, employment agreement, or applicable law that exists or arises (or may be deemed to exist or arise) as a result of, or in connection with (i) the employment of any Employee on or after the Closing Date, (ii) any change or proposed change to the remuneration, benefits, terms and conditions of employment, or the working conditions of any Employee after the Closing Date, or (iii) the termination of employment of any Employee on or after the Closing Date. Buyer shall assume accrued paid time off benefits and accrued bonuses of the Employees to the extent such amounts are included in the calculation of Working Capital.

(d) U.S. COBRA. Buyer agrees to provide any required notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any other similar applicable law after the Closing Date relating to any health plan maintained by Buyer or the Company on or after the Closing Date. MicroStrategy shall retain all liabilities for providing or continuing to provide post-employment health coverage under COBRA or otherwise with respect to current and former employees of the Business for all COBRA qualifying events occurring prior to the expiration of transition services.

(e) Indemnity. Except for the Company Benefit Plans, Sellers shall indemnify and hold Buyer, the Company and its Affiliates harmless with respect to any liabilities associated with all Employee Benefit Plans, programs and arrangements, including all MicroStrategy Benefit Plans, and any other Employee Benefit Plans sponsored, maintained or contributed to by Sellers or any of their ERISA Affiliates, other than with respect to amounts reflected on the Final Closing Working Capital Statement or amounts owed under the Transition Services Agreement.

(f) No Third Party Beneficiaries. Nothing in this Section 10.4 or any other provision of this Agreement shall create any third party beneficiary right in any person other than the parties to this Agreement or any right to employment or continued employment or to a particular term or condition of employment with the Company, Buyer or any of their respective Affiliates. Nothing in this Section 10.4 or any other provision of this Agreement (i) shall be construed to establish, amend, or modify any benefit or compensation plan, program, agreement or arrangement, or (ii) shall limit the ability of the Company, Buyer or any of their Affiliates to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time assumed, established, sponsored or maintained by any of them.

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Section 10.5 No Use of Name.

Following the Closing, other than incidental use in the ordinary course of business of collateral material existing at the Closing, (a) Buyer shall have no rights to use any trademarks, tradenames, logos or any contraction, abbreviation or simulation of MicroStrategy (the “Retained Marks”), including those Retained Marks listed on Schedule 10.5, and will not hold itself out as having any affiliations with MicroStrategy other than with respect to the documents referred to herein and (b) MicroStrategy shall have no rights to use any trademarks, tradenames, logos or any contraction, abbreviation or simulation of the Company, including “Alarm” and “Alarm.com,” and will not hold itself out as having any affiliations with Buyer or the Company other than with respect to the documents referred to herein and its historical affiliation as former majority owner of the Company.

Section 10.6 Non-Competition, Non-Solicitation and Confidentiality.

(a) Non-Competition. During the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, each Seller severally covenants and agrees that he or it shall not, and shall not allow their respective direct or indirect subsidiaries, for its or his own account or the account of any other person (other than Buyer), to, engage (including as an owner, manager or employee) in the business of selling residential and commercial alarm security products and services anywhere in the world (a “Competitive Business”); provided, however, that the foregoing covenant shall not prohibit, or be interpreted as prohibiting, such Seller from:

(i) owning up to 2% of the equity of a publicly traded company; or

(ii) acquiring any person or entity which engages in a Competitive Business if either:

(A) in the calendar year prior to such acquisition, the consolidated revenues of such person or entity from its Competitive Business did not constitute more than 15% of the total consolidated revenues of such person or entity; or

(B) such Seller promptly commences and pursues the transfer of that portion of the business of such person or entity as constitutes a Competitive Business upon terms and conditions and at a price determined by such Seller in its sole discretion until the earlier to occur of (i) the transfer of such Competitive Business, which shall be effected not later than the 12-month anniversary of such acquisition or (ii) the fifth anniversary of the Closing Date.

(b) Seller Non-Solicitation. Each Seller agrees, on behalf of itself and each of its direct or indirect subsidiaries, that each Seller shall not:

(i) induce or attempt to induce any Covered Employee to leave the employ of the Company or the Subsidiary, or in any way interfere with the relationship between the Company or the Subsidiary and any Covered Employee (other than by way of a general solicitation not targeted at such person or employees of the Company or the Subsidiary);

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(ii) during the period beginning on the Closing Date and ending on the first anniversary of the Closing Date, hire any Covered Employee; or

(iii) during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, induce or attempt to induce any customer, supplier, licensee, licensor or other material business relation of the Company or the Subsidiary to cease doing business with Buyer, the Company or the Subsidiary, or in any way interfere with the relationship between such supplier, licensee, licensor or material business relation and Buyer, the Company and the Subsidiary; or

(iv) during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, make any negative statements or communications about Buyer, the Company or the Subsidiary (except as required by law).

For purposes of this Agreement, “Covered Employee” shall mean, as of the date of determination, any then-current employee of the Company or the Subsidiary or any individual whose employment with the Company or the Subsidiary has been terminated for a period of less than six months; provided that the individual listed in Section 10.6 of the Disclosure Schedule shall not be considered a “Covered Employee” for purposes of this Agreement.

(c) Buyer Non-Solicitation. Buyer agrees, on behalf of itself and each of its direct or indirect subsidiaries, that Buyer shall not:

(i) induce or attempt to induce any MicroStrategy Employee that is a Vice President, Executive Vice President or “officer” (as defined in Rule 16a-1 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended) of MicroStrategy to leave the employ of MicroStrategy or any of its subsidiaries, or in any way interfere with the relationship between MicroStrategy and its direct or indirect subsidiaries (collectively, the “MicroStrategy Entities”) and any such person (other than by way of a general solicitation not targeted at employees of any of the MicroStrategy Entities);

(ii) during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, induce or attempt to induce any MicroStrategy Employee who is an engineer to leave the employ of any MicroStrategy Entity, or in any way interfere with the relationship between a MicroStrategy Entity and any such person (other than by way of a general solicitation not targeted at employees of any of the MicroStrategy Entities);

(iii) during the period beginning on the Closing Date and ending on the first anniversary of the Closing Date, hire any MicroStrategy Employee; or

(iv) during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, induce or attempt to induce any customer, supplier,

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licensee, licensor or other material business relation of any of the MicroStrategy Entities to cease doing business with any of the MicroStrategy Entities or in any way interfere with the relationship between such supplier, licensee, licensor or material business relation and any of the MicroStrategy Entities (including making any negative statements or communications about MicroStrategy, except as required by law).

For purposes of this Agreement, “MicroStrategy Employee” shall mean, as of the date of determination, any then-current employee of any of the MicroStrategy Entities or any individual whose employment with any of the MicroStrategy Entities has been terminated for a period of less than six months; provided that the individual listed in Section 10.6 of the Disclosure Schedule shall not be considered a “MicroStrategy Employee” for purposes of this Agreement.

(d) Confidentiality. Each Seller shall treat and hold as confidential any information concerning the business and affairs of the Company and the Subsidiary, including any notes, analyses, compilations, studies, forecasts, interpretations or other documents that are derived from, contain, reflect or are based upon any such information (the “Buyer Confidential Information”), refrain from using any of the Buyer Confidential Information except in connection with this Agreement and enforcing its rights under this Agreement, and shall deliver promptly to Buyer, at the request and option of Buyer, copies of all tangible embodiments of the Buyer Confidential Information which are in such Seller’s possession or under such Seller’s control. Notwithstanding the foregoing, Buyer Confidential Information shall not include information that is (i) generally available to the public other than as a result of a breach of this Section 10.6(d), (ii) rightfully received after the Closing Date from a third party not under any obligation of confidentiality with respect to such information or (iii) is or has been independently developed without violating any obligation of confidentiality hereunder. If any Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Buyer Confidential Information, such Seller shall notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 10.6(d). If, in the absence of a protective order or the receipt of a waiver hereunder, such Seller is, on the advice of counsel, compelled to disclose any Buyer Confidential Information to any tribunal or else stand liable for contempt, such Seller may disclose the Buyer Confidential Information to the tribunal, provided that such Seller shall use its commercially reasonable efforts to obtain, at the request and expense of Buyer, an order or other assurance that confidential treatment shall be accorded to such portion of the Buyer Confidential Information required to be disclosed as Buyer shall designate.

(e) Remedy for Breach. Notwithstanding Section 7.5(a), each Seller acknowledges and agrees that in the event of a breach by it (or any of its Affiliates) of any of the provisions of this Section 10.6, monetary damages may not constitute a sufficient remedy. Consequently, in the event of any such breach, Buyer, the Company and the Subsidiary, and/or their respective successors or assigns, as applicable, may, in addition to any other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or other security or proving actual damages.

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(f) Enforcement. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 10.6 is invalid or unenforceable, each Party agrees that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

(g) Acknowledgment. Each Seller acknowledges and agrees that (i) the restrictions contained in this Section 10.6 for the benefit of Buyer are reasonable in all respects (including with respect to the subject matter, time period and geographical area) and are necessary to protect the value of the Business (including its goodwill), and (ii) Buyer would not have consummated the transactions contemplated hereby without the restrictions contained in this Section 10.6.

(h) Refund of Deposit. Upon the expiration, termination or replacement of the Letter of Credit, MicroStrategy shall refund to Buyer in cash the amount of the Deposit less any amounts drawn under the Letter of Credit on or after the Closing Date plus any and all interest and dividends thereon (net of any applicable fees and expenses).

ARTICLE XI. MISCELLANEOUS

Section 11.1 Press Releases and Announcements.

Each Party shall have the right to issue a press release announcing the execution of this Agreement and a press release announcing the Closing of the transactions contemplated hereby, in each case subject to the consent of the other Party, which shall not be unreasonably withheld, conditioned or delayed. Except as set forth in the preceding sentence, no Party shall issue (and each Party shall cause its Affiliates not to issue) any press release or public disclosure relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by law, regulation or stock exchange rule (in which case the disclosing Party shall advise the other Party and the other Party shall, if practicable, have the right to review such press release or announcement prior to its publication).

Section 11.2 No Third Party Beneficiaries.

Except as provided by applicable law or otherwise expressly provided herein, this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns and, to the extent specified herein, their respective Affiliates; provided, however, that the provisions of ARTICLE VII are intended for the benefit of the entities and individuals specified therein and its respective legal representatives, successors and assigns.

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Section 11.3 Entire Agreement.

This Agreement (including the documents referred to herein) and the Confidentiality Agreement constitute the entire agreement by and between Buyer and the Sellers. This Agreement (including the documents referred to herein) supersedes any prior agreements or representations by or between Buyer and the Sellers, whether written or oral, with respect to the subject matter hereof (other than the Confidentiality Agreement).

Section 11.4 Succession and Assignment.

This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party.

Section 11.5 Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same instrument.

Section 11.6 Headings.

The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 11.7 Notices.

All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered one business day after it is sent by (a) a reputable courier service guaranteeing delivery within one business day or (b) telecopy, provided electronic confirmation of successful transmission is received by the sending Party and a confirmation copy is sent on the same day as the telecopy transmission by certified mail, return receipt requested, in each case to the intended recipient as set forth below:

If to Buyer:

Alarm.com Holdings, Inc.

c/o ABS Capital Management Company

400 East Pratt Street, Suite 910

Baltimore, MD 21202

Telecopy: (410) 246-5606

Attention: Ralph Terkowitz

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Copy to:

Hogan & Hartson LLP

111 S. Calvert Street, Suite 1600

Baltimore, MD 21202

Telecopy: (410) 539-6981

Attention: David A. Gibbons

If to MicroStrategy:

MicroStrategy Incorporated

1861 International Drive

McLean, VA 22102

Telecopy: (703) 848-8669

Attention: President

Copies to:

MicroStrategy Incorporated

1861 International Drive

McLean, VA 22102

Telecopy: (703) 905-6637

Attention: General Counsel

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Telecopy: (617) 526-5000

Attention: Thomas S. Ward, Esq.

If to any other Seller:

Backbone Partners, LLC

c/o Stephen S. Trundle

203 Lawton Street

Falls Church, VA 22046

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Copy to:

Morrison & Foerster LLP

1650 Tysons Boulevard, Suite 400

McLean, Virginia 22102

Telecopy: (703) 760-7777

Attention: Gregory M. Giammittorio, Esq.

David B. Sherwood, Jr.

1133 Dogwood Dr.

McLean, VA 22101

Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

Section 11.8 Governing Law.

Subject to the provisions of certain Exhibits hereto regarding the application of local law, this Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the Commonwealth of Virginia.

Section 11.9 Amendments and Waivers.

The Parties may mutually amend or waive any provision of this Agreement at any time. No amendment or waiver of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 11.10 Severability.

Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties

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agree that the body making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

Section 11.11 Expenses.

Except as otherwise specifically provided to the contrary in this Agreement, each of the Parties shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby; provided that if the transactions contemplated hereby are consummated, the Company shall pay up to $1,500,000 of such costs and expenses of Buyer and up to $130,000 of such costs and expenses of Backbone Partners, LLC and/or Stephen S. Trundle after the Closing (and for the avoidance of doubt, such amounts to reimbursed by the Company shall not be taken into account in calculating the Closing Working Capital Amount pursuant to Section 1.7 of this Agreement). For the avoidance of doubt, it is understood that investment banking fees owed to Imperial Capital, LLC, outside counsel fees of Wilmer Cutler Pickering Hale and Dorr LLP and any other advisory fees incurred by the Company prior to the Closing or MicroStrategy are Seller Transaction Expenses, and not expenses of the Company.

Section 11.12 Specific Performance.

Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each Party agrees that the other Party may be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state or jurisdiction thereof having jurisdiction over the Parties and the matter.

Section 11.13 Construction.

Except where expressly stated otherwise in this Agreement, the following rules of interpretation apply to this Agreement: (i) “either” and “or” are not exclusive and “include,” “includes” and “including” are not limiting; (ii) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (iii) “date hereof” refers to the date set forth in the initial caption of this Agreement; (iv) “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”; (v) definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (vi) references to a contract or agreement mean such contract or agreement as amended or otherwise modified from time to time; (vii) references to a person or entity are also to its permitted successors and assigns; (viii) references to an “Article,” “Section,” “Exhibit” or “Schedule” refer to an Article or Section of, or an Exhibit or Schedule to, this Agreement; (ix) references to “$” or otherwise to dollar amounts refer to the lawful currency of

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the United States; (x) references to a law include any rules, regulations and delegated legislation issued thereunder and (xi) references to a “person” or “persons” shall include associations, corporations, limited liability companies, individuals, partnerships, limited liability partnerships, trusts or any other entity or organization, including a Governmental Entity. The language used in this Agreement shall be deemed to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction shall be applied against either Party.

Section 11.14 Waiver of Jury Trial.

To the extent permitted by applicable law, each Party hereby irrevocably waives all rights to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement (or the documents referred to herein) or the transactions contemplated hereby or the actions of either Party in the negotiation, administration, performance and enforcement of this Agreement.

Section 11.15 Incorporation of Exhibits and Schedules.

The Exhibits, Schedules and Disclosure Schedule to this Agreement are incorporated herein by reference and made a part hereof.

Section 11.16 Facsimile Signature.

This Agreement may be executed by facsimile signature.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

BUYER:
ALARM.COM HOLDINGS, INC.
By:	/s/ Ralph Terkowitz
Print Name:	Ralph Terkowitz
Print Title:	President, CEO, Secretary
SELLERS:
MICROSTRATEGY INCORPORATED
By:	/s/ Arthur S. Locke, III
Print Name:	Arthur S. Locke, III
Print Title:	Executive Vice President, Finance & Chief Financial Officer
BACKBONE PARTNERS, LLC
By:	/s/ Stephen S. Trundle
Print Name:	Stephen S. Trundle
Print Title:	Managing Member
By:	/s/ David B. Sherwood, Jr.
	David B. Sherwood, Jr.

[Signature Page to Purchase Agreement]

Exhibit A

Ownership and Purchase Price Allocation

Exhibit A

Allocation of Estimated Purchase Price

Section 1.2(b)

							Working Capital Adjustments		Indebtedness	Seller Transaction Expenses	Retained Cash
Shareholder	Type	Total Common Stock Issued and Outstanding		Ownership Percentage		Pro Rata Portion of Estimated Purchase Price (in $)	Section 1.2(a)(i)(b) & Section 1.2(a)(i)(e)		Section 1.2(a)(i)(c)	Section 1.2(a)(i)(d)	Section 1.2(a)(i)(f)	Total (in $)
MicroStrategy Incorporated	Cash Seller	263,923	**	87.81	%	27,747,723.61	(121,068.76	)	—	—	—	27,626,654.85
Backbone Partners, LLC	Rollover Seller*	27,695	***	9.21	%	2,911,732.61	(12,704.46	)	—	—	—	2,899,028.15
David B. Sherwood, Jr.	Cash Seller	4,473	***	1.49	%	470,271.89	(2,051.89	)	—	—	—	468,220.00
David B. Sherwood, Jr.	Rollover Seller*	4,473	***	1.49	%	470,271.89	(2,051.89	)	—	—	—	468,220.00
		300,564		100.00	%	31,600,000.00	(137,877.00	)	—	—	—	31,462,123.00

* Buyer shall issue to each Rollover Seller a whole number of shares of Series A Convertible Preferred Stock of Buyer having an aggregate liquidation preference as near as possible to (without exceeding) the portion of the Estimated Purchase Price attributable to the Shares owned by such Rollover Seller (and shall pay cash to such Rollover Seller equal to any excess of such Rollover Seller’s portion of the Estimated Purchase Price over the aggregate liquidation preference of the shares of Series A Preferred Stock issued to it) pursuant to Section 1.2(b).

** Class B Common Stock

*** Class A Common Stock

Exhibit B

Form of Transition Services Agreement

TRANSITION SERVICES AGREEMENT

THIS TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of February 13, 2009 by and between MicroStrategy Incorporated, a Delaware corporation (“MicroStrategy”), and Alarm.com Incorporated, a Delaware corporation (“Alarm.com”). MicroStrategy and Alarm.com are sometimes referred to herein individually as a “Party” and together as the “Parties.”

Preliminary Statement

WHEREAS, MicroStrategy, Alarm.com Holdings, Inc. and certain other stockholders of Alarm.com are parties to a Purchase Agreement, dated as of the date hereof, for the sale of all of the issued and outstanding capital stock of Alarm.com (the “Acquisition Agreement”); and

WHEREAS, in connection with the transactions contemplated by the Acquisition Agreement (the “Transactions”), MicroStrategy has agreed to provide to Alarm.com certain transitional services for the period and on the terms and conditions set forth herein; and

WHEREAS, in connection with the Transactions, MicroStrategy and Alarm.com have entered into a Sublease Agreement and certain other agreements relating to software licensing and intellectual property, in each case dated as of the date hereof;

Agreements

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the sufficiency and receipt of which each Party hereby acknowledges, the Parties agree as follows:

1. Provision of Services.

1.1. Services. With effect from the Closing Date (as defined in the Acquisition Agreement), MicroStrategy will provide Alarm.com certain services described on Schedule A attached hereto exclusively in connection with its operation of the Business (as defined in the Acquisition Agreement) (collectively, the “Services”) for the period specified with respect to each such Service on Schedule A (the “Service Period”) and for the prices specified on Schedule A. These amounts shall be paid by Alarm.com to MicroStrategy in accordance with Section 2 hereof.

1.2. Transition. In addition to the specific Services described on Schedule A, upon a reasonable request by Alarm.com, and at Alarm.com’s sole expense, MicroStrategy shall use commercially reasonable efforts to provide copies of relevant files, data and other information to Alarm.com in connection with the termination of any Service and to assist in the transition of any outstanding legal matters to Alarm.com (including the transfer of copies of files relating to such matters), it being understood that any such assistance shall not constitute legal advice and shall not establish any attorney-client relationship.

1.3. Early Termination of Services. Alarm.com may terminate the provision of any of the Services by MicroStrategy prior to the expiration of the Service Period for such Service by providing MicroStrategy ten (10) Business Days (as defined in the Acquisition Agreement) prior written notice of such termination.

1.4. Third Party Services. MicroStrategy shall have the right to engage the services of independent contractors to deliver or assist MicroStrategy in the delivery of the Services; provided that to the extent that independent contractors were not providing such Services to Alarm.com prior to the Closing Date, MicroStrategy shall only engage independent contractors to provide Services to the extent that MicroStrategy reasonably determines that qualified MicroStrategy personnel are not reasonably available to deliver such Services and such independent contractors shall be reasonably supervised by MicroStrategy personnel.

1.5. Level of Services. MicroStrategy (or its independent contractors) shall provide the Services at a level of quality, degree of care and volume substantially similar to that at which the Services were provided to Alarm.com by MicroStrategy (or its independent contractors) prior to the Closing Date, and at a level of quality and degree of care not less than the quality and degree of care as it exercises in performing similar services for its own account.

1.6. Use of Services. Alarm.com shall use the Services for substantially the same purposes and in substantially the same manner as Alarm.com used the Services immediately prior to the Closing Date. Alarm.com shall not permit the use of the Services by anyone other than Alarm.com.

1.7. Cooperation. Each Party shall cause its employees to reasonably cooperate with employees of the other to the extent required for effective delivery of the Services. In addition, each Party shall name a point of contact who shall be responsible for the day to day implementation of this Agreement.

1.8. No Conflicts. MicroStrategy represents and warrants to Alarm.com that neither MicroStrategy’s execution and delivery of this Agreement, nor the provisions of Services contemplated hereby, will conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any person the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which MicroStrategy is a party or by which it is bound or to which its assets are subject, except as would not have a material adverse effect upon MicroStrategy’s ability to provide the Services.

2. Payment.

2.1. Service Fees. Schedule A indicates, with respect to each Service, whether the fees to be charged for such Service (the “Service Fees”) are to be determined by (a) the pass-through billing method (“Pass-Through Billing”), (b) the per-unit billing method (“Per-Unit Billing”) or (c) the flat fee billing method (“Flat-Fee Billing”) as defined below.

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(a) Pass-Through Billing. The Service Fees for Services subject to the Pass-Through Billing method shall be equal to the actual costs and expenses incurred by MicroStrategy (without any mark-up) in providing such Services during the applicable billing period. If MicroStrategy incurs costs or expenses on behalf of Alarm.com and other businesses operated by MicroStrategy in connection with the provision of Services, MicroStrategy will allocate any such costs or expenses to Alarm.com as set forth on Schedule A.

(b) Per-Unit Billing. The Service Fees for Services subject to the Per-Unit Billing method shall be equal to the number of units of the Service provided to Alarm.com by MicroStrategy during the applicable billing period, multiplied by the per-unit price set forth on Schedule A.

(c) Flat-Fee Billing. The Service Fees for Services subject to the Flat-Fee Billing method shall be equal to a single fixed dollar amount per billing period set forth on Schedule A.

If the provision of a Service is terminated prior to the expiration of the Service Period in accordance with Section 1.2, Alarm.com shall be liable for (i) all Service Fees for such Service through the date of termination and (ii) any reasonable prepaid costs or expenses incurred by MicroStrategy in connection with the contemplated provision of such Service from the date of termination until the expiration of the applicable Service Period.

2.2. Billing and Payment. Within twenty (20) days following the end of each calendar month during the term hereof and within (20) days following the expiration or termination of this Agreement, MicroStrategy shall provide to Alarm.com a single invoice for Services provided by MicroStrategy during the applicable calendar month pursuant to Section 1 hereof (an “Invoice”), together with such reasonable supporting documentation of the Service Fees set forth on such Invoice as Alarm.com may reasonably request. Alarm.com shall pay all amounts due under each Invoice no later than thirty (30) days following receipt of an Invoice. Any amounts due under each Invoice that are not paid when due shall bear interest from and after the date on which such Invoice first became overdue at a rate equal to the lesser of (i) one and one-half percent (1.5%) per month or (ii) the maximum amount permitted by law. Alarm.com agrees to pay on demand all reasonable costs of collection, including reasonable out-of-pocket attorneys’ fees, incurred by MicroStrategy in collecting any such Invoice.

2.3. Taxes. The fees payable by Alarm.com pursuant to Section 2 shall be exclusive of any federal, state, municipal, or other U.S. or foreign government taxes, duties, excises, tariffs, fees, assessments or levies now or hereinafter imposed on the performance or delivery of Services or direct costs of MicroStrategy in performing such Services. Any taxes, duties, excises, tariffs, fees, assessments or levies imposed on the performance or delivery of Services or direct costs of MicroStrategy in performing such Services hereunder shall be the sole

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responsibility of Alarm.com and Alarm.com shall be obligated to reimburse MicroStrategy for any such amounts that MicroStrategy may be required to pay in respect thereof.

3. Confidentiality.

3.1. Information Exchanges. Subject to applicable law and good faith claims of privilege, each Party shall provide the other Party with all information regarding itself and the transactions under this Agreement that the other Party may reasonably request in order to comply with all applicable laws, ordinances, regulations and codes in connection with the provision of Services pursuant to this Agreement.

3.2. Confidential Information. The Parties shall hold in trust and maintain confidential all Confidential Information relating to the other Party. “Confidential Information” shall mean all information disclosed by either Party to the other in connection with this Agreement, whether orally, visually, in writing or in any other tangible form, and includes, but is not limited to, economic, scientific, technical, product and business data, business plans, and the like, but shall not include (i) information which becomes generally available other than by disclosure in violation of the provisions of this Section 3.2, (ii) information which becomes available on a non-confidential basis to a Party from a source other than the other Party to this Agreement provided the Party in question reasonably believes that such source is not or was not bound to hold such information confidential, (iii) information acquired or developed independently by a Party without violating this Section 3.2 or any other confidentiality agreement with the other Party, (iv) information that MicroStrategy reasonably believes it needs to disclose in order to provide the Services; provided that Alarm.com shall have the option to waive MicroStrategy’s provision of Services to the extent necessary to avoid such disclosure, and (v) information that any Party hereto is required to disclose by law, provided that it first notifies the other Party hereto of such requirement and allows such Party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure. Without prejudice to the rights and remedies of either Party to this Agreement, a Party disclosing any Confidential Information to the other Party in accordance with the provisions of this Agreement shall be entitled to equitable relief by way of an injunction if the other Party hereto breaches or threatens to breach any provision of this Section 3.2. The obligations set forth in this Section 3.2 are in addition to, and not in lieu of, any obligation of confidentiality provided for in the Acquisition Agreement.

4. Indemnification.

4.1. Indemnification Obligations Separate from Acquisition Agreement. The indemnification obligations set forth in this Section 4 shall be separate and independent from, and shall have no effect upon, the indemnification obligations of the Parties under the Acquisition Agreement and no claim may be made hereunder for any claims arising solely pursuant to the Acquisition Agreement.

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4.2. Indemnification by MicroStrategy. MicroStrategy shall indemnify Alarm.com in respect of, and hold Alarm.com harmless against, any and all losses, debts, obligations and other liabilities, monetary damages, fines, penalties, costs and expenses (including reasonable attorneys’ fee and expenses) (collectively, “Damages”) incurred or suffered by Alarm.com or any Affiliate thereof, arising from (i) the gross negligence, bad faith or intentional misconduct of MicroStrategy in connection with the provision of any Services, or (ii) the material breach by MicroStrategy of any of its obligations hereunder.

4.3. Indemnification by Alarm.com. Alarm.com shall indemnify MicroStrategy in respect of, and hold MicroStrategy harmless against, any and all Damages incurred or suffered by MicroStrategy or any Affiliate thereof, arising from (i) the gross negligence, bad faith or intentional misconduct of Alarm.com in connection with the receipt or use of any Services by Alarm.com and/or its agents, or (ii) the material breach by Alarm.com of any of its obligations hereunder.

4.4. Procedures. The procedures for indemnification for any claim pursuant to this Section 4 shall be governed by Section 7.3 of the Acquisition Agreement.

4.5. Limitation on Liability. Except for any breach of Section 3 of this Agreement or for Damages arising from a Party’s bad faith or intentional misconduct, neither Party shall be liable to the other for any amount in excess of the amount invoiced by MicroStrategy to Alarm.com hereunder for the three-month period immediately preceding any event giving rise to liability (or, if the event giving rise to liability occurs within the first three-month period, the amount invoiced by MicroStrategy to Alarm.com for such three-month period). Neither Party shall be liable to the other under this Agreement for consequential damages, except for those arising out of any breach of Section 3 of this Agreement. Except as set forth in Section 4.1 of this Agreement, the indemnification rights set forth in this Section 4 shall be the sole and exclusive remedies of Alarm.com and MicroStrategy and their respective Affiliates with respect to claims resulting from any breach or failure to perform any covenant or agreement contained in this Agreement.

5. Term and Termination.

5.1. Unless earlier terminated in accordance with Section 5.2 or Section 5.3 below, this Agreement shall be in effect from the date hereof until the earlier to occur of (i) eighteen (18) months from the date hereof or (ii) termination of the last of the Services to be provided hereunder.

5.2. This Agreement may be terminated by either Party in the event of a material breach of this Agreement by the other Party that is not cured within thirty days of written notice thereof from the other Party.

5.3. This Agreement may be terminated by Alarm.com in its entirety upon 10 Business Days prior written notice to MicroStrategy.

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5.4. Upon termination of this Agreement for any reason, all rights and obligations of the Parties under this Agreement shall cease and be of no further force or effect, except that the provisions of Sections 2, 3 and 4 of this Agreement shall survive any such termination or expiration.

6. Force Majeure. MicroStrategy shall be excused for failure to provide the Services hereunder to the extent that such failure is directly or indirectly caused by an occurrence commonly known as force majeure, including, without limitation, delays arising out of acts of God, acts or orders of a government, agency or instrumentality thereof (whether of fact or law), acts of public enemy, riots, embargoes, strikes or other concerted acts of workers (whether of MicroStrategy or other persons), casualties or accidents, delivery of materials, transportation or shortage of cars, trucks, fuel, power, labor or materials, unavailability or malfunction of utilities or equipment, or any other causes, circumstances or contingencies within or without the United States of America, which are beyond the reasonable control of MicroStrategy; provided, however, that MicroStrategy shall use commercially reasonable efforts to resume provision of the Services as soon as practicable. Notwithstanding any events operating to excuse the performance by MicroStrategy, this Agreement shall continue in full force for the remainder of its term.

7. Notices. All notices, billings, requests, demands, approvals, consents and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed delivered (i) two business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, in each case to the intended recipient as set forth below:

If to MicroStrategy:	If to Alarm.com:
MicroStrategy Incorporated	Alarm.com Incorporated
1861 International Drive	1861 International Drive
McLean, VA 22102	McLean, VA 22102
Attn: Chief Financial Officer	Attn: Mr. Steve Trundle

8. No Assignment. This Agreement shall not be assignable except with the prior written consent of the other Party to this Agreement.

9. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia applicable to contracts made and to be performed therein.

10. Relationship of the Parties. The Parties shall for all purposes be considered independent contractors with respect to each other, and neither shall be considered an employee, employer, agent, principal, partner or joint venturer of the other.

11. Entire Agreement; Amendments. This Agreement and all attachments hereto constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior negotiations, undertakings, representations and agreements of the Parties hereto

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relating to such subject matter, including the Amended and Restated Facilities and Administrative Support Agreement between MicroStrategy and Alarm.com dated as of May 16, 2006, which is hereby terminated. This Agreement may not be amended orally but may be amended only by a written instrument signed by all of the Parties hereto.

12. Waivers. The failure of either Party to require strict performance by the other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

13. Interpretation. The paragraph titles used in this Agreement are for convenience of reference only and will not be considered in the interpretation or construction of any of the provisions thereof. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to them in the Acquisition Agreement.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Transition Services Agreement as of the date first above written.

MICROSTRATEGY INCORPORATED	ALARM.COM INCORPORATED
By:	By:
Name:	Name:
Title:	Title:

(Signature Page to Transition Services Agreement)

Exhibit C

Form of Sublease Agreement

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (“Sublease”) is entered into as of this 13th day of February, 2009, by and between MICROSTRATEGY INCORPORATED, a Delaware corporation (“Sublandlord”), and ALARM.COM INCORPORATED, a Delaware corporation (“Subtenant”). Sublandlord and Subtenant are sometimes referred to herein individually as a “Party” and together as the “Parties.”

RECITALS

A. Sublandlord is the tenant under that certain Deed of Lease by and between Tysons Corner Property, LLC, a Virginia limited liability company, as landlord (“Master Landlord”), and Sublandlord, as tenant, dated January 7, 2000, as amended by that certain First Amendment to Lease dated as of August 9, 2000 (the “First Amendment”) and by that certain Second Amendment to Lease dated October 31, 2002 (the “Second Amendment”) and as further amended by that certain Third Amendment to Lease dated September 20, 2006 (such lease, as amended and as it may be further amended from time to time, the “Master Lease”), for certain space located at 1861 International Drive, McLean, VA 22102 (the “Premises”).

B. Sublandlord and Subtenant are parties to that certain Sublease Agreement, dated as of October 10, 2003 (the “Existing Sublease”).

C. Sublandlord is a party to a Purchase Agreement, dated as of the date hereof, for the sale of shares of stock issued by Subtenant (the “Purchase Agreement”).

D. Subtenant wishes to sublease a portion of the Premises from Sublandlord for the continued operation of Subtenant’s business.

E. Sublandlord and Subtenant wish to terminate the Existing Sublease and enter into this Sublease.

Now, therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Basic Sublease Information.

The information set forth in this Section (the “Basic Sublease Information”) is intended to supplement and/or summarize the provisions set forth in the balance of this Sublease. Each reference in this Sublease to any of the terms set forth below shall mean the respective information set forth next to such term as amplified, construed or supplemented by the particular Section(s) of the Sublease pertaining to such information. In the event of a conflict between the provisions of this Section and the balance of the Sublease, the balance of the Sublease shall control.

Sublandlord:	MicroStrategy Incorporated, a Delaware corporation
Sublandlord’s Address for Notices:	1861 International Drive McLean, VA 22102 Attn: Arthur S. Locke, III with a copy (which shall not constitute notice) to: WilmerHale LLP 60 State Street Boston, MA 02109 Attn: Paul Jakubowski, Esq.
Subtenant:	Alarm.com Incorporated, a Delaware corporation with a copy (which shall not constitute notice) to: Hogan & Hartson LLP 111 S. Calvert Street, Suite 1600 Baltimore, MD 21202 Attention: David A. Gibbons
Subtenant’s Address for Notices:	1861 International Drive McLean, VA 22102 Attn: Stephen S. Trundle
Subdemised Premises:	That portion of the Premises specifically indicated on Attachment A hereto, representing approximately 7,100 square feet of Net Rentable Area (as defined in the Master Lease) (the “Operations Space”) and that portion of the Premises specifically indicated on Attachment B hereto, representing approximately 500 square feet of Net Rentable Area (as defined in the Master Lease) (the “NOC Space”).
Building:	1861 International Drive, McLean, VA 22102.
Permitted Use:	As specified in Section 1.8 of the Master Lease and only in connection with the continued operation of Subtenant’s business.
Base Rent:	$45 per square foot of Net Rentable Area per annum pro-rated for partial months. Annual Base Rent includes parking, utilities, Operating Costs (as defined in the Master Lease) and Real Estate Taxes (as defined in the Master Lease) during the Term.
Commencement Date:	The term of the Sublease shall commence upon the date hereof (the “Commencement Date”).

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Expiration Date:	This Sublease shall be for a term of three (3) months with respect to the Operations Space (the “Operations Space Term”) subject to options to extend set forth in Section 4.2 of this Sublease, and for a term of six (6) months with respect to the NOC Space (the “NOC Space Term”) subject to an option to extend set forth in Section 4.2 of this Sublease; provided, however, that this Sublease shall terminate on any date on which the Master Lease is terminated or expires or this Sublease is terminated pursuant to the terms herein (any such expiration date or termination date, the “Expiration Date”).
Subtenant’s Insurance:	Specified and as required in Article 9 of the Master Lease.
Security Deposit:	One (1) month’s Base Rent.

2. Sublease.

Sublandlord hereby subleases to Subtenant, and Subtenant hereby subleases from Sublandlord, the Subdemised Premises upon all of the terms, covenants and conditions in this Sublease.

3. Delivery Condition.

Subtenant acknowledges that it takes possession of the Subdemised Premises in its “as is” condition and further acknowledges that Sublandlord has made no representations or warranties of any kind or nature, whether express or implied, with respect to the Subdemised Premises, the remainder of the Premises, the common areas, or the Building, nor has Sublandlord agreed to undertake or perform any modifications, alterations, or improvements to the Subdemised Premises, the remainder of the Premises, the common areas or the Building which would inure to Subtenant’s benefit.

4. Term.

4.1 Term. The term (the “Term”) of this Sublease shall commence on the Commencement Date and shall end on the Expiration Date.

4.2 Option to Extend. Subtenant shall have two (2) options, exercisable by written notice to Sublandlord delivered at least twenty (20) days before the expiration of the Operations Space Term, to extend the Operations Space Term for a period of one (1) month each. Subtenant shall have one (1) option, exercisable by written notice to Sublandlord delivered at least twenty (20) days before the expiration of the NOC Space Term, to extend the NOC Space Term for a period of six (6) months.

4.3 Surrender. Subtenant shall, on or before the Expiration Date, remove all of Subtenant’s personal property, furniture, trade fixtures and other equipment from the Subdemised Premises, provided that the removal of the same does not adversely affect the

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Subdemised Premises, Building structure, or any Building operating system or is not prohibited by the Master Lease, and that Subtenant promptly repairs any damage to the Subdemised Premises, Building structure, or Building operating system caused by such removal pursuant to the requirements of the Master Lease. In the event that Subtenant fails to remove any such items as required by this Section 4.3 by the Expiration Date, all such items remaining on the Subdemised Premises after the Expiration Date shall be deemed abandoned and Sublandlord may dispose of such items as it sees fit, without liability to Subtenant. Subtenant shall also be responsible for the removal, on or before the Expiration Date, of all alterations as required under the Master Lease installed by Subtenant pursuant to this Sublease and shall be responsible for any associated repair or restoration of the Subdemised Premises as required under the Master Lease. In all other respects, Subtenant shall deliver the Subdemised Premises broom clean, in its condition as of the Commencement Date, reasonable wear and tear and casualty and condemnation excepted. In no event shall Subtenant remove any of the plumbing, electrical, data lines, or HVAC system(s) except as otherwise required pursuant to this Section 4.3.

Subtenant shall vacate and deliver possession of the Subdemised Premises, free of all liens, charges or encumbrances resulting from any act or omission on Subtenant’s part, and free and clear of any and all violations of any law, rule or regulations of any federal, state, municipal or other agency or authority by reason of Subtenant’s actions or failures arising on or after the Commencement Date to fulfill any of its obligations under this Sublease (“Violations”). Subtenant shall indemnify Sublandlord against any and all loss, expense, damage, costs or reasonable attorneys’ fees arising out of Violations first occurring any time on or after the Commencement Date to the extent of Subtentant’s responsibility therefor, except for those Violations arising out of the acts or omissions of Sublandlord and Sublandlord Parties.

4.4 Holding Over. If Subtenant remains in possession of the Subdemised Premises after the Expiration Date, such occupancy shall constitute a tenancy at sufferance, and Subtenant shall be obligated to pay 150% of the Rent as specified in Section 5 of this Sublease and Subtenant shall be liable to Sublandlord for any and all claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Sublandlord and arising out of Subtenant’s failure to timely surrender the Subdemised Premises in accordance with the requirements of this Sublease, including, without limitation, those incurred by Sublandlord arising under the Master Lease.

5. Rent.

As used in this Sublease, the term “Rent” shall include Base Rent and all other amounts which Subtenant is obligated to pay under the terms of this Sublease.

5.1 Rent. Base Rent is as specified in Section 1 (Basic Sublease Information). Base Rent shall be paid in advance on or before the first day of each calendar month without offset or deductions. Base Rent includes all parking, utilities, Operating Costs and Real Estate Taxes. Base Rent for any partial calendar month of the Term, to the extent applicable, shall be pro-rated based on the number of days in that month falling within the Term. In the event that the Commencement Date is a date other than the first day of a calendar month, Base Rent with respect to such month shall be pro-rated for the period beginning on the Commencement Date and ending on the last day of such month and shall be paid within three (3) days of the Commencement Date.

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Subtenant shall also be solely responsible for any and all added cost or charge which has arisen solely because of Subtenant’s tenancy in the Subdemised Premises which are not included in Base Rent, including any other service charges required by the Master Lease or costs incurred by Sublandlord relating to the Subdemised Premises and/or Subtenant’s occupation thereof that are not already then covered by the Base Rent.

5.2 Late Charges; Default Interest. In addition to any other remedies as may be provided in the Master Lease, this Sublease or otherwise, Sublandlord shall be entitled to and Subtenant shall be obligated to pay (i) a late charge of five percent (5%) of any Rent or other payment due hereunder that is not received by Sublandlord within five (5) business days following the date such payment first became due and (ii) in addition to and separate from any such late charge, a charge of five percent (5%) with respect to the amount of any check given by Subtenant to Sublandlord to satisfy a payment, which check is not immediately paid upon presentation by Sublandlord. In addition to the above described charges, Rent or any other amounts past due shall accrue interest from the due date at a default rate of eighteen percent (18%) per year until the same is paid in full.

5.3 Manner of Payment. All Rent or other payment due from Subtenant to Sublandlord hereunder shall be paid in lawful money of the United States, without any prior demand therefor and without any deduction or setoff whatsoever, at the Sublandlord’s address in Section 1 or such other place as Sublandlord shall from time to time designate (including, without limitation, by wire transfer of immediately available funds to an account specified by Sublandlord) by written notice provided to Subtenant at least five (5) business days prior to the date on which such Rent or other amount first becomes payable.

6. Use and Compliance With Laws.

Subtenant shall use the Subdemised Premises for the Permitted Use (as specified in the Basic Sublease Information) during the Term of this Sublease, and for no other use or uses. Subtenant shall not engage in any activities prohibited by the Master Lease. Subtenant shall not use or store flammable or hazardous materials on the Subdemised Premises, except for general office supplies (including ordinary cleaning materials) used for their intended purposes and in compliance with all applicable laws and not posing any significant threat of contamination. Subtenant shall not perform any act or carry on any practice which may injure the Subdemised Premises or cause any offensive odors or noises that constitute a nuisance or menace to any other tenant or tenants of the Building or the Premises or other persons. Nothing shall be done upon or about the Subdemised Premises which shall be unlawful, improper, or contrary to any law, ordinance, regulation or requirement of any public authority or insurance inspection or rating bureau or similar organization having jurisdiction and Subtenant shall be in compliance at all times with all such laws, ordinances, regulations and requirements. Subtenant shall observe and comply with, and shall cause its employees, agents and invitees to observe and comply with the restrictions set forth in this Sublease. Subtenant agrees to comply with all rules and regulations that Master Landlord has made or may hereafter from time to time make for the Building and/or the Premises. Sublandlord shall not be liable to Subtenant or any party claiming through Subtenant in any way for damage caused by the failure of any of the other tenants of the Building to comply with such similar or other covenants in their leases or of such rules and regulations.

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7. Insurance.

Subtenant shall obtain at its sole expense the insurance required under Article 9 of the Master Lease effective as of the Commencement Date. Additionally, Subtenant shall name Sublandlord and Master Landlord as additional insureds, in their capacity as Sublandlord and Master Landlord, and shall furnish Sublandlord, at its request, with certificates of insurance from its insurer, with respect to such insurance, which certificates shall state that such insurance shall not be cancelled, changed or failed to be renewed unless thirty (30) days prior written notice shall have been given to Sublandlord.

8. Assignment and Subletting.

Subtenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate any of its interest in or rights with respect to the Subdemised Premises or Subtenant’s leasehold estate hereunder (collectively, “Assignment”), or permit all or any portion of the Subdemised Premises to be occupied by anyone (whether pursuant to a license, concession or otherwise) other than Subtenant or sublet all or any portion of the Subdemised Premises, without the prior written consent of Master Landlord and Sublandlord, which consent of Sublandlord may be given or withheld in its sole discretion.

9. Alterations.

Subtenant shall not make or suffer to be made any alterations, additions or improvements to the Subdemised Premises, including, without limitation, those related to electrical cabling and/or systems, plumbing, data cabling, HVAC systems, or modifications to existing finishes, without the prior written consent of Master Landlord, as required under the Master Lease, and of Sublandlord, which consent of Sublandlord may be given or withheld in its sole discretion. Additionally, Subtenant shall be subject to the standards for repairs and alterations to the Subdemised Premises to the same extent as Sublandlord is subject to the same as set forth in the Master Lease and any review and approval required under the Master Lease.

10. Repairs and Maintenance.

10.1 Subtenant’s Responsibility. Subtenant shall be responsible for the maintenance and repair of the Subdemised Premises in accordance with the provisions of the Master Lease, at Subtenant’s sole cost and expense.

10.2 Sublandlord’s Responsibility. As between the parties to this Sublease, Sublandlord shall have no responsibility or liability to the Subtenant or anyone claiming through Subtenant, for the Subdemised Premises including, without limitation, the roof, roof covering, foundation, subfloors, building structural components, major building systems (plumbing, electrical and heating, air conditioning and ventilation systems), and exterior walls of the Subdemised Premises; provided, however, Sublandlord shall use reasonable efforts to cause

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Master Landlord to perform any repair, maintenance or replacement obligations for which it is responsible under the terms of the Master Lease. Subtenant shall be responsible for repairs and maintenance to the Subdemised Premises to the same extent as Sublandlord is responsible for the same under the terms of the Master Lease.

11. Default.

Subtenant shall be subject to the same default provisions as specified in Article 11 of the Master Lease as if it were the tenant thereunder, and Sublandlord shall have all the remedies specified therein, as if it were Master Landlord, including, without limitation, the right to terminate the Sublease and the right to perform Subtenant’s obligations under this Sublease at Subtenant’s cost. Notwithstanding the foregoing, Subtenant shall only be entitled to one-half (1/2) of the cure period for a default, if any, provided for under the Master Lease; provided that Subtenant shall have no fewer than five (5) business days to perform as long as after such five business-day period, at least two (2) business days remain in Sublandlord’s cure period under the Master Lease.

12. Indemnity.

In addition to such indemnities as may be provided for in the Master Lease, Subtenant agrees to indemnify and hold Sublandlord and its affiliates, officers, agents, servants, employees and independent contractors (individually a “Sublandlord Party” and collectively, “Sublandlord Parties”) harmless against all loss, damage, liability, or expense suffered by or claimed against any Sublandlord Party, by any person or entity (i) caused by or otherwise arising from, in whole or in part, any breach or default by Subtenant of any covenant or obligation it has hereunder (including, but not limited to, all covenants or obligations of the tenant under the Master Lease assumed by Subtenant pursuant to the terms of this Sublease), or (ii) caused by or in connection with anything owned or controlled by Subtenant, if in connection with the subject matter of this Sublease, or (iii) resulting from any act, failure to act, or negligence of Subtenant or its employees, agents or invitees, if in connection with the subject matter of this Sublease, or (iv) resulting from any nuisance suffered on the Subdemised Premises, except for any damage to third parties or property resulting from the gross negligence or willful misconduct of Sublandlord, Master Landlord or their affiliates, officers, agents, servants, employees and independent contractors. Subtenant further agrees to indemnify Sublandlord and hold Sublandlord harmless from all losses, damages, liabilities and expenses which Sublandlord may incur, or for which Sublandlord may be liable to Master Landlord, arising from the acts or omissions of Subtenant which are or are alleged to be defaults of Sublandlord under the Master Lease or are the subject matter of any indemnity to Master Landlord under the Master Lease. The obligations of Subtenant to indemnify Sublandlord and/or the Sublandlord Parties and/or hold the Sublandlord and/or the Sublandlord Parties harmless in this Section 12 and elsewhere herein shall survive the expiration or other termination of this Sublease. The indemnification obligations set forth in this Section 12 shall be separate and independent from, and shall have no effect upon, the indemnification obligations of the Parties under the Purchase Agreement and no claim may be made hereunder for any claims arising solely pursuant to the Purchase Agreement.

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13. Master Lease.

13.1 Master Lease. Notwithstanding anything in this Sublease to the contrary, the rights of Subtenant shall be subject to and limited by the terms and conditions contained in the Master Lease between Sublandlord and Master Landlord, as they may be amended from time to time. Sublandlord shall have the right to amend the Master Lease from time to time without the consent of Subtenant; provided, however, any such amendment shall not have a materially adverse effect on Subtenant and shall not materially reduce the rights of Subtenant with respect to the use of the Subdemised Premises; provided, further, that Sublandlord shall indemnify and hold harmless Subtenant and its affiliates, officers, agents, servants, employees and independent contractors (individually, a “Subtenant Party” and collectively, “Subtenant Parties”) against any loss, damage, liability or expense suffered by or claimed against any Subtenant Party resulting from any such amendment to the Master Lease. Any rights granted to Subtenant herein which are limited by the Master Lease shall be deemed to be so limited by this Sublease.

13.2 No Violation. Notwithstanding anything in this Sublease to the contrary, Subtenant shall not commit or permit to be committed any act or omission which shall violate any term or condition of the Master Lease with respect to the Subdemised Premises. Subtenant shall indemnify and hold harmless Sublandlord from and against any loss, liability, claim, cost or expense (including reasonable attorneys’ fees) incurred by Sublandlord as a result of any termination or attempted termination of the Master Lease resulting from any such act or omission by Subtenant.

13.3 Consent of Master Landlord. Notwithstanding anything in this Sublease to the contrary, the effectiveness of this Sublease shall be conditioned, to the extent required, upon Sublandlord obtaining the written consent of the Master Landlord under the Master Lease to this Sublease. If the consent of the Master Landlord is required but not obtained, this Sublease shall be void. Subtenant agrees to execute any reasonable agreements and provide information required by Sublandlord (including evidence of creditworthiness) as a pre-condition to obtaining such consent.

13.4 Termination of Master Lease. If the Master Lease terminates for any reason prior to the expiration or other termination of this Sublease, this Sublease shall terminate concurrently therewith without any liability of Sublandlord to Subtenant and, except for any Subtenant obligations hereunder arising on or prior to the termination of this Sublease, following Subtenant’s surrender in compliance with Section 4.3 hereof, Subtenant’s obligations hereunder shall terminate, except with respect to any indemnification or hold harmless obligations of Subtenant, which shall survive such termination.

13.5 Incorporation of Master Lease. Notwithstanding any other provision of this Sublease to the contrary, this Sublease and Subtenant’s rights under this Sublease shall at all times be subject to all of the terms, covenants, and conditions of the Master Lease (a copy of which agreement, as currently in effect, Subtenant hereby represents that it has received), with the same force and effect as if fully set forth herein, and except as otherwise expressly provided for herein, Subtenant shall keep, observe and perform or cause to be kept, observed and performed, faithfully all those terms, covenants and conditions of Sublandlord as tenant under the Master Lease with respect to the Subdemised Premises. Except as otherwise provided hereby, the terms, conditions, rights and responsibilities of the Master Lease are incorporated herein by reference, and Sublandlord shall have the rights and responsibilities with respect to the

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Subtenant that the Master Landlord has with respect to Sublandlord pursuant to the Master Lease, and Subtenant shall have the rights and responsibilities with respect to Sublandlord that Sublandlord has with respect to the Master Landlord pursuant to the Master Lease. However, to the extent that the Master Lease requires or obligates Master Landlord to maintain, repair, restore, or otherwise expend any money or take any action to preserve and maintain all or any portion of the Subdemised Premises or to furnish any services to the Subdemised Premises, such obligation shall not pass to Sublandlord by reason of this Sublease and shall remain with the Master Landlord. Subject to the first sentence of this Section 13.5, with respect to the relationship between Sublandlord and Subtenant, the terms, covenants and conditions of this Sublease shall control with respect to any conflict or inconsistency between the terms, covenants and conditions contained herein and the terms, covenants and conditions of the Master Lease. Notwithstanding the foregoing, the following sections of the Master Lease are hereby excluded from application to or incorporation within this Sublease: Sections 1.9-1.10, 2.2-2.3, 3.1-3.2, 4.7, 5.9, 6.3, 6.12, 7.1, 7.5, 9.6, 14.1-14.2, 15.2, 15.6 and 15.23-15.26; Exhibits C, C-1, C-2, E, and H-O; First Amendment to Master Lease Sections 3, 4, 5, 9, 11, and 13; the Second Amendment to the Master Lease; and the Third Amendment to the Master Lease Sections 2.1-2.3.

14. Parking.

Subtenant shall be entitled to one (1) parking space for each three hundred (300) square feet subleased. The charge for parking is included in the Base Rent. All parking spaces utilized by Subtenant shall be used in accordance with the terms of the Master Lease. Any additional parking spaces at the Premises or elsewhere required or desired by Subtenant shall be obtained by Subtenant at its sole cost and expense. Sublandlord makes no representation or warranty concerning the availability of parking spaces.

15. Furniture.

Subtenant shall have the use of all furniture contained within the Subdemised Premises at no additional charge to Subtenant, it being acknowledged that such use is included in payment of the Base Rent. Subtenant acknowledges that it takes possession of said furniture in its “as is” condition and further acknowledges that Sublandlord has made no representations or warranties of any kind or nature, whether express or implied, including, without limitation, any warranty of merchantability, with respect to the furniture, nor has Sublandlord agreed to undertake or perform any modifications, alterations, or improvements to the furniture which would inure to Subtenant’s benefit. At the end of the Term, Subtenant shall deliver to Sublandlord the furniture in its condition as of the Commencement Date, reasonable wear and tear excepted.

16. Access.

Each employee of the Subtenant will be provided a security card to be used to access the Operations Space and will be responsible for adhering to Sublandlord’s reasonable security policies and procedures at all times. Each employee of Subtenant listed in Attachment C (each, an “Authorized Employee”) will be provided a security card to be used to access the NOC Space and will be responsible for adhering to Sublandlord’s reasonable security policies and procedures at all times. No agent, employee, contractor or other personnel of Subtenant (collectively,

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“Personnel”), other than Authorized Employees, may enter the NOC Space without (i) prior authorization for each entry from Sublandlord, and (ii) being accompanied by an employee of Sublandlord designated in writing by Sublandlord.

Upon termination of the Sublease, Subtenant is responsible for returning each security card. The Subtenant will be charged $25 for each lost security card. Security cards must be prominently displayed by Subtenant employees at all times while on the Premises.

Guests of the Subtenant must register at Sublandlord’s front desk located in the lobby of the Premises. Employees or guests of Subtenant are not allowed to bring onto the Premises guns, knives, dangerous or hazardous materials or chemicals, dangerous objects, illegal substances or alcoholic beverages. Subtenant employees are required to conduct themselves in a professional and courteous manner at all times. Failure to adhere to this Section 16 may result in the employee or guest being temporarily or permanently removed from the Premises at the Sublandlord’s sole discretion.

17. Confidentiality.

The Parties shall hold in trust and maintain confidential all Confidential Information relating to the other Party. “Confidential Information” shall mean all information disclosed by either Party to the other in connection with this Sublease, whether orally, visually, in writing or in any other tangible form, and includes, but is not limited to, economic, scientific, technical, product and business data, business plans, and the like, but shall not include (i) information which becomes generally available other than by disclosure in violation of the provisions of this Section 17, (ii) information which becomes available on a non-confidential basis to a Party from a source other than the other Party to this Sublease provided the Party in question reasonably believes that such source is not or was not bound to hold such information confidential, (iii) information acquired or developed independently by a Party without violating this Section 17 or any other confidentiality agreement with the other Party, (iv) information that a Party reasonably believes it needs to disclose in order to perform its obligations under the Sublease; provided that the other Party shall have the option to waive the disclosing Party’s performance of its obligations to the extent necessary to avoid such disclosure, and (v) information that any Party hereto reasonably believes it is required to disclose by law, provided that it first notifies the other Party hereto of such requirement and allows such Party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure. Without prejudice to the rights and remedies of either Party to this Sublease, a Party disclosing any Confidential Information to the other Party in accordance with the provisions of this Sublease shall be entitled to equitable relief by way of an injunction if the other Party hereto breaches or threatens to breach any provision of this Section 17.

18. Brokers.

Each Party represents that it has dealt with no broker or agent in connection with this Sublease and each Party shall hold the other Party harmless from any and all liability, loss, damage, expense, claim action, demand, suit or obligation arising out of or relating to a breach by it of such representation.

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19. Counterparts.

This Sublease may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

20. Governing Law.

This Sublease shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia, except with respect to the choice-of-law provisions thereof.

21. Waivers; Amendments.

No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided herein shall be cumulative and not exclusive of any rights or remedies provided by law. Any provision of this Sublease may be waived if, but only if, such waiver is in writing and is signed by the party against whom the enforcement of such waiver is sought. No waiver of any provision of this Sublease, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such provision. This Sublease may not be amended, modified or supplemented other than by a written instrument signed by each party hereto.

22. Entire Agreement.

This Sublease constitutes the entire agreement and understanding among the parties hereto and supercedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof, including, without limitation, the Existing Sublease.

23. Severability.

Any term or provision of this Sublease which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Sublease or affecting the validity or enforceability of any of the terms or provisions of this Sublease in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

24. Termination of Existing Sublease.

Upon execution of this Sublease, the Existing Sublease shall terminate and cease to be in effect as if the date of this Sublease were the Expiration Date (as defined in the Existing Sublease) of the Existing Sublease, except with respect to the rights and obligations that survive pursuant to the terms of the Existing Sublease.

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[Signature page follows]

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IN WITNESS WHEREOF, this Sublease shall be deemed to have been executed and delivered as of the date first set forth above.

SUBLANDLORD:

MICROSTRATEGY INCORPORATED, a Delaware corporation

By:

Name:

Title:

SUBTENANT:

ALARM.COM INCORPORATED, a Delaware corporation

By:

Name:

Title:

Exhibit D

Form of Software License Agreement

MICROSTRATEGY END USER LICENSE AGREEMENT

This MICROSTRATEGY END USER LICENSE AGREEMENT (“Agreement”) is entered into by and between MICROSTRATEGY SERVICES CORPORATION (“MicroStrategy’) and ALARM.COM INCORPORATED (“Licensee”).

LICENSEE CONTACT INFORMATION
NAME OF LICENSEE:	ALARM.COM INCORPORATED
ADDRESS:	1861 INTERNATIONAL DRIVE, MCLEAN, VA 22102
TELEPHONE:
CONTACT PERSON:	ANNEMARIE FERRARO
CONTACT EMAIL ADDRESS:

1. TERMS APPLICABLE TO A LICENSING OF PERPETUAL SOFTWARE LICENSES

1.1 Licensee acknowledges upon execution of this Agreement, Licensee’s Integrated Configuration is listed below.

PRODUCTION ENVIRONMENT
SKU NUMBER	DESCRIPTION	SKU TYPE	QUANTITY	Unit Price	Total
75649	MicroStrategy Intelligence Server Module - SMB Edition 8.1.2	Named User	***	$***	$***
75651	MicroStrategy Report Services Option - SMB Edition 8.1.2	Named User	***	$***	$***
76172	MicroStrategy Narrowcast Server Module - SMB Edition 8.1.2	Named User	***	$***	$***
76173	MicroStrategy Web Reporter Module - SMB Edition 8.1.2	Named User	***	$***	$***
76177	MicroStrategy Web Analyst Option - SMB Edition 8.1.2	Named User	***	$***	$***
76179	MicroStrategy Web Professional Option - SMB Edition 8.1.2	Named User	***	$***	$***
76181	MicroStrategy Desktop Analyst Module - SMB Edition 8.1.2	Named User	***	$***	$***
76182	MicroStrategy Desktop Designer Option - SMB Edition 8.1.2	Named User	***	$***	$***
76183	MicroStrategy Architect - SMB Edition 8.1.2	Named User	***	$***	$***
			Subtotal		$194,400
			Discount		-$194,400
			Total		$0

2. TERMS

2.1 Licensee agrees that it has had a chance to review the terms and conditions of the clickwrap license agreement listed at http://www.microstrategy.com/licensing/ as of the Effective Date of this Agreement. Subject to payment of fees, MicroStrategy grants Licensee a license to use the Software and Documentation as listed above, solely for Licensee’s internal business and for use for use by Licensee’s customers and dealers in conjunction with Alarm.com’s security services by Named Users in the Territory according to the terms and conditions of the click-wrap license. The terms of the click-wrap license are incorporated in this Agreement by reference as if set forth fully herein. In the event of a conflict between any provision of this Agreement and any provision of the clickwrap license agreement, the provisions of this Agreement shall prevail as it relates to the specific Products and Services described herein.

TECHNICAL SUPPORT SERVICES
SKU NUMBER	DESCRIPTION	SKU TYPE	AMOUNT
30004	MicroStrategy Technical Support Bronze First Year	PER YEAR	$***

2.2 The Technical Support Services Amount above is the Technical Support Services fee for the Products on the Order for a period of one year commencing on the date of this Agreement. Upon expiration of the initial year of service, second year Technical Support Services will renew with MicroStrategy at the following amount $***.

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

2.3 Licensee agrees to renew Technical Support Services fees for its Integrated Configuration unless Licensee provides written notice to MicroStrategy ninety (90) days before expiration of the then current term that it desires to have its Technical Support Services lapse for its Integrated Configuration. Licensee will be billed annually for the subsequent renewals

2.4 Under Licensee’s Bronze Technical Support Services annual subscription, Licensee is entitled to two (2) technical contacts to report issues and receive support. Licensee must notify MicroStrategy in writing if it wishes to change the technical contact person(s). Licensee designates the technical contacts listed below. This designation supersedes and replaces all prior designations. If no one is listed, the prior designation by Licensee shall continue.

TECHNICAL CONTACTS
NAME OF TECHNICAL CONTACT	TECHNICAL CONTACT EMAIL ADDRESS
1. Dave Hutz
2. AnneMarie Ferraro

2.5 So long as Licensee maintains an active continuous subscription to Technical Support Services for its Integrated Configuration, MicroStrategy grants Licensee the right to purchase Products off MicroStrategy’s then current standard product list at a ***percent (***%) discount plus an annual subscription to Technical Support Services calculated by multiplying the aggregated total of the number of units licensed times the standard list price times ***percent (***%).

2.6 This Agreement including references to the clickwrap license agreement constitute the complete agreement between the Parties and supersede all prior agreements, estimates, presentations, purchase orders, and representations, whether written or oral, concerning the subject matter of this Agreement. This Agreement may not be modified or amended except in a writing signed by a duly authorized representative of each party; no other act, document, usage or custom shall be deemed to amend or modify this Agreement.

(Remainder of page intentionally left blank)

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

IN WITNESS WHEREOF, the Parties to this Agreement hereto have caused this MicroStrategy Software License Agreement to be executed by their authorized representatives as of the Effective Date.

	MicroStrategy
Print Name of Licensee Above
Signature	Signature
Date Executed	Date Executed
Name	Name
Title	Title
Address:

Exhibit E

Form of Intellectual Property Amendment

February 13, 2009 (the “Amendment Date”)

MicroStrategy Incorporated

1861 International Drive

McLean, Virginia 22102

Attn: Jonathan Klein, General Counsel

Re:	First Amendment to Intellectual Property
	Assignment and License Back Agreement

Dear Jonathan:

MicroStrategy Incorporated (“MSTR”) and Alarm.com Incorporated (“Alarm.com”) are parties to that certain Intellectual Property Assignment and License Back Agreement dated October 10, 2003 (the “Agreement”). Pursuant to discussions between Alarm.com and MSTR, the parties have agreed to amend the Agreement as described in this letter. Terms used in this letter but not defined herein shall have the meanings ascribed to them in the Agreement.

1. MSTR and Alarm.com acknowledge and agree that the Agreement shall not be deemed to apply to any intellectual property developed by either party after the date of this letter. Pursuant to such acknowledgement and agreement, the following language is hereby inserted at the end of each of Sections 2.2(e), 3.2(e) and 4.2(e):

Notwithstanding the foregoing, (i) MSTR shall be deemed to have requested (and Alarm.com shall be deemed to have granted) a fully paid-up license under the terms hereof to all such changes, developments and improvements made, created or otherwise conceived prior to the Amendment Date, and (ii) nothing in this provision shall permit MSTR to request or receive a license to any change, development or improvement made, created or otherwise conceived on or after the Amendment Date.

2. Article 6 is replaced with the following language:

Except for the licenses granted in Section 7.12, MSTR can terminate any license under this Agreement at any time.

3. Section 7.4 is hereby deleted in its entirety and replaced with the following language:

Nonassignability. This Agreement (including any rights and obligations hereunder) may not be assigned by either party without the prior written consent of the other, except in the event of a merger with or acquisition of such party by (or sale of substantially all assets to) another entity. Notwithstanding the foregoing, either party may assign any of its rights or obligations hereunder to any one or more of its Subsidiaries. Each party acknowledges that it shall continue to be obligated if and to the extent that a permitted Subsidiary assignee under this paragraph fails to perform the obligations that such party has assigned. Any attempted assignment in violation of this paragraph without consent shall be null and void.

4. A new Section 7.12 that reads as follows is hereby appended to the Agreement:

MSTR hereby grants to Alarm.com a worldwide, perpetual, non-cancelable, non-exclusive, royalty-free license under (i) all patents and patent applications owned by MSTR or its Subsidiaries (other than Angel.com Incorporated) as of the Amendment Date, and (ii) all trade secrets, know-how, information, and copyright rights owned by MSTR or its Subsidiaries (other than Angel.com Incorporated) and used by Alarm.com in its business as of the Amendment Date, but excluding all software products that are offered, distributed or licensed by MSTR on a commercial basis including, without limitation, the MicroStrategy SMB editions of Intelligence Server Module, Report Services Option, Narrowcast Server Module, Web Reporter Module, Web Analyst Option, Web Professional Option, Desktop Analyst Module, Desktop Designer Option, and MicroStrategy Architect (i and ii, collectively, the “MSTR Licensed Rights”) to make, have made, use, sell, offer to sell, import, lease, distribute, modify and create derivative works of Alarm.com products and offer Alarm.com services, in each case solely with respect to the business of developing and selling residential and commercial alarm security and independent living, health or environmental monitoring products and services (the “Alarm.com Field”). Alarm.com has no right or license hereunder to exercise any right outside of the Alarm.com Field, and Alarm.com shall not utilize any MSTR Licensed Rights in any manner outside the Alarm.com Field.

5. A new Section 7.13 that reads as follows is hereby appended to the Agreement:

a. Subject to Section 7.13(b), nothing in this Agreement shall restrict or prevent MSTR from selling, offering, importing, leasing, licensing or sublicensing or otherwise distributing products or offering services to third parties who make, use, sell, offer to sell, import, lease, license or sublicense or otherwise distribute products or offer services that are similar or identical to Alarm.com’s products or services (but not using Alarm.com’s trademarks, service marks or other indicia of source).

b. Notwithstanding anything to the contrary in this Agreement, MSTR shall not license or sublicense on a stand-alone basis (i.e. not as a part of another MSTR Product) any Alarm Independent Technology. “Alarm Independent Technology” means Alarm.com trade secrets, know-how, information, copyrighted works and other intellectual property that (i) are not based on, related to, or derived from, nor include, in whole or in part, any inventions claimed in patents or patent applications, trade secrets, know-how, information, copyrighted works, or other intellectual property owned by MSTR or its Affiliates (other than Alarm.com) or licensed by MSTR to Alarm.com hereunder and (ii) were developed exclusively by Alarm.com employees after October 10, 2003 and prior to the Amendment Date without access or reference to any such MSTR inventions, trade secrets, know-how, information, copyrighted works, or other intellectual property. In addition, MSTR acknowledges and agrees that the licenses granted to it under this Agreement do not include the right to sublicense any patents or patent applications owned by Alarm.com, except in connection with the license of an MSTR Product.

c. Alarm.com irrevocably agrees and covenants that it shall not assert, bring, maintain, participate in or threaten: (i) MSTR or any of its Affiliates with any claim of infringement (including contributory infringement or inducement to infringe) of any patent, copyright, trade secret or any other intellectual property right in existence or pending as of the Amendment Date (other than trademarks, service marks or other indicia of source); or (ii) any third party with any claim of infringement (including contributory infringement or inducement to infringe) of any patent, copyright, trade secret or any other intellectual property right in existence or pending as of the Amendment Date (other than trademarks, service marks or other indicia of source) to the extent such claim arises from, is based on, relates to, or derives from an allegation that such third party or such third party’s product or service uses, incorporates, embeds, embodies or is integrated with a product or service offered, provided, distributed, licensed, leased or sold by MSTR or its Affiliates; provided that the foregoing shall not affect Alarm.com’s ability to enforce its rights under Section 7.13(b) of this Agreement.

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d. For the avoidance of doubt, nothing herein shall limit, amend or otherwise modify the rights and remedies of any entity, including without limitation the parties, pursuant to Section 10.6(a) of the Purchase Agreement among, inter alia, MSTR and Alarm.com Holdings, Inc. dated as of the Amendment Date (the “Purchase Agreement”).

6. A new Section 7.14 that reads as follows is hereby appended to the Agreement:

In addition to the rights and licenses granted to MSTR under Sections 2, 3 and 4 of the Agreement and subject to Section 7.13(b), Alarm.com hereby grants to MSTR an unrestricted, worldwide, perpetual, non-cancelable, nonexclusive, royalty-free license to make, have made, use, distribute, modify, create derivative works, sell, offer to sell, import, lease, license or sublicense MSTR Products under all other trade secrets, know-how, information, patents and patent applications and copyright rights throughout the world that are owned, controlled or licensable by Alarm.com as of the Amendment Date, but, for the avoidance of doubt, excluding any change, development or improvement made thereto by Alarm.com after the Amendment Date.

7. For avoidance of doubt and subject to Section 7.13(b), the parties agree and acknowledge that (a) MSTR’s right to grant sublicenses of the rights licensed to MSTR under Sections 2.2(a), 3.2(a), 4.2(a) and 7.14 of the Agreement includes the right to grant sublicenses of all such rights (including the right to grant further sublicenses) to MSTR’s direct and indirect distributors, resellers, representatives, agents, contractors, subcontractors, manufacturers and customers for any purpose otherwise permitted hereunder in connection with MSTR Products and (b) the rights licensed to MSTR under Sections 2.2(a), 3.2(a) and 4.2(a) of the Agreement include the right to distribute, modify and create derivative works in connection with MSTR Products.

8. Alarm.com shall use reasonable efforts to comply with the marking requirements of 35 U.S.C. §287; provided, however, that MSTR shall cooperate by providing suggested marking text or updates to the same.

Except as expressly set forth herein, no change is made hereby to the terms and provisions of the Agreement and, as amended hereby, the Agreement will remain in full force and effect.

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Please execute this letter where indicated confirming your agreement to the terms contained herein.

Sincerely,

ALARM.COM INCORPORATED

Date: February     , 2009

Stephen S. Trundle

Chief Executive Officer,

COUNTERSIGNED AND AGREED:
MICROSTRATEGY INCORPORATED
By:
Date:	February     , 2009
Arthur S. Locke
Executive Vice President and Chief Financial Officer

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Exhibit F

Form of Dealer and Supplier Assignment Agreement

ASSIGNMENT AGREEMENT

ASSIGNMENT AGREEMENT (this “Assignment”) dated as of February 13, 2009 between Alarm.com Incorporated (“Alarm.com”) and MicroStrategy Incorporated (“MSTR”).

WHEREAS, MSTR entered into nondisclosure, confidentiality or similar agreements (in each case, an “Agreement”) with certain prospective suppliers and dealers for Alarm.com, which Agreements are set forth on Schedule 1; and

WHEREAS, the parties hereto desire to assign the Agreements to Alarm.com.

NOW, THEREFORE, in consideration of the foregoing and the agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. MSTR, to the extent permissible by the terms of the Agreements, hereby assigns, transfers and sets over to Alarm.com and its successors and assigns all of MSTR’s rights and interests under the Agreements, and MSTR shall have no rights thereto. Alarm.com, to the extent permissible by the terms of the Agreements, hereby assumes all of MSTR’s obligations under the Agreement; provided that MSTR shall be responsible for any liabilities arising from or relating to its performance or non-performance of the Agreements prior to the date hereof.

2. This Assignment, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed under and in accordance with the laws of the Commonwealth of Virginia, excluding the choice of law rules thereof. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, WHETHER NOW EXISTING OR HEREAFTER EXISTING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES HERETO AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT BETWEEN OR AMONG THE PARTIES HERETO IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY ACTION OR PROCEEDING WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS ASSIGNMENT SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

3. If any part of any provision of this Assignment shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provisions or the remaining provisions hereof or of said agreement, document or writing.

4. This Assignment may be executed in separate counterparts, none of which need contain the signatures of all parties, each of which shall be deemed to be an original, and all of which taken together constitute one and the same instrument. It shall not be necessary in making proof of this Amendment and Assignment to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.

5. This Assignment constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties hereto pertaining to the subject matter hereof.

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2

IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment and Assignment, or has caused this Assignment to be duly executed and delivered in its name on its behalf, all as of the day and year first above written.

ALARM.COM INCORPORATED:

By:

Name:

Title:

MICROSTRATEGY INCORPORATED:

By:

Name:

Title:

3

Exhibit G-1

Form of Backbone Partners Promissory Note

Exhibit G-1

BACKBONE PARTNERS, LLC

PROMISSORY NOTE

[Date] $[Face Amount]

FOR VALUE RECEIVED, Backbone Partners, LLC, a Delaware limited liability company (the “Company”), hereby promises to pay to the order of Alarm.com Holdings, Inc., a Delaware corporation (the “Holder”), the principal sum of [            ] ($[            ]) plus accrued interest thereon plus enforcement costs (including reasonable attorney fees) thereon (collectively, the “Obligations”) in accordance with the following provisions of this Promissory Note (this “Note”):

Section 1. Interest. Interest shall accrue on the outstanding Obligations from the date hereof at the rate equal to the minimum compounded annual interest rate applicable to mid-term notes under Section 1274(d) of the Internal Revenue Code of 1986, as amended (such published rate for February 2009 being 1.65%).

Section 2. Payment. All outstanding Obligations shall be immediately due and payable in cash (without presentment, further demand, protest or other notice of any kind), to the extent that such Obligations have not previously been paid, on the earlier of (i) the fifth (5th) anniversary of the date hereof or (ii) the occurrence of a Liquidity Event. At any time, the Company may prepay all or any part of the outstanding Obligations without penalty or restriction; provided that the Company shall provide at least five (5) days prior written notice of prepayment to the Holder. “Liquidity Event” means either:

(a) a merger, consolidation or other corporate reorganization involving the Holder or a subsidiary of the Holder (other than a merger, consolidation or reorganization effected to change the domicile of the Holder) in which the stockholders of the Holder immediately prior to such merger, consolidation or reorganization do not continue to hold, immediately following such merger, consolidation or reorganization, greater than fifty percent (50%) of the voting power of the outstanding capital stock of (i) the surviving or resulting corporation or (ii) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation, in each case provided that the Company has the right to participate in such merger, consolidation or reorganization on substantially the same terms as the other stockholders; or

(b) the sale or other disposition, in a single transaction or series of related transactions, (i) by the Holder of all or substantially all the assets of the Holder (except where such sale or other disposition is to a wholly owned subsidiary of the Holder) or (ii) by stockholders of the Holder of capital stock representing greater than fifty percent (50%) of the voting power of the outstanding capital stock of the Holder, provided that the Company has the right to participate in such sale or other disposition on substantially the same terms as the other stockholders.

Section 3. Default. The occurrence of one or more of the following events shall constitute an event of default (“Event of Default”):

(a) The Company shall fail to pay any Obligations when due and such failure to pay continues for a period of fifteen (15) days.

(b) The entry of a decree or order by a court having jurisdiction in the premises adjudging the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization arrangement, adjustment, or composition of or in respect of the Company under the federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, or trustee of the Company, or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.

(c) The institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the federal Bankruptcy Act or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, or trustee of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

Section 4. Notice of Event of Default. The Company shall promptly notify the Holder upon the occurrence of an Event of Default.

Section 5. Enforcement. The Company waives presentment, protest and demand, notice of protest, and notice of dishonor.

Section 6. Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of Delaware.

Section 7. Titles and Captions. All section titles or captions contained in this Note are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Note.

Section 8. Parties in Interest. Nothing herein shall be construed to be to the benefit of any party other than the Company and the Holder.

Section 9. Monetary Terms. All references to “Dollars” or “$” shall mean dollars of the United States of America.

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Section 10. Purchase Agreement. This Note is being delivered in accordance with the terms of the Purchase Agreement dated as of February [    ], 2009 among the Holder, the Company and the other parties thereto.

Section 11. Security. As security for the Obligations, the Company agrees to enter into a stock pledge agreement in the form attached as Exhibit A hereto which shall be effective as of the date hereof.

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3

IN WITNESS WHEREOF, a duly authorized officer of the Company has executed this Note to be effective on the date first written above.

BACKBONE PARTNERS, LLC
By:
Name:	Stephen S. Trundle
Title:

4

EXHIBIT A

BACKBONE PARTNERS, LLC

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT (this “Agreement”) is entered into as of [Date] by and between Backbone Partners, LLC, a Delaware limited liability company (the “Company”), and Alarm.com Holdings, Inc., a Delaware corporation (the “Secured Party”). The Company and the Secured Party may be referred to herein individually as a “Party” and together as the “Parties.”

The Company and the Secured Party hereby agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

(a) “Purchase Agreement” means the Purchase Agreement dated as of February 11, 2009 among the Secured Party, the Company and the other parties thereto.

(b) “Event of Default” has the meaning set forth in Section 3 of the Note.

(c) “Lien” means any lien, pledge, charge, security interest or other encumbrance.

(d) “Note” means that certain Promissory Note, dated as of [Date], made by the Company in favor of the Secured Party in connection with the Purchase Agreement.

(e) “Obligations” means the obligations of the Company to the Secured Party under the Note.

(f) “Pledged Shares” means all of the shares of Series A Convertible Preferred Stock, par value $0.001 per share, of the Secured Party held by the Company and represented by stock certificate number [    ], and any securities of the Secured Party issued to the Company in exchange for, in substitution of, or otherwise on account of such shares.

(g) “UCC” means the Uniform Commercial Code as may, from time to time, be in effect in the State of Delaware.

ARTICLE II

SECURITY INTEREST

2.1 Security Interest in Pledged Shares. As security for the payment of the Obligations, the Company hereby pledges to the Secured Party, and grants to the Secured Party a security interest in, the Pledged Shares and all dividends, distributions, cash, instruments and other property and proceeds from time to time received, receivable or otherwise made upon or distributed in respect of or in exchange for any or all of the Pledged Shares. This Agreement

secures the payment of all of the Obligations. The security interests granted hereby are granted as security only and shall not subject the Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Company with respect to any of the Pledged Shares.

2.2 Delivery of Pledged Shares. All certificates or instruments representing or evidencing the Pledged Shares, together with appropriate stock powers therefor signed in blank, shall, simultaneously with the execution and delivery hereof, be delivered to and held by the Secured Party in trust for the Company, and shall continue to be held in trust until the Secured Party exercises its rights with respect thereto upon and during the continuance of an Event of Default or until the security interest created under this Agreement terminates.

2.3 Financing Statements. The Company hereby authorizes the Secured Party to file such financing statements describing the Pledged Shares, such amendments to financing statements and such continuation financing statements as the Secured Party may reasonably require to effect a perfected security interest in the Pledged Shares pursuant to the UCC.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

3.1 Representations and Warranties. The Company represents and warrants to the Secured Party that (a) the Company is the record and beneficial owner of the Pledged Shares and has good and marketable title thereto, subject to no Liens except for the pledge and security interest created by this Agreement and any Liens under a stockholders’ or similar agreement applicable to the Company or the Pledged Shares (a “Stockholders Agreement”), (b) upon delivery to the Secured Party of all certificates or instruments representing or evidencing the Pledged Shares, the Secured Party shall have a valid and perfected security interest in the Pledged Shares subject to no prior Lien except for any Liens under a Stockholders’ Agreement, (c) no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement, or necessary for the validity or enforceability hereof or for the perfection of the security interests of the Secured Party granted hereby and (d) the Company has not performed any acts which might prevent the Secured Party from enforcing any of the terms and conditions of this Agreement or which would limit the Secured Party in any such enforcement.

3.2 Covenants of the Company. So long as the Obligations remain unsatisfied, the Company shall (a) not create, incur or permit to exist any Liens upon or with respect to the Pledged Shares that are senior or equal in priority to the security interest of the Secured Party created by this Agreement and (b) the Company shall, at its expense and in such manner and form as the Secured Party may reasonably require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that the Secured Party reasonably deems necessary or desirable, or that the Secured Party may reasonably request, in order to create, preserve, perfect or validate the security interests granted hereby or to enable the Secured Party to exercise and enforce its rights hereunder with respect to any of the Pledged Shares.

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3.3 Rights of the Company. The Company shall have the right to vote the Pledged Shares, to the same extent as if the Pledged Shares were not pledged to the Secured Party pursuant to this Agreement. So long as no Event of Default shall have occurred and be continuing, the Company shall be entitled to receive and retain any and all dividends, interest and other payments and distributions made upon or with respect to the Pledged Shares; provided that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Shares, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal of, in redemption of, or in exchange for, any Pledged Shares, shall be forthwith delivered to the Secured Party to hold as pledged collateral or to pay amounts owing under the Note.

ARTICLE IV

REMEDY UPON EVENT OF DEFAULT

Upon the occurrence and during the continuance of any Event of Default, the Secured Party shall have all rights and remedies of a secured party under the UCC and other applicable laws with respect to the Pledged Shares, including the right to sell the Pledged Shares and any pledged collateral described in Section 3.3 by public or private sale at such times and on such terms as the Secured Party shall determine, provided that the net proceeds received from any such sale shall be applied first, to the payment of the Secured Party’s fees and expenses in connection therewith, second, to the payment of the Obligations and third, in the case of any remaining surplus after payment in full of the foregoing, such surplus shall be promptly paid over to the Company; provided, further, that any such sale shall be conducted in accordance with any restriction on transfer set forth in a Stockholders’ Agreement.

ARTICLE V

MISCELLANEOUS

5.1 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware.

5.2 Titles and Captions. All section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement.

5.3 Parties in Interest. Nothing herein shall be construed to be to the benefit of any party other than the Company and the Secured Party.

5.4 Amendment. This Agreement may be amended only by an instrument in writing executed by each Party.

5.5 Entire Agreement. This Agreement and the Note (and the documents referred to herein and therein) embody the complete agreement and understanding between the Parties with respect to the subject matter hereof and thereof, and supersede any prior understandings, agreements or representations by or between the Parties relating to such subject matter.

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5.6 Termination. Upon the full, final and irrevocable payment and performance of all the Obligations, the security interest created under this Agreement shall terminate, and the Secured Party shall promptly deliver to the Company any certificates or instruments representing or evidencing the Pledged Shares, and any other pledged collateral described in Section 3.3, in the Secured Party’s possession or control and shall execute and deliver to the Company such documents and instruments reasonably requested by the Company as shall be necessary to evidence termination of the security interest created under this Agreement.

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IN WITNESS WHEREOF, a duly authorized officer of each Party has executed this Stock Pledge Agreement to be effective on the date first written above.

BACKBONE PARTNERS, LLC,
a Delaware limited liability company
By:
Name:	Steven S. Trundle
Title:
ALARM.COM HOLDINGS, INC.,a Delaware corporation
By:
Name:
Title:

Exhibit G-2

Form of Sherwood Promissory Note

Exhibit G-2

DAVID B. SHERWOOD, JR.

PROMISSORY NOTE

[Date] $[Face Amount]

FOR VALUE RECEIVED, David B. Sherwood, Jr. (the “Obligor”), hereby promises to pay to the order of Alarm.com Holdings, Inc., a Delaware corporation (the “Holder”), the principal sum of [            ] ($[            ]) plus accrued interest thereon plus enforcement costs (including reasonable attorney fees) thereon (collectively, the “Obligations”) in accordance with the following provisions of this Promissory Note (this “Note”):

Section 1. Interest. Interest shall accrue on the outstanding Obligations from the date hereof at the rate equal to the minimum compounded annual interest rate applicable to mid-term notes under Section 1274(d) of the Internal Revenue Code of 1986, as amended (such published rate for February 2009 being 1.65%).

Section 2. Payment. All outstanding Obligations shall be immediately due and payable in cash (without presentment, further demand, protest or other notice of any kind), to the extent that such Obligations have not previously been paid, on the fifth (5th) anniversary of the date hereof. At any time, the Obligor may prepay all or any part of the outstanding Obligations without penalty or restriction; provided that the Obligor shall provide at least five (5) days prior written notice of prepayment to the Holder.

Section 3. Default. The occurrence of one or more of the following events shall constitute an event of default (“Event of Default”):

(a) The Obligbor shall fail to pay any Obligations when due and such failure to pay continues for a period of fifteen (15) days.

(b) The entry of a decree or order by a court having jurisdiction in the premises adjudging the Obligor as bankrupt or insolvent, or approving as properly filed a petition seeking adjustment or composition of or in respect of the Obligor under the federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, or trustee of the Obligor’s assets, or any substantial part of its property, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.

(c) The institution by the Obligor of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking relief under the federal Bankruptcy Act or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, or trustee of the Obligor’s assets, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due.

Section 4. Notice of Event of Default. The Obligor shall promptly notify the Holder upon the occurrence of an Event of Default.

Section 5. Enforcement. The Obligor waives presentment, protest and demand, notice of protest, and notice of dishonor.

Section 6. Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of Delaware.

Section 7. Titles and Captions. All section titles or captions contained in this Note are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Note.

Section 8. Parties in Interest. Nothing herein shall be construed to be to the benefit of any party other than the Obligor and the Holder.

Section 9. Monetary Terms. All references to “Dollars” or “$” shall mean dollars of the United States of America.

Section 10. Purchase Agreement. This Note is being delivered in accordance with the terms of the Purchase Agreement dated as of February 11, 2009 among the Holder, the Obligor and the other parties thereto.

Section 11. Security. As security for the Obligations, the Obligor agrees to enter into a stock pledge agreement in the form attached as Exhibit A hereto which shall be effective as of the date hereof.

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2

IN WITNESS WHEREOF, the Obligor has executed this Note to be effective on the date first written above.

DAVID B. SHERWOOD, JR.

3

EXHIBIT A

DAVID B. SHERWOOD, JR.

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT (this “Agreement”) is entered into as of [Date] by and between David B. Sherwood, Jr. (the “Obligor”), and Alarm.com Holdings, Inc., a Delaware corporation (the “Secured Party”). The Obligor and the Secured Party may be referred to herein individually as a “Party” and together as the “Parties.”

The Obligor and the Secured Party hereby agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

(a) “Purchase Agreement” means the Purchase Agreement dated as of February 11, 2009 among the Secured Party, the Obligor and the other parties thereto.

(b) “Event of Default” has the meaning set forth in Section 3 of the Note.

(c) “Lien” means any lien, pledge, charge, security interest or other encumbrance.

(d) “Note” means that certain Promissory Note, dated as of [Date], made by the Obligor in favor of the Secured Party in connection with the Purchase Agreement.

(e) “Obligations” means the obligations of the Obligor to the Secured Party under the Note.

(f) “Pledged Shares” means all of the shares of Series A Convertible Preferred Stock, par value $0.001 per share, of the Secured Party held by the Obligor and represented by stock certificate number [        ], and any securities of the Secured Party issued to the Obligor in exchange for, in substitution of, or otherwise on account of such shares.

(g) “UCC” means the Uniform Commercial Code as may, from time to time, be in effect in the State of Delaware.

ARTICLE II

SECURITY INTEREST

2.1 Security Interest in Pledged Shares. As security for the payment of the Obligations, the Obligor hereby pledges to the Secured Party, and grants to the Secured Party a security interest in, the Pledged Shares and all dividends, distributions, cash, instruments and other property and proceeds from time to time received, receivable or otherwise made upon or distributed in respect of or in exchange for any or all of the Pledged Shares. This Agreement secures the payment of all of the Obligations. The security interests granted hereby are granted as security only and shall not subject the Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Obligor with respect to any of the Pledged Shares.

2.2 Delivery of Pledged Shares. All certificates or instruments representing or evidencing the Pledged Shares, together with appropriate stock powers therefor signed in blank, shall, simultaneously with the execution and delivery hereof, be delivered to and held by the Secured Party in trust for the Obligor, and shall continue to be held in trust until the Secured Party exercises its rights with respect thereto upon and during the continuance of an Event of Default or until the security interest created under this Agreement terminates.

2.3 Financing Statements. The Obligor hereby authorizes the Secured Party to file such financing statements describing the Pledged Shares, such amendments to financing statements and such continuation financing statements as the Secured Party may reasonably require to effect a perfected security interest in the Pledged Shares pursuant to the UCC.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

3.1 Representations and Warranties. The Obligor represents and warrants to the Secured Party that (a) the Obligor is the record and beneficial owner of the Pledged Shares and has good and marketable title thereto, subject to no Liens except for the pledge and security interest created by this Agreement and any Liens under a stockholders’ or similar agreement applicable to the Obligor or the Pledged Shares (a “Stockholders Agreement”), (b) upon delivery to the Secured Party of all certificates or instruments representing or evidencing the Pledged Shares, the Secured Party shall have a valid and perfected security interest in the Pledged Shares subject to no prior Lien except for any Liens under a Stockholders’ Agreement, (c) no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement, or necessary for the validity or enforceability hereof or for the perfection of the security interests of the Secured Party granted hereby and (d) the Obligor has not performed any acts which might prevent the Secured Party from enforcing any of the terms and conditions of this Agreement or which would limit the Secured Party in any such enforcement.

3.2 Covenants of the Company. So long as the Obligations remain unsatisfied, the Obligor shall (a) not create, incur or permit to exist any Liens upon or with respect to the Pledged Shares that are senior or equal in priority to the security interest of the Secured Party created by this Agreement and (b) at its expense and in such manner and form as the Secured Party may reasonably require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that the Secured Party reasonably deems necessary or desirable, or that the Secured Party may reasonably request, in order to create, preserve, perfect or validate the security interests granted hereby or to enable the Secured Party to exercise and enforce its rights hereunder with respect to any of the Pledged Shares.

3.3 Rights of the Obligor. The Obligor shall have the right to vote the Pledged Shares, to the same extent as if the Pledged Shares were not pledged to the Secured Party pursuant to this Agreement. So long as no Event of Default shall have occurred and be

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continuing, the Obligor shall be entitled to receive and retain any and all dividends, interest and other payments and distributions made upon or with respect to the Pledged Shares; provided that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Shares, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal of, in redemption of, or in exchange for, any Pledged Shares, shall be forthwith delivered to the Secured Party to hold as pledged collateral or to pay amounts owing under the Note.

ARTICLE IV

REMEDY UPON EVENT OF DEFAULT

Upon the occurrence and during the continuance of any Event of Default, the Secured Party shall have all rights and remedies of a secured party under the UCC and other applicable laws with respect to the Pledged Shares, including the right to sell the Pledged Shares and any pledged collateral described in Section 3.3 by public or private sale at such times and on such terms as the Secured Party shall determine, provided that the net proceeds received from any such sale shall be applied first, to the payment of the Secured Party’s fees and expenses in connection therewith, second, to the payment of the Obligations and third, in the case of any remaining surplus after payment in full of the foregoing, such surplus shall be promptly paid over to the Obligor; provided, further, that any such sale shall be conducted in accordance with any restriction on transfer set forth in a Stockholders’ Agreement.

ARTICLE V

MISCELLANEOUS

5.1 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware.

5.2 Titles and Captions. All section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement.

5.3 Parties in Interest. Nothing herein shall be construed to be to the benefit of any party other than the Obligor and the Secured Party.

5.4 Amendment. This Agreement may be amended only by an instrument in writing executed by each Party.

5.5 Entire Agreement. This Agreement and the Note (and the documents referred to herein and therein) embody the complete agreement and understanding between the Parties with respect to the subject matter hereof and thereof, and supersede any prior understandings, agreements or representations by or between the Parties relating to such subject matter.

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5.6 Termination. Upon the full, final and irrevocable payment and performance of all the Obligations, the security interest created under this Agreement shall terminate, and the Secured Party shall promptly deliver to the Obligor any certificates or instruments representing or evidencing the Pledged Shares, and any other pledged collateral described in Section 3.3, in the Secured Party’s possession or control and shall execute and deliver to the Obligor such documents and instruments reasonably requested by the Obligor as shall be necessary to evidence termination of the security interest created under this Agreement.

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IN WITNESS WHEREOF, the Obligor and a duly authorized officer of the Secured Party has executed this Stock Pledge Agreement to be effective on the date first written above.

DAVID B. SHERWOOD, JR.

ALARM.COM HOLDINGS, INC.,a Delaware corporation

By:

Name:

Title:

Exhibit H

Standard-Form Employee NDA

Confidentiality, Non-Competition

and Proprietary Rights Agreement

For our Company, people are the most important asset. That is because, in our competitive environment, we rely distinctly on your intellect and inventiveness. Your creativity, enterprise and common sense help us succeed against intense competition; your monetary compensation and benefits package, as well as community-building events within the Company, reflect this value. We invest millions in research, development, marketing and infrastructure to advance our activities. We invest in you. We take the risk that these investments will pay off. It is not our intent to underwrite entrepreneurship that will not end up profiting the Company. In other words, work done on Company time belongs to the Company.

It is to protect our investment in you that we ask you to read, undergo and sign the following agreement, which is a condition of your employment.

NOW, THEREFORE, in consideration for the agreement of the Company to employ me and as a condition to my continued employment by the Company, I hereby agree as follows:

1. Definitions:

a) “Company” means MicroStrategy Incorporated and the subsidiaries and Affiliates of MicroStrategy Incorporated including Alarm.com Incorporated (“Alarm.com”), except that for purposes of paragraphs 4, 5, 6, 7, and 8, the Company does not include Alarm.com. “Affiliate” shall mean: (i) any corporation, company or other entity more than thirty-three percent (33%) of whose outstanding shares or securities are, now or hereafter, owned or controlled, directly or indirectly, by MicroStrategy Incorporated and its Affiliates, and (ii) any partnership, joint venture, unincorporated association or limited liability company more than fifty percent (50%) of whose ownership interest is now or hereafter owned or controlled in the aggregate, directly or indirectly, by MicroStrategy Incorporated and its Affiliates.

b) “Proprietary Information” means any information that I may be furnished or may otherwise receive or have received or have or had access to which relates to the Company’s past, present or future business, finances, business plans, business opportunities, products, software, research, development, improvements, inventions, processes, techniques, designs or other technical data, administrative, management, financial, customers, marketing, personnel information, or manufacturing activities, or of a third party which provided proprietary information to the Company . All such information is considered by the Company to be proprietary and confidential.

c) “Effective Date” means                     , 2006.

2. Confidentiality. Both during my employment with the Company and subsequent thereto, I agree to preserve and protect the confidentiality of the Proprietary Information and all physical forms thereof, whether obtained by or available to me before this Agreement is signed or afterward. In addition, I shall not (i) disclose or disseminate the Proprietary Information to any third party, including employees of the Company, without a need to know; (ii) remove Proprietary Information from the Company’s premises other than as necessary for the performance of my duties; or (iii) use Proprietary Information for my own benefit or for the benefit of any third party.

3. Exceptions. The foregoing obligations shall not apply to any information which I can establish to have (i) become publicly known or made generally available to the public without breach of this Agreement by me or misconduct by others who were under a confidentiality obligation as to the item or items involved; (ii) been given to me by a third party who is not obligated to maintain confidentiality; or (iii) been developed by me prior to the date my employment began with the Company, as established by Exhibit A hereto. If I receive information with uncertain confidentiality, I agree to treat such information as Proprietary Information until I have written verification from management of the Company that such information is neither confidential nor proprietary.

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4. Ownership and Returning Proprietary Information. I agree that all Proprietary Information used or generated during the course of working for the Company prior to the Effective Date is the property of the Company. I agree that certain Proprietary Information used or generated during the course of working for Alarm.com subsequent to the Effective Date that is specific to the actual or anticipated business, research or development of Alarm.com is the property of Alarm.com and all other Proprietary Information is the property of the Company. I agree to deliver to the Company all documents and other tangibles (including diskettes and other storage media) containing Proprietary Information of the Company immediately upon leaving the employ of the Alarm.com or otherwise within three (3) days after the Company so requests. I further agree to deliver to Alarm.com all documents and other tangibles (including other storage media) containing Proprietary Information of Alarm.com immediately upon leaving the employ of Alarm.com or otherwise within three (3) days after Alarm.com so requests.

5. Assignment.

(a) I acknowledge and agree that all works of authorship created prior to the Effective Date, including without limitation, all designs, techniques, devices, discoveries, processes, software, writings, inventions, improvements or documentation and all related know how, produced, made, conceived or authored by me, solely or jointly with others, in the course of my employment with the Company prior to the Effective Date together with any intellectual property rights on the works of authorship, are works made for hire and the property of the Company if such works (i) relate in any manner, at the time the work is conceived or reduced to practice, to the actual or anticipated business, research, or development of the Company; (ii) are suggested by or result from any task assigned to me or work performed by me for or on behalf of the Company; or (iii) are created or developed with the use of the Company equipment, supplies, facilities, information or materials. I shall disclose any such works of authorship promptly to the Company and hereby assign any and all rights in such works to the Company or its assignees. For works of authorship created subsequent to the Effective Date, I acknowledge and agree that all works of authorship, including without limitation throughout this Agreement, all designs, techniques, devices, discoveries, processes, software, writings, inventions, improvements or documentation and all related know how, produced, made, conceived or authored by me, solely or jointly with others, subsequent to the Effective Date together with any intellectual property rights on the works of authorship, are works made for hire and the property of Alarm.com if such works (i) relate in any manner, at the time the work is conceived or reduced to practice, to the actual or anticipated business, research or development of Alarm.com; (ii) are suggested by or result from any task assigned to me or work performed by me or on behalf of Alarm.com; or (iii) are created or developed with the use of Alarm.com equipment, supplies, facilities, information or materials. To the extent, however, that such works of authorship relate to (i) the actual, or anticipated business, research or development of the Company rather than Alarm.com; (ii) are suggested by or result from any task assigned to me or work performed by me or on behalf of the Company rather than Alarm.com; or (iii) are created and developed with the use of the Company’s equipment, supplies, facilities, information or materials, then I agree that such works of authorship are works made for hire and the property of the Company.

(b) For works of authorship created prior to the Effective Date, to the extent that any such works of authorship may not, by operation of law, be works made for hire, this Agreement shall constitute an irrevocable assignment by me to the Company of the ownership of, and all right, title and interest in, such items, and the Company shall have the right to obtain and hold in its own name, all intellectual property rights, including without limitation, patent, trade secret, copyright and similar protections which may be available in such works throughout the world. For works of authorship created subsequent to the Effective Date, to the extent that any such works of authorship may not, by operation of law, be works made for hire, this Agreement shall constitute an irrevocable assignment by me to Alarm.com or to the Company, as appropriate in accordance with the terms of subsection (a) above, of the ownership of, and all right, title and interest in, such items, and Alarm.com or the Company shall each have the right to obtain and hold in its own name, all intellectual property rights, including without limitation, patent, trade secret, copyright and similar protections which may be available in such works throughout the world.

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(c) I agree that all works of authorship made by me, solely or jointly with others, after the date my employment with the Company terminates that are based on or contain Proprietary Information of the Company shall belong to the Company, and I promise to assign any and all rights in such future works of authorship to the Company. For the purposes of this subparagraph, a work of authorship is based on the Proprietary Information of the Company if the work derives from or incorporates any such information in principle or design. I further agree that all works of authorship made by me, solely or jointly with others, after the date my employment with Alarm.com terminates that are based on or contain Proprietary Information of Alarm.com shall belong to Alarm.com, and I promise to assign any and all rights in such future works of authorship to Alarm.com. For purposes of this subparagraph, a work of authorship is based on the Proprietary Information of Alarm.com if the work derives from or incorporates any such information in principle or design.

(d) I agree to assign to the Company all rights in any work of authorship made by me if the Company is required to grant those rights to the United States Government or any of its agencies. I further agree to assign to Alarm.com or the Company, as appropriate in accordance with the terms of subsection (a) above, all rights in any work of authorship made by me subsequent to the Effective Date if the Company or Alarm.com is required to grant those rights to the United States Government or any of its agencies.

(e) I agree to assist the Company and/or Alarm.com, or either of their designees or assignees, at the Company’s or Alarm.com’s expense, in every proper way to secure the Company’s and/or Alarm.com’s rights in such works of authorship and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company and/or Alarm.com of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company and/or Alarm.com shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company and/or Alarm.com or either of their successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such works of authorship, and any copyright, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after my employment with the Company or Alarm.com ends.

(f) In the event the Company and/or Alarm.com is unable due to my subsequent disability or incapacity or for any other reason whatsoever to secure my signature to any lawful and necessary document required to apply for, register or execute any patent, copyright or other applications with respect to any such works of authorship, I hereby irrevocably appoint the Company and/or Alarm.com and their duly authorized officers and agents as my agents and attorneys-in-fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by me.

6. Disclosure of Works of Authorship. In order to permit the Company to claim rights to which it may be entitled, I agree to disclose to the Company in writing and in confidence (i) all inventions or works of authorship that I made, either solely or jointly with others, during the term of my employment with the Company, and (ii) all patent and copyright applications filed by me during my employment and through my effective date. I also agree to submit to a reasonable and confidential review process under which the Company may determine such issues as may arise under this paragraph.

7. Ongoing Disclosure of Works of Authorship. In order to permit Alarm.com to claim rights to which it may be entitled, I agree to disclose to Alarm.com in writing and in confidence (i) all inventions or works of authorship that I make, either solely or jointly with others, during the term of my employment with Alarm.com, and (ii) all patent and copyright applications filed by me during, or within one (1) year after the termination of, my employment. I also agree to submit to a reasonable and confidential review process under which Alarm.com may determine such issues as may arise under this paragraph.

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8. Prior Inventions. All inventions, original works of authorship, developments, improvements, and trade secrets that were made by me before my employment with the Company (collectively referred to as “Prior Inventions”) are listed and described in Exhibit A hereto. These items are excluded from Paragraph 5 of this Agreement. If no such list is attached, I represent that there are no such Prior Inventions. If in the course of my employment with the Company I incorporated into a Company product, process or code a Prior Invention owned by me or in which I have an interest, the Company is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or code. If in the course of my employment with Alarm.com I incorporate into an Alarm.com product, process or code a Prior Invention owned by me or in which I have an interest, Alarm.com is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or code.

9. Outside Activities. I understand that I may continue to work on, and retain rights to, projects of my own interest outside of the Company provided that (i) they do not fall under Paragraph 5(a) above; (ii) they do not fall under Paragraph 10 (“Competitive Employment”) below; (iii) they do not interfere in any way with my performance at work for the Company; and (iv) should any products with potential commercial application result from any such project, the Company shall be given the right of first refusal to purchase and market such products.

10. Competitive Employment. While employed by the Company and for one (1) year after the termination of my employment for any reason, I will not, within the United States or any country in which the Company or a licensee of the Company is then operating or preparing to operate, (i) directly or indirectly participate, in a way that is materially in competition with the Company, in the ownership, control or management of any business that competes with the business of the Company, or (ii) be employed by or otherwise provide services to any such business in any capacity such that my job duties or those services would make such employment or services competitive with the business interests of the Company.

11. No Conflicting Obligations. My performance of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me prior to my employment with the Company. Further, my performance of this Agreement and as an employee of the Company does not and will not breach any prior agreement by me not to compete with the business of any other company. I will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or other person or entity. I am not a party to any other agreement that will interfere with my full compliance with this Agreement. I will not enter into any agreement, whether written or oral, in conflict with the provisions of this Agreement. I hereby agree to indemnify and hold the Company harmless from and against any and all damages, claims, costs, and expenses, including reasonable attorneys’ fees, based on or arising, directly or indirectly, from the breach of any agreement or understanding between me and another person or company; this includes, but is not limited to, liability for the Company arising from or based on any confidential or proprietary information or trade secrets I have obtained from sources other than the Company and liability for the Company arising from or based on any non-competition agreement that I have signed with any other business or entity. In addition, I hereby authorize the Company to provide a copy of this Agreement to any new employers upon request, and I agree to provide such information as the Company may from time to time request to determine my compliance with this Agreement.

12. Covenant Not to Solicit Employees. While employed by the Company and for a one-year period after the termination of my employment for any reason, I agree not to solicit for employment (or to assist with such solicitation) any employee or former employee of the Company. The restrictions set forth in this paragraph apply to the solicitation of any person who is, or within the two years before the termination of my employment was, an employee of the Company.

13. Covenant Not to Solicit Customers. While employed by the Company and for a one-year period after the termination of my employment for any reason, I agree not to solicit for business (or to assist with such solicitation) any customer or client of the Company. For the purpose of this paragraph, the terms “customer” and “client” include any person or entity (or employee or agent thereof), within or outside the United States of America, with whom, within the three years before the termination of my employment: (i) the Company does or has done business, to whom the

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Company’s products or services have been provided or sold, and/or to whom the Company is making, has made, or has planned to make business contacts or sales calls, and (ii) I or employees under my direction had contact during my employment with the Company .

14. Business Partners. I agree to be bound by the terms and conditions of all agreements between the Company and its clients, contractors or agents (“Business Partners”), including, but not limited to, agreements not to work for a Business Partner’s competitors, confidentiality agreements and agreements to submit to drug tests.

15. “AT WILL” EMPLOYMENT STATUS. I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT WITH THE COMPANY IS ON AN AT-WILL BASIS, MEANING THAT EITHER I OR THE COMPANY MAY TERMINATE THE EMPLOYMENT RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE OR NOTICE. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, I ALSO UNDERSTAND THAT NOTHING IN THIS AGREEMENT IS INTENDED TO CREATE A GUARANTEE OF CONTINUED EMPLOYMENT AND SHOULD NOT BE CONSTRUED AS SUCH UNDER ANY CONDITIONS.

16. Survival. My obligations under paragraphs 2 (“Confidentiality”), 3 (“Exceptions”) and 5 (“Assignment”) shall remain in effect for my entire life and shall be binding upon my heirs, estate and executors. All other provisions of this Agreement shall survive for five years after the termination of my employment, with the exception of my obligations under paragraphs 10 (“Competitive Employment”), 12 (“Covenant Not to Solicit Employees”) and 13 (“Covenant Not to Solicit Customers”) which shall survive for one year after termination of my employment, without regard to the reason for the termination of my employment.

17. Specific Performance. I acknowledge and agree that a breach of any of the promises or agreements contained herein will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law. Accordingly, I agree that the Company shall be entitled to injunctive relief and/or a decree of specific performance, or other equitable relief to prevent the violation of my obligations herein in addition to any other right or remedy that may be available (including monetary damages if appropriate).

18. Attorneys’ Fees. In the event any action is taken to enforce this Agreement, the prevailing party shall be entitled to its reasonable attorneys’ fees and court costs.

19. Waiver. No act or failure to act by the Company will waive any right contained herein. Any waiver by the Company must be in writing and signed by an officer of the Company to be effective.

20. Assignment. This Agreement may be assigned by the Company at any time without my consent, and shall be binding upon all successors and assigns of the Company and upon my heirs, executors and administrators. I may not assign or delegate my duties under this Agreement without the Company’s prior written approval and only then to an assignee who agrees in writing to be bound by all the terms of this Agreement.

21. Severability. The provisions of this Agreement are severable. In the event that any provision of this Agreement conflicts with the law under which this Agreement is to be construed or if any such provision is held overbroad or invalid by a court or arbitrator with jurisdiction over the parties to this Agreement, such provision shall be deemed to be restated (and the parties hereby agree to grant the court or arbitrator the authority to perform such restatement) to reflect as nearly as possible the original intentions of the parties in accordance with the applicable law. The remaining provisions of the Agreement shall continue in full force and effect.

22. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Virginia without regard to conflicts of law principles.

23. Entire Agreement. This document, including Exhibit A attached hereto, constitutes my entire agreement with the Company with respect to its subject matter, superseding any prior negotiations and agreements, including without limitation any and all agreements (“Prior Agreement”) entered into between me and the Company prior to the date hereof regarding confidentiality, non-competition, non-solicitation or intellectual property matters. This Agreement shall be effective as of the date I began employment with the Company, provided, however, that, notwithstanding

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anything herein to the contrary, to the extent that this Agreement or any provision herein are determined to be unenforceable or not applicable to matters arising prior to the execution of this Agreement and which matters are otherwise subject to a Prior Agreement, then the Prior Agreement shall remain in effect with respect to such matter(s). No provisions of this Agreement may be changed except by a written agreement signed by both me and an officer of the Company.

Employee

Signature

Print Name

Date

MicroStrategy Incorporated

Signature

Print Name

Title

Date

Alarm.com Incorporated

Signature

Print Name

Title

Date

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Exhibit A

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

Title	Date	Identifying Number
		or Brief Description

             No inventions or improvements

             Additional Sheets Attached

	Signature of Employee
	Print Name of Employee
Date

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EX-21.1

Exhibit 21.1

MICROSTRATEGY INCORPORATED

SUBSIDIARIES

Angel.com Incorporated	MicroStrategy International Limited
(Delaware)	(Bermuda)
MicroStrategy Administration Corporation	MicroStrategy International II Limited
(Delaware)	(Bermuda)
MicroStrategy Management Corporation	MicroStrategy Italy S.r.l.
(Delaware)	(Italy)
MicroStrategy Services Corporation	Nihon MicroStrategy Kabushiki Kaisha (MicroStrategy Japan Inc.)
(Delaware)	(Japan)
Strategy.com Incorporated	MicroStrategy Korea Co., Ltd.
(Delaware)	(Korea)
MicroStrategy Austria GmbH	MicroStrategy Limited
(Austria)	(United Kingdom)
MicroStrategy Belgium BVBA	MicroStrategy México, S. de R.L. de C.V.
(Belgium)	(Mexico)
MicroStrategy Benelux B.V.	MicroStrategy Poland sp. z o. o.
(Netherlands)	(Poland)
MicroStrategy Brasil Ltda.	MicroStrategy Portugal, Sociedade Unipessoal, Lda.
(Brazil)	(Portugal)
MicroStrategy Canada Incorporated	MicroStrategy Pty. Ltd.
(Canada)	(Australia)
MicroStrategy China Technology Center Ltd.	MicroStrategy Singapore Pte. Ltd.
(China)	(Singapore)
MicroStrategy Denmark ApS	MicroStrategy South Africa (Proprietary) Limited
(Denmark)	(South Africa)
MicroStrategy Deutschland GmbH	MicroStrategy Sweden AB
(Germany)	(Sweden)
MicroStrategy France SARL	MicroStrategy Switzerland GmbH
(France)	(Switzerland)
MicroStrategy Holdings (Hong Kong) Co. Limited	Strategy.com International Limited
(Hong Kong)	(Bermuda)
MicroStrategy Ibérica, S.L.U.
(Spain)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated February 23, 2009, with respect to the consolidated financial statements, schedule, and internal control over financial reporting included in the Annual Report of MicroStrategy Incorporated on Form 10-K for the year ended December 31, 2008. We hereby consent to the incorporation by reference of said reports in the Registration Statements of MicroStrategy Incorporated on Forms S-3 (File No. 333-58136, effective June 20, 2002) and on Forms S-8 (File No. 333-107954, effective August 13, 2003, File No. 333-65258, effective July 17, 2001, 333-65264, effective July 17, 2001, No. 333-44844, effective August 30, 2000, No. 333-44846, effective August 30, 2000, and No, 333-58189, effective June 30, 1998).

/s/ GRANT THORNTON LLP

McLean, Virginia

February 23, 2009

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Michael J. Saylor, certify that:

1. I have reviewed this annual report on Form 10-K of MicroStrategy Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 23, 2009	/s/ Michael J. Saylor
	Michael J. Saylor
	Chairman of the Board of Directors, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Arthur S. Locke, III, certify that:

1. I have reviewed this annual report on Form 10-K of MicroStrategy Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 23, 2009	/s/ Arthur S. Locke, III
	Arthur S. Locke, III
	Executive Vice President, Finance & Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of MicroStrategy Incorporated (the “Company”) for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer of the Company and the Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge on the date hereof:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 23, 2009	/s/ Michael J. Saylor
	Michael J. Saylor
	Chairman of the Board of Directors,
	President and Chief Executive Officer
Dated: February 23, 2009	/s/ Arthur S. Locke, III
	Arthur S. Locke, III
	Executive Vice President, Finance &
	Chief Financial Officer