10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2006

¨ 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 001-32336

DIGITAL REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland	26-0081711
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
560 Mission Street, Suite 2900 San Francisco, CA	94105
(Address of principal executive offices)	(Zip Code)

(415) 738-6500

(Registrant’s telephone number, including area code)

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.  x Yes    ¨ No

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

Large accelerated filer ¨ Accelerated filer x Non- accelerated filer ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 31, 2006
Common Stock, $.01 par value per share	36,104,961

DIGITAL REALTY TRUST, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2006

TABLE OF CONTENTS

		Page number
PART I.	FINANCIAL INFORMATION
ITEM 1.	Consolidated Condensed Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2006 and 2005 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2006 and 2005 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	38
ITEM 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	40
ITEM 1A.	Risk factors	40
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
ITEM 3.	Defaults Upon Senior Securities	40
ITEM 4.	Submission of Matters to a Vote of Security Holders	41
ITEM 5.	Other Information	41
ITEM 6.	Exhibits	41
	Signatures	42

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

DIGITAL REALTY TRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share data)

	June 30, 2006 (unaudited)			December 31, 2005
ASSETS
Investments in real estate:
Land	$	203,903		$	191,961
Acquired ground leases		2,982			1,477
Buildings and improvements		1,059,608			941,115
Tenant improvements		133,259			123,957
Investments in real estate		1,399,752			1,258,510
Accumulated depreciation and amortization		(80,541	)		(64,404	)
		1,319,211			1,194,106
Cash and cash equivalents		13,408			10,930
Accounts and other receivables, net of allowance for doubtful accounts of $1,287 and $763 as of June 30, 2006 and December 31, 2005, respectively		17,403			7,587
Deferred rent		30,639			25,094
Acquired above market leases, net		44,376			48,237
Acquired in place lease value and deferred leasing costs, net		209,940			201,141
Deferred financing costs, net		7,706			7,659
Restricted cash		22,658			22,123
Assets held for sale		37,897			—
Other assets		10,619			12,293
Total Assets	$	1,713,857		$	1,529,170
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable under line of credit	$	211,554		$	181,000
Mortgage loans		608,947			568,067
Accounts payable and other accrued liabilities		43,326			36,869
Accrued dividends and distributions		—			15,639
Acquired below market leases, net		84,185			67,177
Liabilities related to assets held for sale		28,081			—
Security deposits and prepaid rents		14,329			11,476
Total liabilities		990,422			880,228
Commitments and contingencies
Minority interests in consolidated joint venture related to assets and liabilities held for sale		191			206
Minority interests in operating partnership		240,808			262,239
Stockholders’ equity:
Preferred Stock: $0.01 par value, 20,000,000 authorized:
Series A Cumulative Redeemable Preferred Stock, 8.50%, $103,500,000 liquidation preference ($25.00 per share), 4,140,000 issued and outstanding		99,297			99,297
Series B Cumulative Redeemable Preferred Stock, 7.875%, $63,250,000 liquidation preference ($25.00 per share), 2,530,000 issued and outstanding		60,502			60,502
Common Stock; $0.01 par value: 100,000,000 authorized, 36,104,961 and 27,363,408 shares issued and outstanding as of June 30, 2006 and December 31, 2005		361			274
Additional paid-in capital		359,590			252,562
Dividends in excess of earnings		(41,312	)		(27,782	)
Accumulated other comprehensive income, net		3,998			1,644
Total stockholders’ equity		482,436			386,497
Total liabilities and stockholders’ equity	$	1,713,857		$	1,529,170

See accompanying notes to the condensed consolidated financial statements.

1

DIGITAL REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited in thousands except share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Operating Revenues:
Rental	$	52,033		$	36,148		$	99,857		$	67,337
Tenant reimbursements		12,675			8,079			24,175			14,557
Other		—			3,832			168			4,132
Total operating revenues		64,708			48,059			124,200			86,026
Operating Expenses:
Rental property operating and maintenance		13,618			9,166			25,328			15,810
Property taxes		7,096			4,721			13,935			8,203
Insurance		1,068			511			1,958			1,091
Depreciation and amortization		19,511			13,728			37,024			25,267
General and administrative		4,674			2,453			8,920			4,866
Other		150			961			331			1,482
Total operating expenses		46,117			31,540			87,496			56,719
Operating income		18,591			16,519			36,704			29,307
Other Income (Expenses):
Interest and other income		262			110			491			239
Interest expense		(11,830	)		(8,938	)		(22,869	)		(16,708	)
Loss from early extinguishment of debt		(425	)		—			(482	)		(125	)
Income from continuing operations before minority interests		6,598			7,691			13,844			12,713
Minority interests in continuing operations of operating partnership		(1,413	)		(3,272	)		(3,435	)		(5,507	)
Income from continuing operations		5,185			4,419			10,409			7,206
Loss from discontinued operations before minority interests		(163	)		(217	)		(491	)		(344	)
Minority interests attributable to discontinued operations		73			133			264			212
Loss from discontinued operations		(90	)		(84	)		(227	)		(132	)
Net income		5,095			4,335			10,182			7,074
Preferred stock dividends		(3,445	)		(2,199	)		(6,890	)		(3,470	)
Net income available to common stockholders	$	1,650		$	2,136		$	3,292		$	3,604
Income per share from continuing operations available to common stockholders:
Basic	$	0.05		$	0.10		$	0.12		$	0.18
Diluted	$	0.05		$	0.10		$	0.12		$	0.18
Loss per share from discontinued operations:
Basic	$	—		$	—		$	(0.01	)	$	(0.01	)
Diluted	$	—		$	—		$	(0.01	)	$	(0.01	)
Net income per share available to common stockholders:
Basic	$	0.05		$	0.10		$	0.11		$	0.17
Diluted	$	0.05		$	0.10		$	0.11		$	0.17
Weighted average common shares outstanding:
Basic		33,372,240			21,421,300			30,453,957			21,421,300
Diluted		33,872,344			21,584,913			30,944,327			21,559,958

See accompanying notes to the condensed consolidated financial statements.

2

DIGITAL REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited in thousands)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Net income	$	5,095		$	4,335		$	10,182		$	7,074
Other comprehensive income:
Foreign currency translation adjustments		2,703			2			3,276			1,166
Minority interests in foreign currency translation adjustments		(1,211	)		(1	)		(1,517	)		(694	)
Increase (decrease) in fair value of interest rate swaps		1,061			(1,412	)		2,265			(2	)
Minority interests in change in fair value of interest rate swaps		(474	)		840			(1,117	)		1
Reclassification of other comprehensive income to interest expense		(644	)		236			(1,065	)		545
Minority interests in reclassification of other comprehensive income to interest expense		287			(140	)		512			(324	)
Comprehensive income	$	6,817		$	3,860		$	12,536		$	7,766

See accompanying notes to the condensed consolidated financial statements.

3

DIGITAL REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited in thousands)

	Six Months Ended
	June 30, 2006			June 30, 2005
Cash flows from operating activities (including discontinued operations):
Net income	$	10,182		$	7,074
Adjustments to reconcile net income to net cash provided by operating activities
Minority interests in operating partnership and discontinued operations		3,171			5,295
Write-off of net assets due to early lease terminations		80			(58	)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases, including amounts for discontinued operations		21,294			14,331
Amortization over the vesting period of the fair value of equity compensation		866			96
Allowance for doubtful accounts		524			(81	)
Amortization of deferred financing costs		1,702			1,382
Write-off of deferred financing costs, included in net loss on early extinguishment of debt		106			125
Amortization of debt premium		(114	)		(39	)
Amortization of acquired in place lease value and deferred leasing costs		16,764			12,140
Amortization of acquired above market leases and acquired below market leases, net		(2,216	)		(818	)
Changes in assets and liabilities:
Accounts and other receivables		(2,213	)		(1,689	)
Deferred rent		(7,992	)		(4,991	)
Deferred leasing costs		(3,720	)		(721	)
Other assets		(1,439	)		610
Accounts payable and other accrued liabilities		4,194			(241	)
Security deposits and prepaid rents		3,267			1,903
Net cash provided by operating activities (including discontinued operations)		44,456			34,318
Cash flows from investing activities:
Acquisitions of properties (including $16.5 million paid to GI Partners in 2005)		(146,497	)		(311,034	)
Deposits paid for acquisitions of properties		(500	)		—
Receipt of value added tax refund		3,121			—
Refundable value added tax in conjunction with acquisition		(805	)		—
Change in restricted cash		(787	)		(10,754	)
Improvements to investments in real estate		(23,769	)		(4,790	)
Other deposits		(911	)		—
Tenant improvement advances to tenants		(7,362	)		—
Net cash used in investing activities		(177,510	)		(326,578	)

4

DIGITAL REALTY TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(unaudited in thousands)

Six Months Ended
June 30, 2006	June 30, 2005

Cash flows from financing activities:
Borrowings on line of credit	$	225,554		$	212,000
Repayments on line of credit		(195,000	)		(68,000	)
Proceeds from mortgage loans		107,865			100,000
Principal payments on mortgage loans		(42,230	)		(11,769	)
Settlement of foreign currency forward sale contract		694			(2,519	)
Reimbursement by GI Partners of settlement cost of foreign currency forward sale contract		—			1,911
Payment of loan fees and costs		(1,965	)		(1,085	)
Refund of rate-lock deposit		1,200			—
Gross proceeds from the sale of common stock		97,600
Gross proceeds from the sale of preferred stock		—			103,500
Common stock offering costs paid		(3,097	)		(594	)
Preferred stock offering costs paid		—			(4,203	)
Proceeds from exercise of employee stock options		452			—
Payment of dividends to preferred stockholders		(6,890	)		(3,470	)
Payment of dividends to common stockholders and distributions to limited partners of operating partnership		(47,990	)		(34,086	)
Net cash provided by financing activities		136,193			291,685
Net increase (decrease) in cash and cash equivalents		3,139			(575	)
Cash and cash equivalents classified within assets held for sale		(661	)		—
Cash and cash equivalents at beginning of period		10,930			4,557
Cash and cash equivalents at end of period	$	13,408		$	3,982
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized	$	23,540		$	15,502
Supplementary disclosure of noncash investing and financing activities:
Change in net assets related to foreign currency translation adjustments	$	3,276		$	473
Increase in other assets related to increase in fair value of interest rate swaps		2,265			—
Reclassification of owner’s equity to minority interest in the Operating Partnership		(42,123	)		—
Operating Partnership units converted to common stock		53,842			—
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		3,261			435
Allocation of purchase of properties to:
Investments in real estate		146,703			271,810
Accounts and other receivables		—			200
Acquired above market leases		—			12,380
Acquired below market leases		(22,846	)		(19,198	)
Acquired in place lease value and deferred leasing costs		23,699			66,520
Other Assets		—			500
Mortgage loans assumed		—			(9,746	)
Loan premium		—			(944	)
Accounts payable and other accrued liabilities		(1,059	)		(11,333	)
Reverse minority interest in consolidated joint venture		—			845
Cash paid for acquisition of properties		146,497			311,034
Increase to components of net investment foreign currency hedge upon settlement:
Investment in real estate		—			5,304
Mortgage loans		—			(3,307	)
Other accrued liabilities		—			(1,997	)
		—			—
Accrual of common and preferred stock offering costs		—			250
Reallocation of limited partners’ interests in Operating Partnership to the general partner		—			257

See accompanying notes to the condensed consolidated financial statements.

5

DIGITAL REALTY TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2006 and 2005

(unaudited)

1. Organization and Description of Business

Digital Realty Trust, Inc. through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership) and the subsidiaries of the Operating Partnership (collectively, “we” or the Company) is engaged in the business of owning, acquiring, repositioning and managing technology-related real estate. As of June 30, 2006 our portfolio consists of 50 properties; 45 are located throughout the United States, four are located in Europe, and one property is located in Canada. Our properties are diversified in major markets where corporate data center and technology tenants are concentrated, including the Boston, Chicago, Dallas, Los Angeles, New York, Philadelphia, San Francisco and Silicon Valley metropolitan areas. The portfolio consists of Internet gateway properties, data center properties, technology manufacturing properties and regional or national headquarters of technology companies.

We completed our initial public offering (IPO) on November 3, 2004 and commenced operations on that date. The Operating Partnership was formed on July 21, 2004 in anticipation of our IPO. As of June 30, 2006, we own a 57.3% common interest and a 100% preferred interest in the Operating Partnership. We have control over the Operating Partnership. The limited partners of the Operating Partnership do not have rights to replace the general partner nor do they have participating rights, although they do have certain protective rights.

2. Summary of Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of Digital Realty Trust, Inc., the Operating Partnership, the subsidiaries of the Operating Partnership and its consolidated joint venture. Intercompany balances and transactions have been eliminated. The interests of the joint venture partner, a third party, is reflected in minority interests in the accompanying condensed consolidated financial statements.

Property interests contributed to the Operating Partnership by Global Innovation Partners, LLC (GI Partners) in exchange for Units in anticipation of completion of our IPO have been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests. Accordingly, the contributed assets and assumed liabilities were recorded at the historical cost basis. Property interests acquired from third parties for cash or Units are accounted for using purchase accounting.

The accompanying condensed interim financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments are of a normal recurring nature and necessary for a fair presentation of the consolidated financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2005.

(b) Cash Equivalents

For purpose of the condensed consolidated statements of cash flows, we consider short-term investments with original maturities of 90 days or less when purchased to be cash equivalents. As of June 30, 2006 and December 31, 2005, cash equivalents consist of investments in a money market fund.

6

(c) Share Based Compensation

We account for share based compensation, including stock options and fully vested long-term incentive units granted in connection with the IPO, using the fair value method of accounting. The estimated fair value of each of the long-term incentive units granted in connection with our IPO was equal to the IPO price of our stock and such amount was recorded as an expense upon closing of the IPO since those long-term incentive units were fully vested as of the grant date. The estimated fair value of the stock options granted by us is being amortized over the vesting period of the stock options. The estimated fair value of the Class C Partnership units (discussed in note 8) is being amortized over the expected service period of five years.

(d) Income Taxes

We have elected to be treated and believe that we have operated in a manner that has enabled us to qualify as a Real Estate Investment Trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, (the Code) as amended. As a REIT, we generally are not required to pay federal corporate income taxes on our taxable income to the extent it is currently distributed to our stockholders.

However, qualification and taxation as a REIT depends upon our ability to meet the various qualification tests imposed under the Code including tests related to annual operating results, asset composition, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that we will be organized or be able to operate in a manner so as to qualify or remain qualified as a REIT. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.

We have elected to treat three of the Operating Partnership’s subsidiaries as taxable REIT subsidiaries (each, a TRS). In general, a TRS may perform non-customary services for tenants, hold assets that we cannot hold directly and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the provision to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). Our TRS’s are subject to corporate federal and state income taxes based on their taxable income. These rates are generally those rates which are charged for regular corporate entities. Income taxes are recorded using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded against the combined federal and state net deferred taxes reducing the deferred tax asset to a net amount. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

As of June 30, 2006 one of our TRS’s is estimated to have a net operating loss carryforward for federal and state income tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of future realizability, management has fully offset the net deferred tax assets with a valuation allowance.

To the extent that any foreign taxes are incurred by the subsidiaries invested in real estate located outside of the United States, a provision is made for such taxes.

(e) Asset Retirement Obligations

We record accruals for estimated retirement obligations, as required by SFAS No. 143, “Accounting for Asset Retirement Obligations” and FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). The amount of asset retirement obligations relates primarily to estimated asbestos removal costs at the end of the economic life of properties that were built before 1984. As of both June 30, 2006 and December 31, 2005 the amount included in accounts payable and other accrued liabilities on our condensed consolidated balance sheets was approximately $0.8 million and the equivalent asset is recorded at $0.7 million, net of amortization.

7

(f) Reclassifications

Certain reclassifications have been made to the 2005 consolidated financial statements to conform to the 2006 presentation. These include the reclassification of 7979 East Tufts Avenue revenues and expenses to discontinued operations in the accompanying condensed consolidated statements of operations, as further described in note 5.

(g) Management’s Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates made.

3. Minority Interests in the Operating Partnership

Minority interests in the Operating Partnership relate to the interests that are not owned by us. The following table shows the ownership interest in the Operating Partnership at June 30, 2006 and December 31, 2005.

	June 30, 2006			December 31, 2005
	Common units and long term incentive units	Percentage of total		Common units and long term incentive units	Percentage of total
The Company	36,104,961	57.3	%	27,363,408	46.4	%
Minority interest consisting of:
GI Partners	19,669,175	31.2		23,699,359	40.2
Third Parties	5,655,846	8.9		6,331,511	10.7
Employees (long term incentive units, see note 8)	1,622,671	2.6		1,622,671	2.7
	63,052,653	100.0	%	59,016,949	100.0	%

In conjunction with our formation, GI Partners received common units (founder units), in exchange for contributing ownership interests in properties to the Operating Partnership. Also in connection with acquiring real estate interests owned by third parties, the Operating Partnership issued common units to those sellers. Limited partners who acquired common units in the formation transactions have the right to require the Operating Partnership to redeem part or all of their common units for cash based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption. Alternatively, we may elect to acquire those common units in exchange for shares of our common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. Pursuant to registration rights agreements we entered into with GI Partners and the other third party contributors, we filed a shelf registration statement covering the issuance of the shares of our common stock issuable upon redemption of the common units, and the resale of those shares of common stock by the holders. GI Partners distributed 4,030,184 Operating Partnership common units to its owners and these units were converted into shares of our common stock on March 29, 2006 and sold to third parties on April 3, 2006. Richard Magnuson, the Executive Chairman of our board of directors, Michael Foust, our Chief Executive Officer and a member of our board of directors, and Scott Peterson, our Senior Vice President, Acquisitions, are minority indirect investors in GI Partners. The conversion of the GI Partners’ founder units of the Operating Partnership to shares of our common stock was recorded as a reduction to minority interest and an increase to common stock and additional paid in capital based on the book value per unit in the accompanying condensed consolidated balance sheet.

During the three months ended June 30, 2006, third parties converted 675,665 Operating Partnership units into shares of our common stock. These conversions were recorded as a reduction to minority interest and an increase to common stock and additional paid in capital based on the book value per unit in the accompanying condensed consolidated balance sheet. We did not receive any cash proceeds upon conversion of these Operating Partnership units.

8

Under the terms of certain third parties’ (the eXchange parties) contribution agreement signed in the third quarter of 2004, we have agreed to indemnify each eXchange party against adverse tax consequences in the event the Operating Partnership directly or indirectly, sells, exchanges or otherwise disposes of (whether by way of merger, sale of assets or otherwise) in a taxable transaction any interest in 200 Paul Avenue 1-4 or 1100 Space Park Drive until the earlier of November 3, 2013 and the date on which these contributors hold less than 25% of the Units issued to them in the formation transactions consummated concurrently with the IPO. Under the eXchange parties’ contribution agreement, we have agreed to make $20.0 million of indebtedness available for guaranty by these parties until the earlier of November 3, 2013 and the date on which these contributors or certain transferees hold less than 25% of the Units issued to them in the formation transactions consummated concurrently with the IPO.

4. Investments in Real Estate Acquired During the Three Months Ended June 30, 2006

We made the following acquisitions of real estate assets during the three months ended June 30, 2006:

Property	Metropolitan Area	Date acquired	Purchase Price (in millions)
6800 Millcreek Drive	Toronto, Canada	April 13, 2006	$	16.0
101 Aquila Way	Atlanta	April 20, 2006		25.3
12001 North Freeway	Houston	April 26, 2006		30.5
14901 FAA Boulevard	Dallas	June 30, 2006		50.6
			$	122.4

The purchase prices of these acquisitions have been allocated on a preliminary basis to the assets acquired and the liabilities assumed. We expect to finalize our purchase price allocation no later than twelve months from the date of each acquisition.

5. Discontinued Operations

In June 2006, we classified 7979 East Tufts Avenue as “held for sale” upon committing to sell this property and we also ceased recording depreciation expense at that time.

The results of operations of 7979 East Tufts Avenue are reported as discontinued operations for all periods presented in the accompanying consolidated condensed financial statements. The following table summarizes the income and expense components that comprise loss from discontinued operations for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Operating revenues	$	1,660		$	1,490		$	3,151		$	3,034
Operating expenses		(1,476	)		(1,360	)		(2,949	)	$	(2,683	)
Interest and other income		4			4			7			7
Interest expense		(351	)		(351	)		(700	)		(702	)
Loss from discontinued operations before minority interests		(163	)		(217	)		(491	)		(344	)
Minority interests attributable to discontinued operations		73			133			264			212
Loss from discontinued operations	$	(90	)	$	(84	)	$	(227	)	$	(132	)

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The major classes of assets and liabilities associated with assets held for sale as of June 30, 2006 consist of the following (in thousands):

	June 30, 2006
Investments in real estate	$	37,389
Accumulated depreciation and amortization		(5,360	)
Net investments in real estate		32,029
Other assets		5,868
Assets held for sale	$	37,897
Mortgage loans		26,000
Other liabilities		2,081
Liabilities related to assets held for sale	$	28,081
Minority interests in consolidated joint venture related to assets and liabilities held for sale	$	191

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6. Debt

A summary of outstanding indebtedness as of June 30, 2006 and December 31, 2005, respectively, is as follows (in thousands):

Properties	Interest Rate at June 30, 2006		Maturity Date		Principal Outstanding June 30, 2006			Principal Outstanding December 31, 2005
Mortgage loans:
Secured Term Debt (1)	5.65	%	Nov. 11, 2014		$	151,905		$	152,918
350 East Cermak Road	1-month LIBOR + 2.20	%(2)(3)	Jun. 9, 2008	(4)		100,000			100,000
200 Paul Avenue 1-4	5.74	%	Oct. 8, 2015			81,000			81,000
2323 Bryan Street (5)	6.04	%	Nov. 6, 2009			56,931			57,282
34551 Ardenwood Boulevard 1-4, 2334 Lundy Place, 2440 Marsh Lane	1-month LIBOR + 1.59	%(2)	Aug. 9, 2006	(6)		43,000			43,000
7979 East Tufts Avenue	5.14	%	—			—			26,000	(7)
6 Braham Street	6.85	%	—			—			22,490	(8)
6 Braham Street	3-month GBP LIBOR + 0.90	%(2)	Apr. 10, 2011			24,399	(8)
4055 Valley View Lane	3-month LIBOR + 1.20	%(2)	Jan. 1, 2009			20,880			21,150
100 Technology Center Drive	3-month LIBOR + 1.70	%(2)	Apr. 1, 2009			20,000			20,000
Paul van Vlissingenstraat 16	3-month EURIBOR + 1.60	%(2)	Jul. 18, 2013			14,325	(9)		—
Chemin de l’Epinglier 2	3-month EURIBOR + 1.50	%(2)	Jul. 18, 2013			10,334	(9)		—
47700 Kato Road & 1055 Page Avenue	1-month LIBOR + 2.25	%	—			—			17,540
1125 Energy Park Drive	7.62	%(10)	Mar. 1, 2032			9,622			9,675
375 Riverside Parkway	3-month LIBOR + 1.85	%(2)	Nov. 25, 2006	(4)		8,775			8,775
600 West Seventh Street	5.80	%	Mar. 15, 2016			59,731			—
731 East Trade Street	8.22	%	Jul. 1, 2020			5,964			6,042
						606,866			565,872
Unsecured line of credit	1-month LIBOR + 1.50	%(11)	Oct. 31, 2008	(12)		211,554			181,000
Total principal outstanding						818,420			746,872
Loan premium—1125 Energy Park Drive and 731 East Trade Street mortgages						2,081			2,195
Total indebtedness					$	820,501		$	749,067

(1) This amount represents six mortgage loans secured by our interests in 36 NE 2nd Street, 3300 East Birch Street, 100 & 200 Quannapowitt Parkway, 300 Boulevard East, 4849 Alpha Road, and 11830 Webb Chapel Road. Each of these loans is cross-collateralized by the six properties.

(2) We have entered into interest rate swap agreements as a cash flow hedge for interest generated by these LIBOR, EURIBOR and GBP LIBOR based loans. The total notional amount of the swap agreements was $241.7 million as of June 30, 2006 and $192.9 million as of December 31, 2005. See note 10 for further information.

(3) This is the weighted average interest rate as of June 30, 2006. The first note, in a principal amount of $80.0 million, bears interest at a rate of 1-month LIBOR + 1.375% per annum and the second note, in a principal amount of $20.0 million, bears interest at a rate of 1-month LIBOR + 5.5% per annum.

(4) Two one-year extensions are available, which we may exercise if certain conditions are met.

(5) This loan is also secured by a $5.0 million letter of credit.

(6) The 13-month extension option has been exercised and a one-year extension is available.

(7) As of June 30, 2006 the outstanding principal for this loan is $26.0 million and is included in liabilities related to assets held for sale in our condensed consolidated balance sheet.

(8) Based on exchange rate of $1.85 to £1.00 as of June 30, 2006 and $1.72 to £1.00 as of December 31, 2005.

(9) Based on exchange rate of $1.28 to €1.00 as of June 30, 2006.

(10) If the loan is not repaid by March 1, 2012, the interest rate increases to the greater of 9.62% or the then treasury rate plus 2%.

(11) The interest rate under our unsecured line of credit equals either (i) LIBOR (ranging from 1- to 6-month LIBOR) plus a margin of between 1.250% and 1.625% or (ii) the greater of (x) the base rate announced by the lender and (y) the federal funds rate, plus a margin of between 0.375% - 0.750%. In each case, the margin is based on our leverage ratio. We incur a fee ranging from 0.15% to 0.25% for the unused portion of our unsecured line of credit.

(12) A one-year extension option is available.

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At June 30, 2006, our Operating Partnership has an unsecured revolving line of credit facility (credit facility) for $350.0 million (with the option to further increase to $500 million subject to receipt of lender commitments and satisfaction of other conditions). As of June 30, 2006 borrowings under the credit facility bear interest at a rate of 6.83%, which is based on 1-month LIBOR plus a margin ranging from 1.250% to 1.625%, depending on our Operating Partnership’s overall leverage and this margin was 1.50% as of June 30, 2006. The credit facility matures in October 2008, subject to a one-year extension option and has a $150.0 million sub-facility for foreign exchange advances in Euros and British Sterling. As of June 30, 2006, approximately $211.6 million was drawn under this facility. The credit facility contains various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments or merge with another company, and requirements to maintain financial coverage ratios and maintain a pool of unencumbered assets. In addition, except to enable us to maintain our status as a REIT for federal income tax purposes, we will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 95% of Funds From Operations, as defined, for such period, subject to certain other adjustments. As of June 30, 2006, we were in compliance with all the covenants. On July 24, 2006 we increased the size of our credit facility to $500 million.

Some of the loans impose penalties upon prepayment. The terms of the following mortgage loans do not permit prepayment of the loan prior to the dates listed below:

Loan	Date
2323 Bryan Street	August 2009
200 Paul Avenue 1-4	November 2010
1125 Energy Park Drive	December 2011
Secured Term Debt	September 2014

During the three and six months ended June 30, 2006 we capitalized interest of approximately $1.1 million and $1.8 million, respectively. We did not capitalize any interest in the same periods in 2005.

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7. Income per Share

The following is a summary of basic and diluted income per share (in thousands, except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Income from continuing operations	$	5,185		$	4,419		$	10,409		$	7,206
Preferred stock dividends		(3,445	)		(2,199	)		(6,890	)		(3,470	)
Income from continuing operations available to common stockholders		1,740			2,220			3,519			3,736
Loss from discontinued operations		(90	)		(84	)		(227	)		(132	)
Net income available to common stockholders	$	1,650		$	2,136		$	3,292		$	3,604
Weighted average shares outstanding—basic		33,372,240			21,421,300			30,453,957			21,421,300
Potentially dilutive common shares:
Stock options		398,235			163,613			393,566			138,658
Class C Units		101,869			—			96,804			—
Weighted average shares outstanding—diluted		33,872,344			21,584,913			30,944,327			21,559,958
Income (loss) per share - basic:
Income per share available to common stockholders	$	0.05		$	0.10		$	0.12		$	0.18
Loss per share from discontinued operations		—			—			(0.01	)		(0.01	)
Net income per share from continuing operations available to common stockholders	$	0.05		$	0.10		$	0.11		$	0.17
Income (loss) per share - diluted:
Income per share from continuing operations available to common stockholders	$	0.05		$	0.10		$	0.12		$	0.18
Loss per share from discontinued operations		—			—			(0.01	)		(0.01	)
Net income per share available to common stockholders	$	0.05		$	0.10		$	0.11		$	0.17

We have excluded common Operating Partnership units not owned by us from the computation of diluted earnings per share as their effect would not be dilutive. The weighted average number of common Operating Partnership units excluded was 27,087,007 and 31,521,431 units during the three months ended June 30, 2006 and 2005, respectively, and 29,290,860 and 31,521,431 units during the six months ended June 30, 2006 and 2005, respectively. In addition for the three and six months ended June 30, 2006, the effect of the assumed exercise of 52,500 potentially dilutive outstanding stock options was not included in the net income per share calculation as this effect is antidilutive.

8. Stockholders’ Equity

(a) Redeemable Preferred Stock

Underwriting discounts and commissions and other offering costs totaling approximately $7.0 million are reflected as a reduction to preferred stock in the accompanying condensed consolidated balance sheets.

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8.50% Series A Cumulative Redeemable Preferred Stock

We currently have outstanding 4,140,000 shares of our 8.50% series A cumulative redeemable preferred stock, or series A preferred stock. Dividends are cumulative on our series A preferred stock from the date of original issuance in the amount of $2.125 per share each year, which is equivalent to 8.50% of the $25.00 liquidation preference per share. Dividends on our series A preferred stock are payable quarterly in arrears. Our series A preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, our series A preferred stock will rank senior to our common stock with respect to the payment of distributions and other amounts and rank on parity with our Series B Preferred Stock. We are not allowed to redeem our series A preferred stock before February 9, 2010, except in limited circumstances to preserve our status as a REIT. On or after February 9, 2010, we may, at our option, redeem our series A preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series A preferred stock up to but excluding the redemption date. Holders of our series A preferred stock generally have no voting rights except for limited voting rights if we fail to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Our series A preferred stock is not convertible into or exchangeable for any other property or securities of our company.

7.875% Series B Cumulative Redeemable Preferred Stock

We currently have outstanding 2,530,000 shares of our 7.875% series B cumulative redeemable preferred stock, or series B preferred stock. Dividends are cumulative on our series B preferred stock from the date of original issuance in the amount of $1.96875 per share each year, which is equivalent to 7.875% of the $25.00 liquidation preference per share. Dividends on our series B preferred stock are payable quarterly in arrears. Our series B preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, our series B preferred stock will rank senior to our common stock with respect to the payment of distributions and other amounts and rank on parity with our Series A Preferred Stock. We are not allowed to redeem our series B preferred stock before July 26, 2010, except in limited circumstances to preserve our status as a REIT. On or after July 26, 2010, we may, at our option, redeem our series B preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series B preferred stock up to but excluding the redemption date. Holders of our series B preferred stock generally have no voting rights except for limited voting rights if we fail to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Our series B preferred stock is not convertible into or exchangeable for any other property or securities of our company.

(b) Shares and Units

A common unit and a share of our common stock have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the Operating Partnership. The common units are further discussed in note 3 and the long term incentive units are discussed in note 9, including the conversion of Operating Partnership common units into our common stock during the three and six months ended June 30, 2006.

In May 2006, we issued 4.0 million shares of common stock at a price of $24.40, which resulted in net proceeds of approximately $94.5 million after offering costs.

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(c) Dividends and Distributions

In 2006, we have declared the following dividends and equivalent distributions on common units in our Operating Partnership:

Date dividend and distribution declared	Share class	Dividend and distribution amount per share		Period covered	Dividend and distribution payable date	Annual equivalent rate of dividend and distribution per share		Dividend and distribution amount (in thousands)
February 27, 2006	Series A Preferred Stock	$	0.53125	January 1, 2006 to March 31, 2006	March 31, 2006 to shareholders on record on March 15, 2006.	$	2.125	$	2,199
February 27, 2006	Series B Preferred Stock	$	0.49219	January 1, 2006 to March 31, 2006	March 31, 2006 to shareholders on record on March 15, 2006.	$	1.969		1,246
February 27, 2006	Common stock and operating partnership common units and long term incentive units.	$	0.26500	January 1, 2006 to March 31, 2006	March 31, 2006 to shareholders on record on March 15, 2006.	$	1.060		15,642
May 1, 2006	Series A Preferred Stock	$	0.53125	April 1, 2006 to June 30, 2006	June 30, 2006 to shareholders on record on June 15, 2006.	$	2.125		2,199
May 1, 2006	Series B Preferred Stock	$	0.49219	April 1, 2006 to June 30, 2006	June 30, 2006 to shareholders on record on June 15, 2006.	$	1.969		1,246
May 1, 2006	Common stock and operating partnership common units and long term incentive units.	$	0.26500	April 1, 2006 to June 30, 2006	June 30, 2006 to shareholders on record on June 15, 2006.	$	1.060		16,709
Total 2006 dividends and distributions declared through June 30, 2006:
Series A Preferred Stock									4,398
Series B Preferred Stock									2,492
Common stock and operating partnership common units and long term incentive units.									32,351
								$	39,241

(d) Stock Options

The fair value of each option granted under the 2004 Incentive Award Plan is estimated on the date of the grant using the Black-Scholes option-pricing model with the weighted-average assumptions listed below for grants in 2006 and 2005. The fair values are being expensed on a straight-line basis over the vesting period of the options, which ranges from four to five years. The expense recorded for the three months ended June 30, 2006 and 2005 was approximately $76,000 and $44,000, respectively, and was $150,000 and $96,000 during the six months ended June 30, 2006 and 2005, respectively. Unearned compensation representing the unvested portion of the stock options totaled $1.1 million and $1.0 million as of June 30, 2006 and December 31, 2005, respectively. We expect to recognize this unearned compensation over the next 3.4 years on a weighted average basis.

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The following table sets forth the weighted-average assumptions used to calculate the fair value of the stock options granted during the three and six months ended June 30, 2006 and 2005:

	Three and Six Months Ended June 30,
	2006		2005
Dividend yield	3.79	%	6.88	%
Expected life of option	120 months		120 months
Risk-free interest rate	4.59	%	4.13	%
Expected stock price volatility	25.02	%	20.00	%

The following table summarizes the 2004 Incentive Award Plan’s stock option activity for the six months ended June 30, 2006:

	Six months ended June 30, 2006
	Shares		Weighted average exercise price
Options outstanding, January 1, 2006	939,841		$	13.27
Granted	52,500			28.09
Exercised	(35,704	)		12.67
Forfeited	(25,954	)		12.34
Options outstanding, June 30, 2006	930,683		$	14.16
Exercisable, end of period	147,422		$	12.14
Weighted-average fair value of options granted during the period			$	6.42

We issued newly created common shares for the common stock options exercised during the six months ended June 30, 2006. The intrinsic value of options exercised in the six months ended June 30, 2006 was approximately $0.5 million.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2006:

Options outstanding							Options exercisable
Exercise price	Number outstanding	Weighted average remaining contractual life	Weighted average exercise price		Aggregate Intrinsic Value		Number exercisable	Weighted average exercise price		Aggregate Intrinsic Value
$12.00-13.02	704,933	8.34	$	12.06	$	8,902,505	140,672	$	12.04	$	1,779,709
$13.47-14.50	53,250	8.59		14.19		559,355	6,750		14.31		70,070
$20.37	120,000	9.36		20.37		518,400	—		20.37		—
$28.09	52,500	9.66		28.09		—	—		—		—
	930,683	8.56	$	14.16	$	9,980,260	147,422	$	12.14	$	1,849,779

9. Incentive Plan

(a) Incentive Award Plan

Our 2004 Incentive Award Plan provides for the grant of incentive awards to employees, directors and consultants. Awards issuable under the 2004 Incentive Award Plan include stock options, restricted stock, dividend equivalents, stock appreciation rights, long-term incentive units, cash performance bonuses and other incentive awards. Only employees are eligible to receive incentive stock options under the 2004 Incentive Award Plan. We have reserved a total of 4,474,102 shares of common stock for issuance pursuant to the 2004 Incentive Award Plan, subject to certain adjustments set forth in the 2004 Incentive Award Plan. As of June 30, 2006, 560,493 shares of common stock or awards convertible into or

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exchangeable for common stock remained available for future issuance under the 2004 Incentive Award Plan. Each long-term incentive and Class C unit issued under the 2004 Incentive Award Plan will count as one share of common stock for purposes of calculating the limit on shares that may be issued under the 2004 Incentive Award Plan and the individual award limit discussed below.

(b) Long Term Incentive Units

Long-term incentive units may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. Long-term incentive units, whether vested or not, will receive the same quarterly per unit distributions as common units in the Operating Partnership, which equal per share distributions on our common stock. Initially, long-term incentive units do not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in the Operating Partnership for all purposes, and therefore accrete to an economic value for participants equivalent to our common stock on a one-for-one basis. If such parity is reached, vested long-term incentive units may be converted into an equal number of common units of the Operating Partnership at any time, and thereafter enjoy all the rights of common units of the Operating Partnership.

In connection with the IPO, an aggregate of 1,490,561 of fully vested long-term incentive units were issued and compensation expense totaling $17.9 million was recorded at the completion of the IPO. Parity was reached for these units on February 9, 2005 upon completion of our series A preferred stock offering.

(c) Class C Profits Interests Units

During the fourth quarter of 2005, we granted to each of our named executive officers and certain other employees an award of Class C Profits Interest Units (Class C Units) of the Operating Partnership under our 2004 Incentive Award Plan. If the performance condition and the other vesting conditions are satisfied with respect to a Class C Unit, as described below, the Class C Unit will be treated in the same manner as the existing long-term incentive units issued by the Operating Partnership.

The Class C Units subject to each award will vest based on the achievement of a 10% or greater compound annual total shareholder return, as defined, for the period from the grant date through earlier of September 30, 2008 and the date of a change of control of our Company (the Performance Condition) combined with the employee’s continued service with our company or the Operating Partnership through September 30, 2010. Upon achievement of the Performance Condition, the Class C units will receive the same quarterly per unit distribution as common units in the Operating Partnership.

The aggregate amount of the performance award pool will be equal to 7% of the excess shareholder value, as defined, created during the applicable performance period, but in no event will the amount of the pool exceed the lesser of $40,000,000 or the value of 2.5% of the total number of shares of our common stock and limited partnership units of the Operating Partnership at the end of the performance period.

Except in the event of a change in control of our company, 60% of the Class C Units that satisfy the Performance Condition will vest at the end of the three year performance period and an additional 1/60th of such Class C Units will vest on the date of each monthly anniversary thereafter, provided that the employee’s service has not terminated prior to the applicable vesting date.

To the extent that any Class C Units fail to satisfy the Performance Condition, such Class C Units will automatically be cancelled and forfeited by the employee. In addition, any Class C Units which are not eligible for pro rata vesting in the event of a termination of the employee’s employment due to death or disability or without cause (or for good reason, if applicable) will automatically be cancelled and forfeited upon a termination of the employee’s employment.

In the event that the value of the employee’s allocated portion of the award pool that satisfies the performance condition equates to a number of Class C Units that is greater than the number of Class C Units awarded to the executive, we will make an additional payment to the executive in the form of a number of shares of our restricted stock equal to the difference subject to the same vesting requirements as the Class C Units.

A portion of the award pool remains unallocated and available for grants to other future senior executives or to the then

17

current grantees (including the named executive officers) if the Compensation Committee determines that the award pool percentage allocated to one or more of such executives should be increased.

On October 26, 2005, the Operating Partnership amended and restated its agreement of limited partnership in order to create the Class C Units. As of June 30, 2006, and December 31, 2005, 1,180,000 Class C units had been awarded to our executive officers and other employees, and 80,000 Class C units are currently available for future awards. The fair value of these awards of approximately $4.0 million will be recognized as compensation expense on a straight line basis over the expected service period of five years. The unearned compensation as of June 30, 2006 and December 31, 2005 was $3.4 million and $3.8 million respectively, respectively. As of June 30, 2006 and December 31, 2005, none of the above awards had vested. We recognized compensation expense related to these Class C units of $0.2 million and $0.4 million in the three and six months ended June 30, 2006, respectively. If the Performance Condition is not met, the unamortized amount will be recognized as an expense at that time.

10. Derivative Instruments

(a) Interest rate swap agreements

As of June 30, 2006, we were a party to interest rate swap agreements which hedge variability in cash flows related to LIBOR and EURIBOR based mortgage loans. The fair value of these derivatives was $4.7 million and $3.3 million at June 30, 2006 and December 31, 2005, respectively.

As of June 30, 2006, we estimate that $2.3 million of accumulated other comprehensive income will be reclassified to earnings as a reduction to interest expense during the twelve months ending June 30, 2007 as the hedged forecasted transactions impact earnings.

The table below summarizes the terms of these interest rate swaps and their fair values as of June 30, 2006 (in thousands):

Current Notional Amount	Strike Rate		Effective Date	Expiration Date	Fair Value
$  43,000	3.250	%	Nov. 26, 2004	Sept. 15, 2006	$	189
20,835	3.754		Nov. 26, 2004	Jan. 2, 2009		812
20,000	3.824		Nov. 26, 2004	Apr. 1, 2009		856
8,775	3.331		Nov. 26, 2004	Dec. 1, 2006		77
100,000	4.025		May 26, 2005	Jun. 15, 2008		2,662
24,399	4.944		Jul. 10, 2006	Apr. 10, 2011		158
14,325	3.981		May 17, 2006	Jul. 18, 2013		28
10,334	4.070		Jun. 23, 2006	Jul. 18, 2013		(33	)
$241,668					$	4,749

We have two LIBOR interest rate caps that are not designated as hedges. The fair values of the caps were immaterial as of June 30, 2006 and December 31, 2005.

(b) Foreign currency contract

On January 4, 2006, we received net proceeds of $0.7 million when we terminated a foreign currency forward sale contract entered into on January 24, 2005 which was used to hedge our equity investment in 6 Braham Street, located in London, England. This forward contract was designated as a net investment hedge. The cumulative translation adjustment amounts related to the net investment hedge (including the $0.7 million received upon termination in January 2006) are included in other accumulated comprehensive income and will be reclassified to earnings when the hedged investment is sold or liquidated.

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11. Related Party Transactions

We paid CB Richard Ellis, an affiliate of GI Partners, building management fees and leasing commissions. Fees incurred were $1.1 million and $0.2 million for the three months ended June 30, 2006 and 2005, respectively and $1.5 million and $0.6 million for the six months ended June 30, 2006 and 2005, respectively.

In April 2005, we entered into two agreements with Linc Facility Services, LLC, or LFS primarily for personnel providing for operations and maintenance repairs of the mechanical, electrical, plumbing and general building service systems of five of our properties. LFS belongs to The Linc Group, which GI Partners has owned since late 2003. Our consolidated statement of operations includes amounts related to these fees of $0.5 million and $0.2 million for the three months ended June 30, 2006 and 2005, respectively, and $0.7 million and $0.2 million for the six months ended June 30, 2006 and 2005, respectively.

GI Partners distributed 4,030,184 Operating Partnership common units to its owners and these units were converted into shares of our common stock on March 29, 2006 and sold to third parties on April 3, 2006. Our condensed consolidated statement of operations included general and administrative expenses representing legal and other costs directly related to facilitating this conversion of $0.3 million during the three months ended March 31, 2006. During the three months ended June 30, 2006 GI Partners agreed to reimburse us for these costs which we recognized as a reduction in general and administrative expenses in the accompanying condensed consolidated statement of operations for the three months ended June 30, 2006.

12. Commitments and Contingencies

The seller of 350 East Cermak Road can earn an additional $20.0 million by obtaining a change in the real estate tax classification prior to December 31, 2006. We have also agreed with the seller to share a portion, not to exceed $135,000 per month, of rental revenue, adjusted for our costs to lease the premises, from the lease of the 260,000 square feet of space held for redevelopment. This revenue sharing agreement will terminate in May 2013. We have recorded no liability for these contingent liabilities on our condensed consolidated balance sheet at June 30, 2006, as the events causing this contingency had not occurred at June 30, 2006.

As part of the acquisition of Paul van Vlissingenstraat 16, we entered into an agreement with the seller, whereby, for twelve months from the execution of the purchase and sale agreement, our purchase price may increase depending upon future leasing activity as a result of actions by the seller. The amount of the potential commitment is not currently quantifiable as it is based on a 10% cap rate on the incremental operating income from qualifying new leases that are closed or binding during the participation period. We have recorded no liability for this contingent liability on our consolidated balance sheet at June 30, 2006 as the events causing this contingency had not occurred at June 30, 2006.

As part of the acquisition of Clonshaugh Industrial Estate, we entered into an agreement with the seller whereby the seller is entitled to receive 40% of the net rental income generated by the existing building, after we have received a 9% return on all capital invested in the property. As of February 6, 2006 the date we acquired this property, we have estimated the present value of these expected payments over the 10 year lease term to be approximately $1.1 million and this value has been capitalized with a corresponding amount recorded in accounts payable and other liabilities. No amounts have been paid to the seller as at June 30, 2006.

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As of June 30, 2006 we had signed purchase agreements to acquire the following properties:

Location	Purchase price ($ millions)			Purchase completed on:
Properties acquired between June 30, 2006 and August 4, 2006:
Gyroscoopweg 2E-2F in Amsterdam, Netherlands (1)	$	11.3		27-Jul-06
Properties not acquired as of August 4, 2006:
Miami		5.6	(2)
Boston		8.7	(2)
Tempe, Arizona		9.8	(2)
		24.1
Total	$	35.4

(1) The purchase price was approximately €8.9 million and is translated at the rate of exchange on the date we acquired the property.

(2) As we are completing due diligence for these potential acquisitions we can give no assurance that we will complete their purchase.

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. As of June 30, 2006, we had commitments under leases in effect for approximately $38.3 million of tenant improvement costs and leasing commissions all of which we expect to incur in 2006.

13. Tenant leases

Revenues recognized from Savvis Communications comprised approximately 12.2% and 8.8% of total operating revenues, for the three months ended June 30, 2006 and 2005, respectively, and comprised approximately 12.6% and 9.9% of total revenues, for the six months ended June 30, 2006 and 2005, respectively. Revenues recognized from Qwest Communications International, Inc., comprised approximately 11.5% and 9.8% of total operating revenues, for the three months ended June 30, 2006 and 2005, respectively, and comprised approximately 11.9% and 9.0% of total operating revenues, for the six months ended June 30, 2006 and 2005, respectively. Other than noted here, for the three and six months ended June 30, 2006 and 2005 no single tenant comprised more than 10% of total operating revenues.

14. Subsequent Events

On July 12, 2006, we completed the sale of 7979 East Tufts Avenue for $60.4 million, realizing a gain of approximately $17 million, after the deduction of minority interests.

On July 14, 2006 we signed a purchase agreement to acquire a property in Atlanta for approximately $6.1 million.

On July 24, 2006 we increased the amount of our credit facility from $350 million to $500 million.

On July 25, 2006 we acquired 120 East Van Buren Street, a property located in Phoenix for approximately $175.0 million. This property is the leading internet gateway in Phoenix and a premier datacenter facility for companies with operations in the Southwestern United States.

On July 27, 2006 we acquired a property in Amsterdam, Netherlands for approximately €8.9 million (approximately $11.3 million based on the rate of exchange on July 27, 2006). Simultaneous with this property purchase we closed a €7.1 million 7-year loan with 1.5% amortization per annum at a fixed rate of 5.49% based on the swap rate.

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On July 31, 2006, we declared the following dividends per share and the Operating Partnership declared an equivalent distribution per unit.

Share Class	Series A Preferred Stock		Series B Preferred Stock		Common stock
Dividend and distribution amount	$	0.53125	$	0.49219	$	0.265
Dividend and distribution payable date		October 2, 2006		October 2, 2006		October 2, 2006
Dividend payable to shareholders of record on:		September 15, 2006		September 15, 2006		September 15, 2006
Annual equivalent rate of dividend and distribution	$	2.125	$	1.969	$	1.060

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report. This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following: adverse economic or real estate developments in our markets or technology related real estate; general and local economic conditions; defaults on or non-renewal of leases by tenants; increased interest rates and operating costs; our inability to manage growth effectively; our failure to obtain necessary outside financing; decreased rental rates or increased vacancy rates; difficulties in identifying properties to acquire and completing acquisitions; our failure to successfully operate acquired properties and operations; our failure to successfully redevelop properties acquired for that purpose; our failure to maintain our status as a REIT; possible adverse changes to tax laws; environmental uncertainties and risks related to natural disasters; financial market fluctuations; changes in foreign currency exchange rates; and changes in real estate and zoning laws and increases in real property tax rates.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this report. In addition, we discussed a number of material risks in our annual report on Form 10-K for the year ended December 31, 2005. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

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Overview

Our Company. We completed our initial public offering, (IPO) of common stock on November 3, 2004. We believe that we have operated in a manner that has enabled us to qualify, and have elected to be treated, as a Real Estate Investment Trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986 as amended (the Code). Our company was formed on March 9, 2004. During the period from our formation until we commenced operations in connection with the completion of our IPO we did not have any corporate activity other than the issuance of shares of common stock in connection with the initial capitalization of the company. Any reference to “our”, “we” and “us” in this filing includes our company and our predecessor. The predecessor is comprised of the real estate activities and holdings of Global Innovation Partners LLC (GI Partners) related to the properties in our portfolio.

Business and strategy. Our primary business objectives are to maximize sustainable long-term growth in earnings, funds from operations and cash flow per share and to maximize returns to our stockholders. We expect to achieve our objectives by focusing on our core business of investing in technology-related real estate. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of corporate enterprise data center and technology industry tenants. Most of our properties contain fully redundant electrical supply systems, multiple power feeds, above-standard precision cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. We focus solely on technology-related real estate because we believe that the growth in corporate data center adoption and the technology-related real estate industry generally will be superior to that of the overall economy.

Since the acquisition of our first property in 2002 and through June 30, 2006, we acquired an aggregate of 50 technology-related real estate properties with 10.3 million net rentable square feet including approximately 1.2 million square feet of space held for redevelopment. We have developed detailed, standardized procedures for evaluating acquisitions to ensure that they meet our financial and other criteria. We expect to continue to acquire additional assets as a key part of our growth strategy. We intend to aggressively manage and lease our assets to increase their cash flow.

We may acquire properties subject to existing mortgage financing and other indebtedness or new indebtedness may be incurred in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any dividends with respect to our common stock and our preferred stock. We currently intend to limit our indebtedness to 60% of our total market capitalization and, based on the closing price of our common stock on June 30, 2006 of $24.69, our ratio of debt to total market capitalization was approximately 32% as of June 30, 2006. Our total market capitalization is defined as the sum of the market value of our outstanding common stock (which may decrease, thereby increasing our debt to total market capitalization ratio), excluding options issued under our incentive award plan, plus the liquidation value of our preferred stock, plus the aggregate value of the units not held by us (with each unit value equal to the market value of one share of our common stock), plus the book value of our total consolidated indebtedness excluding a $26.0 million loan related to 7979 East Tufts Avenue, a property classified as held for sale as of June 30, 2006 and which we sold on July 12, 2006.

Revenue Base. As of June 30, 2006, we owned 50 properties through our Operating Partnership. These properties are mainly located throughout the U.S., with four properties located in Europe and one property in Canada. We acquired our first portfolio property in January 2002 and have added properties as follows:

Year Ended December 31:	Properties acquired	Net rentable square feet acquired	Space held for redevelopment square feet at June 30, 2006 (1)
2002	5	1,125,292	19,890
2003	8	1,540,806	123,891
2004	11	2,796,275	88,238
2005	20	2,657,572	855,139
Six months ended June 30, 2006	6	1,012,412	69,279
Properties owned at June 30, 2006	50	9,132,357	1,156,437

(1) Redevelopment space is unoccupied space that requires significant capital investment in order to develop data center

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facilities that are ready for use. Most often this is shell space. However, in certain circumstances this may include partially built data center space that was not completed by previous ownership and requires a large capital investment in order to build out the space.

As of June 30, 2006, the properties in our portfolio were approximately 94.7% leased excluding 1.2 million square feet held for redevelopment. Due to the capital intensive and long term nature of the operations being supported, our lease terms are generally longer than standard commercial leases. At June 30, 2006, our average lease term was approximately 12 years, with an average of approximately 7 years remaining. For current and future colocation facilities, the typical lease is shorter. Our lease expirations through 2008 are 7.1% of net rentable square feet excluding space held for redevelopment as of June 30, 2006. Operating revenues from properties outside the United States were $5.5 million and $2.2 million for the six months ended June 30, 2006 and 2005, respectively.

Operating expense. Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground leases. Since the consummation of our IPO, our asset management function has been internalized and we are incurring our general and administrative expenses directly. Prior to April 2005, we had a transition services agreement with CB Richard Ellis Investors with respect to transitional accounting and other services. In addition, as a public company, we are incurring significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of Sarbanes-Oxley Act of 2002. In addition, we engage third-party property managers to manage most of our properties. As of June 30, 2006, 34 of our properties were managed by CB Richard Ellis, an affiliate of GI Partners.

Formation Transactions. In connection with the completion of our IPO, our Operating Partnership received contributions of direct and indirect interests in 23 of the properties in our portfolio in exchange for consideration that included cash, assumption of debt, and an aggregate of 38,262,206 units in our Operating Partnership (with the cash, assumed debt and units having an aggregate value of $1,097.7 million based on the IPO price per share of $12.00).

We accounted for the ownership interests contributed to us by GI Partners in exchange for a partnership interest in our Operating Partnership as a reorganization of entities under common control in a manner similar to a pooling of interests. Accordingly, the assets and liabilities contributed by GI Partners are accounted for by our Operating Partnership at GI Partners’ historical cost. We utilized purchase accounting to account for the acquisition of (i) ownership interests in 200 Paul Avenue 1-4 and 1100 Space Park Drive, which were contributed to us by third parties in exchange for interests in our Operating Partnership, cash and the assumption of debt and (ii) the 10% minority ownership interest in 2323 Bryan Street, which was contributed to us by our joint venture partner in exchange for an interest in our Operating Partnership and the repayment of debt. Accordingly, the purchase price for these interests, which are equal to the value of the Operating Partnership units that we issued in exchange for these interests plus cash paid and debt assumed, were allocated to the assets acquired and liabilities assumed based on the fair value of the assets and liabilities.

Factors Which May Influence Future Results of Operations

Rental income. The amount of net rental income generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from lease terminations. Excluding 1.2 million square feet held for redevelopment, as of June 30, 2006, the occupancy rate in the properties in our portfolio was approximately 94.7% of our net rentable square feet.

The amount of rental income generated by us also depends on our ability to maintain or increase rental rates at our properties. Included in our approximately 9.1 million square feet of net rentable square feet at June 30, 2006 is approximately 97,000 net rentable square feet of space with extensive data center improvements that is currently, or will shortly be, available for lease. We had leased approximately 281,000 square feet of similar space at June 30, 2006. Rather than leasing all of this space to large single tenants, we are subdividing some of it for multi-tenant turn-key data center use, with tenants averaging between 100 and 15,000 square feet of net rentable space. Multi-tenant turn-key data centers are effective solutions for tenants who lack the expertise or capital budget to provide their own extensive data center infrastructure and security. As experts in data center construction and operations we are able to lease space to these tenants at a significant premium over other uses. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

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In addition, as of June 30, 2006, we had approximately 1.2 million square feet of redevelopment space, or approximately 11% of the total space in our portfolio, including three vacant properties comprising approximately 424,800 square feet. Redevelopment space requires significant capital investment in order to develop data center facilities that are ready for use, and in addition, we may require additional time or encounter delays in securing tenants for redevelopment space. We intend to purchase additional vacant properties and properties with vacant redevelopment space in the future.

Future economic downturns or regional downturns affecting our submarkets or downturns in the technology-related real estate industry that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. At June 30, 2006 one tenant, VarTec Telecom, Inc. (VarTec) was in bankruptcy and leased approximately 149,000 square feet of net rentable space across two separate properties as follows:

• VarTec’s lease of approximately 135,300 square feet at 2440 Marsh Lane, was modified in June 2006, with a new lease expiration date of September 30, 2006. We are currently in discussions with Comtel Telcom (the purchaser of essentially all of VarTec’s operating assets) to remain in the current data center space at 2440 Marsh Lane.

• Var Tec also leases approximately 13,600 square feet at 350 East Cermak Road. On April 27, 2006 we were notified that VarTec intends to petition the court to accept this lease. As of June 30, 2006, the carrying values of lease related net assets relating to this lease was approximately $2.3 million. We will continue to monitor events to determine if a write off of these assets is appropriate.

In January 2006, VarTec notified us of its intention to file a motion to reject its lease of approximately 8,600 square feet at 2323 Bryan Street. The motion was granted by the bankruptcy court on February 21, 2006 and as such, this lease was rejected effective February 28, 2006.

Scheduled lease expirations. Our ability to re-lease expiring space will impact our results of operations. In addition to approximately 0.5 million square feet of available space in our portfolio excluding approximately 1.2 million square feet available for redevelopment as of June 30, 2006, leases representing approximately 2.7% and 1.2% of the square footage of our portfolio, excluding redevelopment space, are scheduled to expire during the periods ending December 31, 2006 and 2007, respectively.

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Conditions in significant markets. As of June 30, 2006 our portfolio was geographically concentrated in the following metropolitan markets:

Metropolitan Market	Percentage of total gross annualized rent (1)
Silicon Valley	21.3	%
Dallas	16.4	%
Chicago	12.6	%
Los Angeles	7.9	%
San Francisco	7.5	%
Boston	5.5	%
Philadelphia	4.5	%
New York	4.5	%
Other	19.8	%
	100.0	%

(1) Gross annualized rent is monthly contractual rent under existing leases as of the stated date multiplied by 12.

Operating expenses. Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground leases. We are also incurring general and administrative expenses, including expenses relating to the internalization of our asset management function, as well as significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of the Sarbanes-Oxley Act. Increases or decreases in such operating expenses will impact our overall performance. As a relatively new public company, we expect to incur additional operating expenses as we expand our various business functions.

Interest Rates. At June 30, 2006, we had approximately $453.3 million of variable rate debt, of which approximately $241.7 million is subject to interest rate swap agreements. Since 2002, the United States Federal Reserve has been increasing short term interest rates, which has recently had a significant upward impact on shorter-term interest rates, including the interest rates that our variable rate debt is based upon. Continued increases in interest rates may increase our interest expense and therefore negatively affect our financial condition and results of operations. Increased interest rates may also increase the risk that the counterparties to our swap agreements will default on their obligations, which would further increase our interest expense.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses in the reporting period. Our actual results may differ from these estimates. We have provided a summary of our significant accounting policies in Note 2 to our consolidated financial statements included elsewhere in this report. We describe below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and consolidated results of operations. Our management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions management believes are reasonable as of the date on the front cover of this report.

Investments in Real Estate

Acquisition of real estate. The price that we pay to acquire a property is impacted by many factors including the condition of the property and improvements, the occupancy of the building, the existence of above and below market tenant leases, the creditworthiness of the tenants, favorable or unfavorable financing, above or below market ground leases and numerous other factors. Accordingly, we are required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the assets acquired and liabilities assumed based on our estimate of the fair values of such assets and liabilities. This includes determining the value of the property and improvements, land, any ground leases,

25

tenant improvements, in-place tenant leases, tenant relationships, the value (or negative value) of above (or below) market leases and any debt assumed from the seller or loans made by the seller to us. Each of these estimates requires a great deal of judgment and some of the estimates involve complex calculations. Our allocation methodology is summarized in Note 2 to our consolidated financial statements. These allocation assessments have a direct impact on our results of operations. For example, if we were to allocate more value to land, there would be no depreciation with respect to such amount. If we were to allocate more value to the property as opposed to allocating to the value of tenant leases, this amount would be recognized as an expense over a much longer period of time. This potential effect occurs because the amounts allocated to property are depreciated over the estimated lives of the property whereas amounts allocated to tenant leases are amortized over the terms of the leases. Additionally, the amortization of value (or negative value) assigned to above (or below) market rate leases is recorded as an adjustment to rental revenue as compared to amortization of the value of in-place leases and tenant relationships, which is included in depreciation and amortization in our consolidated statements of operations.

Useful lives of assets. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate we would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

Asset impairment evaluation. We review the carrying value of our properties when circumstances, such as adverse market conditions, indicate potential impairment may exist. We base our review on an estimate of the future cash flows (excluding interest charges) expected to result from the real estate investment’s use and eventual disposition. We consider factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If our evaluation indicates that we may be unable to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. These losses have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether an asset has been impaired, our strategy of holding properties over the long-term directly decreases the likelihood of recording an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that impairment has occurred, the affected assets must be reduced to their fair value. No such impairment losses have been recognized to date.

We estimate the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs, similar to the income approach that is commonly utilized by appraisers.

Capitalization of costs.

We capitalize pre-acquisition costs related to probable property acquisitions. We also capitalize direct and indirect costs related to construction and development, including property taxes, insurance and financing costs relating to space under development. Costs previously capitalized related to any property acquisitions no longer considered probable are written off. The selection of costs to capitalize and which acquisitions are probable is subjective and depends on many assumptions including the timing of potential acquisitions and the probability that future acquisitions occur. If we made different assumptions in this respect we would have a different amount of capitalized costs in the periods presented leading to different net income.

Revenue Recognition

Rental income is recognized using the straight-line method over the terms of the tenant leases. Deferred rents included in our balance sheets represent the aggregate excess of rental revenue recognized on a straight-line basis over the contractual rental payments that would be recognized under the remaining terms of the leases. Our leases generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. Such reimbursements are recognized in the period that the expenses are incurred. Lease termination fees are recognized over the remaining term of the lease, effective as of the date the lease modification is finalized, assuming collection is not considered doubtful. As discussed above, we recognize amortization of the value of acquired above or below market tenant

26

leases as a reduction of rental income in the case of above market leases or an increase to rental revenue in the case of below market leases.

We must make subjective estimates as to when our revenue is earned and the collectibility of our accounts receivable related to minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. We specifically analyze accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period.

Share-based awards

We recognize compensation expense related to share-based awards. We generally amortize this compensation expense over the vesting period of the award. The calculation of the fair value of share-based awards is subjective and requires several assumptions over such items as expected stock volatility, dividend payments and future company results. These assumptions have a direct impact on our net income because a higher share-based awards amount would result in lower net income for a particular period.

Results of Operations

The discussion below relates to our financial condition and results of operations for the three and six months ended June 30, 2006 and 2005. A summary of our results for the three and six months ended June 30, 2006 and 2005 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Statement of Operations Data:
Total operating revenues	$	64,708		$	48,059		$	124,200		$	86,026
Total operating expenses		(46,117	)		(31,540	)		(87,496	)		(56,719	)
Operating income		18,591			16,519			36,704			29,307
Other Income (expenses)		(11,993	)		(8,828	)		(22,860	)		(16,594	)
Income from continuing operations before minority interests	$	6,598		$	7,691		$	13,844		$	12,713

Our property portfolio has experienced consistent and significant growth since the first property acquisition in January 2002. As a result of such growth, a period-to-period comparison of our financial performance focuses primarily on the impact on our revenues and expenses resulting from the new property additions to our portfolio. On a “same space” property basis, our revenues and expenses have remained substantially stable as a result of the generally consistent occupancy rates at our properties. The following table identifies each of the properties in our portfolio acquired from December 31, 2003 through June 30, 2006:

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Acquired Properties	Acquisition Date	Redevelopment Space (1)	Net Rentable Square Feet Excluding Redevelopment Space	Square Feet including Redevelopment Space	Occupancy Rate June 30, 2006 (2)
At December 31, 2003 (13 properties)		143,781	2,666,098	2,809,879	95.5	%
Year Ended December 31, 2004
100 Technology Center Drive	Feb-04	—	197,000	197,000	100.0
4849 Alpha Road	Apr-04	—	125,538	125,538	100.0
600 West Seventh Street	May-04	59,319	430,403	489,722	97.3
2045 & 2055 LaFayette Street	May-04	—	300,000	300,000	100.0
100 & 200 Quannapowitt Parkway	Jun-04	—	388,000	388,000	94.9
11830 Webb Chapel Road	Aug-04	—	365,647	365,647	95.0
150 South First Street	Sep-04	—	179,761	179,761	100.0
3065 Gold Camp Drive	Oct-04	—	62,957	62,957	100.0
200 Paul Avenue 1-4	Nov-04	28,919	498,761	527,680	95.1
1100 Space Park Drive	Nov-04	—	165,297	165,297	100.0
3015 Winona Avenue	Dec-04	—	82,911	82,911	100.0
Subtotal		88,238	2,796,275	2,884,513	97.3
Year Ended December 31, 2005
833 Chestnut Street	Mar-05	119,660	535,098	654,758	75.5
1125 Energy Park Drive	Mar-05	—	112,827	112,827	100.0
350 East Cermak Road	May-05	263,208	870,183	1,133,391	93.3
8534 Concord Center Drive	Jun-05	—	82,229	82,229	100.0
2401 Walsh Street	Jun-05	—	167,932	167,932	100.0
200 North Nash Street	Jun-05	—	113,606	113,606	100.0
2403 Walsh Street	Jun-05	—	103,940	103,940	100.0
4700 Old Ironsides Drive	Jun-05	—	90,139	90,139	100.0
4650 Old Ironsides Drive	Jun-05	—	84,383	84,383	100.0
731 East Trade Street	Aug-05	—	40,879	40,879	100.0
113 North Myers	Aug-05	9,707	19,511	29,218	100.0
125 North Myers	Aug-05	13,242	12,160	25,402	100.0
Paul van Vlissingenstraat 16	Aug-05	35,000	77,472	112,472	58.8
600-780 S. Federal	Sep-05	—	161,547	161,547	83.6
115 Second Avenue	Oct-05	56,236	10,494	66,730	—
Chemin de l’Epinglier 2	Nov-05	—	59,190	59,190	100.0
251 Exchange Place	Nov-05	—	70,982	70,982	100.0
7500 Metro Center Drive	Dec-05	74,962	—	74,962	—
7520 Metro Center Drive	Dec-05	—	45,000	45,000	100.0
3 Corporate Place	Dec-05	283,124	—	283,124	—
Subtotal		855,139	2,657,572	3,512,711	90.3
Six Months Ended June 30, 2006
4025 Midway Road	Jan-06	50,000	49,947	99,947	40.5
Clonshaugh Industrial Estate	Feb-06	—	20,000	20,000	100.0
6800 Millcreek Drive	Apr-06	—	83,758	83,758	100.0
101 Aquila Way	Apr-06	—	313,581	313,581	100.0
12001 North Freeway	Apr-06	19,279	281,426	300,705	98.8
14901 FAA Boulevard	Jun-06	—	263,700	263,700	100.0
Subtotal		69,279	1,012,412	1,081,691	96.7
Total		1,156,437	9,132,357	10,288,794	94.7	%

(1) Redevelopment space requires significant capital investment in order to develop data center facilities that are ready for use. Most often this is shell space. However, in certain circumstances this may include partially built data center space that was not completed by previous ownership and requires a large capital investment in order to build out the space.

(2) Occupancy rates exclude redevelopment space.

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Comparison of the Three Months Ended June 30, 2006 to the Three Months Ended June 30, 2005 and the Six Months Ended June 30, 2006 to the Six Months Ended June 30, 2005

Portfolio

As of June 30, 2006, our portfolio consisted of 50 properties, including one property disclosed as held for sale, with an aggregate of 10.3 million net rentable square feet including 1.2 million square feet held for redevelopment compared to a portfolio consisting of 33 properties with an aggregate of 8.2 million net rentable square feet including 0.6 million square feet held for redevelopment as of June 30, 2005. The increase in our portfolio reflects the acquisition of 17 properties in the twelve months ended June 30, 2006.

Operating revenues

Operating revenues during the three and six months ended June 30, 2006 and 2005 were as follows (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental	$	52,033	$	36,148	$	15,885		$	99,857	$	67,337	$	32,520
Tenant reimbursements		12,675		8,079		4,596			24,175		14,557		9,618
Other		—		3,832		(3,832	)		168		4,132		(3,964	)
Total operating revenues	$	64,708	$	48,059	$	16,649		$	124,200	$	86,026	$	38,174

As shown by the same space and new properties table shown below, the increases in rental revenues and tenant reimbursement revenues in the periods ended June 30, 2006 compared to the same periods in 2005 were primarily due to our acquisitions of properties. Other revenues changes in the periods presented were primarily due to varying tenant termination revenues. We acquired 17 properties during the twelve months ended June 30, 2006.

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The following tables show operating revenues for new properties (properties that were not owned for each of the full six months ended June 30, 2006 and 2005) and same space properties (all other properties) (in thousands):

	Same space							New properties
	Three Months Ended June 30,							Three Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental	$	33,324	$	31,246	$	2,078		$	18,709	$	4,902	$	13,807
Tenant reimbursements		8,593		6,565		2,028			4,082		1,514		2,568
Other		—		3,780		(3,780	)		—		52		(52	)
Total operating revenues	$	41,917	$	41,591	$	326		$	22,791	$	6,468	$	16,323

	Same space							New properties
	Six Months Ended June 30,							Six Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental	$	64,870	$	61,461	$	3,409		$	34,987	$	5,876	$	29,111
Tenant reimbursements		15,929		12,722		3,207			8,246		1,835		6,411
Other		—		4,080		(4,080	)		168		52		116
Total operating revenues	$	80,799	$	78,263	$	2,536		$	43,401	$	7,763	$	35,638

Same space rental revenues increased in both the three and six months ended June 30, 2006 compared to the same periods in 2005 primarily as a result of new leases at our properties during the twelve months ended June 30, 2006, the largest of which was for space in 200 Paul Avenue 1-4 and 300 Boulevard East. Same space tenant reimbursement revenues increased in both the three and six months ended June 30, 2006 compared to the same periods in 2005 primarily as a result of higher utility and operating expenses being billed to our tenants, the largest occurrences of which were at 600 West Seventh Street and 200 Paul Avenue 1-4. The decrease in other revenues was due to termination fee revenues recognized in the three and six months ended June 30, 2005. No such fees were recognized in the same periods in 2006.

Expenses

Expenses during the three and six months ended June 30, 2006 and 2005 were as follows (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental property operating and maintenance	$	13,618	$	9,166	$	4,452		$	25,328	$	15,810	$	9,518
Property taxes		7,096		4,721		2,375			13,935		8,203		5,732
Insurance		1,068		511		557			1,958		1,091		867
Depreciation and amortization		19,511		13,728		5,783			37,024		25,267		11,757
General and administrative		4,674		2,453		2,221			8,920		4,866		4,054
Other		150		961		(811	)		331		1,482		(1,151	)
Total operating expenses		46,117		31,540		14,577			87,496		56,719		30,777
Interest expense		11,830		8,938		2,892			22,869		16,708		6,161
Loss from early extinguishment of debt		425		—		425			482		125		357
Total expenses	$	58,372	$	40,478	$	17,894		$	110,847	$	73,552	$	37,295

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As shown in the same space expense and new properties table below, total expenses in the three and six months ended June 30, 2006 increased compared to the same periods in 2005 primarily as a result of acquisition of properties. The following table shows expenses for new properties (properties that were not owned for each of the full six months ended June 30, 2006 and 2005) and same space properties (all other properties) (in thousands):

	Same space							New properties
	Three Months Ended June 30,							Three Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental property operating and maintenance	$	9,318	$	7,350	$	1,968		$	4,300	$	1,816	$	2,484
Property taxes		3,379		3,370		9			3,717		1,351		2,366
Insurance		632		459		173			436		52		384
Depreciation and amortization		11,971		11,000		971			7,540		2,728		4,812
General and administrative (1)		4,674		2,453		2,221			—		—		—
Other		63		961		(898	)		87		—		87
Total operating expenses		30,037		25,593		4,444			16,080		5,947		10,133
Interest expense		7,034		7,120		(86	)		4,796		1,818		2,978
Loss from early extinguishment of debt		425		—		425			—		—		—
Total expenses	$	37,496	$	32,713	$	4,783		$	20,876	$	7,765	$	13,111

	Same space							New properties
	Six Months Ended June 30,							Six Months Ended June 30,
	2006		2005		Change			2006		2005		Change
Rental property operating and maintenance	$	17,915	$	13,497	$	4,418		$	7,413	$	2,313	$	5,100
Property taxes		6,714		6,799		(85	)		7,221		1,404		5,817
Insurance		1,168		1,031		137			790		60		730
Depreciation and amortization		23,257		21,990		1,267			13,767		3,277		10,490
General and administrative (1)		8,920		4,866		4,054			—		—		—
Other		205		1,482		(1,277	)		126		—		126
Total operating expenses		58,179		49,665		8,514			29,317		7,054		22,263
Interest expense		13,528		14,215		(687	)		9,341		2,493		6,848
Loss from early extinguishment of debt		482		125		357			—		—		—
Total expenses	$	72,189	$	64,005	$	8,184		$	38,658	$	9,547	$	29,111

(1) General and administrative expenses are included in same space as they are not allocable to specific properties.

Same space rental property and maintenance expenses increased in the three and six months ended June 30, 2006 compared to the same periods in 2005 primarily as a result of higher utility rates in several of our properties leading to higher utility expense in 2006. Rental property operating and maintenance expenses included amounts paid to related parties, CB Richard Ellis Investors and The Linc Group, for property management and other fees of $1.4 million and $0.8 million in the six months ended June 30, 2006 and 2005, respectively. We capitalized amounts relating to compensation expense of employees directly engaged in construction and leasing activities of $0.6 million and $1.1 million, respectively, in the three and six months ended June 30, 2006. We did not capitalize any similar costs in the three or six months ended June 30, 2005.

Same space interest expense decreased in the three and six months ended June 30, 2006 compared to the same period in 2005 primarily as a result of lower outstanding debt following the repayment of the 34551 Ardenwood Boulevard 1-4, 2334 Lundy Place, 2440 Marsh Lane mezzanine debt in the fourth quarter of 2005 and repayment of the 47700 Kato Road & 1055 Page Avenue mortgage loan in the first quarter of 2006. Interest incurred on our line of credit is allocated entirely to new properties in the table above.

Other expenses are primarily comprised of write-offs of the carrying amounts for deferred tenant improvements, acquired in place lease value and acquired above market lease values as a result of the early termination of tenant leases. Other expenses decreased in the three and six months ended June 30, 2006 compared to the same periods in 2005 primarily due to the write off of assets following the termination of a tenant in the three months ended June 30, 2005.

General and administrative expenses in the three and six months ended June 30, 2006 increased compared to the same period in 2005 primarily due to higher employee compensation, insurance, legal and consulting costs.

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Discontinued Operations

In June 2006, we classified 7979 East Tufts Avenue as “held for sale” upon committing to sell this property and we also ceased recording depreciation expense at that time. We completed the sale of the property on July 12, 2006 and recognized a gain upon closing. The results of operations of 7979 East Tufts Avenue are reported as discontinued operations for all periods presented.

Liquidity and Capital Resources

Analysis of Liquidity and Capital Resources

As of June 30, 2006, we had $13.4 million of cash and cash equivalents, excluding $22.7 million of restricted cash. Restricted cash primarily consists of interest bearing cash deposits required by the terms of several of our mortgage loans for a variety of purposes, including real estate taxes, insurance, anticipated or contractually obligated tenant improvements and leasing deposits.

Our short term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, dividend payments on our preferred stock, dividend payments to our stockholders and distributions to our unitholders in the Operating Partnership required to maintain our REIT status, capital expenditures, debt service on our loans and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, restricted cash accounts established for certain future payments and by drawing upon our unsecured credit facility.

As of June 30, 2006 our Operating Partnership had a $350 million unsecured revolving line of credit facility (we further increased the unsecured revolving credit facility to $500 million on July 24, 2006). Borrowings under this credit facility currently bear interest at a rate based on 1-month LIBOR plus a margin ranging from 1.250% to 1.625%, depending on our Operating Partnership’s overall leverage, which margin was 1.50% as of June 30, 2006. The unsecured revolving line of credit facility matures in October 2008, subject to a one-year extension option that we may exercise if certain conditions are met. The amended unsecured revolving line of credit facility has a $150.0 million sub-facility for foreign exchange advances in Euros and British Sterling. We intend to use available borrowings under the amended unsecured revolving credit facility to, among other things, finance the acquisition of additional properties, to fund tenant improvements and capital expenditures, and to provide for working capital and other corporate purposes. As of June 30, 2006, we had outstanding $211.6 million under the credit facility and $91.5 million was available for use.

Properties acquired in 2006

During the six months ended June 30, 2006 we acquired the following properties:

Property	Metropolitan Area	Date acquired	Purchase Price (in millions)
4025 Midway Road	Dallas	January 6, 2006	$	16.2
Clonshaugh Industrial Estate	Dublin, Ireland	February 6, 2006		6.3
6800 Millcreek Drive	Toronto, Canada	April 13, 2006		16.0
101 Aquila Way	Atlanta	April 20, 2006		25.3
12001 North Freeway	Houston	April 26, 2006		30.5
14901 FAA Boulevard	Dallas	June 30, 2006		50.6
			$	144.9

Future uses of cash

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. As of June 30, 2006, we had commitments under leases in effect for $38.3 million of tenant improvement costs and leasing commissions all of which we expect to incur in 2006.

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As of June 30, 2006, we have identified from our existing properties approximately 1.2 million square feet of redevelopment space and we also owned approximately 97,000 net rentable square feet of data center space with extensive installed tenant improvements that we may subdivide for multi-tenant turn-key data center use during the next two years rather than lease such space to large single tenants. Turn-Key Data Center space is move-in-ready space for the placement of computer and network equipment required to provide a data center environment. Depending on demand for additional turn-key data space, we may incur significant tenant improvement costs to build out and redevelop these spaces.

Subsequent to June 30, 2006 we acquired the following properties:

• 120 East Van Buren Street, a property located in Phoenix for $175.0 million on July 25, 2006.

• Gyroscoopweg 2E-2F, a property located in Amsterdam, Netherlands for €8.9 million (approximately $11.3 million at the rate of exchange on the date of purchase) on July 27, 2006.

As of August 4, 2006 we also had agreements to acquire the following properties. As we are completing due diligence for these potential acquisitions we can give no assurance that we will complete their purchase:

Location	Purchase amount ($ millions)
Miami	$	5.6
Boston		8.7
Atlanta		6.1
Tempe, Arizona		9.8
	$	30.2

On December 3, 2005, we terminated share purchase agreements to acquire 100% of the shares of two German entities which together own IBM Technology Park, an approximately 80 acre technical campus located near Mainz, Germany containing 11 buildings with a total of approximately 1.5 million net rentable square feet. The terminated share purchase agreements provided for an aggregate purchase price, excluding expenses, for 100% of the shares in the two entities of approximately €77.4 million (approximately $99.1 million based on the rate of exchange on August 3, 2006). We are still in purchase discussions with the owner of this property but there can be no assurance that we will acquire this property in the future, or if we do so that the price will be similar to the terminated agreements.

We are also subject to the commitments discussed below under “Commitments and Contingencies” and Off-Balance Sheet Arrangements, and Distributions as described below.

We expect to meet our long-term liquidity requirements to pay for scheduled debt maturities and to fund property acquisitions and non-recurring capital improvements with net cash from operations, future long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund future property acquisitions and non-recurring capital improvements using our unsecured credit facility pending permanent financing.

Distributions

We are required to distribute 90% of our REIT taxable income (excluding capital gains) on an annual basis in order to continue to qualify as a REIT for federal income tax purposes. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly distributions to preferred stockholders, common stockholders and unit holders from cash flow from operating activities. All such distributions are at the discretion of our board of directors. We may be required to use borrowings under the credit facility, if necessary, to meet REIT distribution requirements and maintain our REIT status. We consider market factors and our performance in addition to REIT requirements in determining distribution

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levels. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which are consistent with our intention to maintain our status as a REIT.

Commitments and Contingencies

The following table summarizes our contractual obligations as of June 30, 2006, including the maturities and scheduled principal on our secured debt and unsecured credit facility debt, and provides information about the commitments due in connection with our ground leases, tenant improvement and leasing commissions (in thousands):

Obligation	Total		2006		2007-2008		2009-2010		Thereafter
Long-term debt principal payments (1)	$	818,420	$	54,661	$	323,556	$	108,103	$	332,100
Interest payable (2)		237,185		24,027		88,061		42,901		82,196
Ground leases (3)		19,484		200		724		724		17,836
Operating lease		3,682		290		1,176		1,290		926
Tenant improvements and leasing commissions		38,285		38,285		—		—		—
	$	1,117,056	$	117,463	$	413,517	$	153,018	$	433,058

(1) Includes $211.6 million of borrowings under our unsecured credit facility, which is due to mature in October 2008 and excludes $2.1 million of loan premiums and a $26.0 million loan related to 7979 East Tufts Avenue, a property classified as held for sale as of June 30, 2006 and which we sold on July 12, 2006.

(2) Interest payable is based on the interest rate in effect on June 30, 2006 including the effect of interest rate swaps and excludes interest payable on a $26.0 million loan related to 7979 East Tufts Avenue, a property classified as held for sale as of June 30, 2006, and which we sold on July 12, 2006. Interest payable excluding the effect of interest rate swaps is as follows (in thousands):

	Total
2006	$	25,384
2007-2008		92,113
2009-2010		42,728
Thereafter		81,660
	$	241,885

(3) This is comprised of ground lease payments on 2010 East Centennial Circle, Chemin de l’Epinglier 2, Clonshaugh Industrial Estate and Paul van Vlissingenstraat 16. After February 2036, rent for the remaining term of the 2010 East Centennial Circle ground lease will be determined based on a fair market value appraisal of the asset and, as a result, is excluded from the above information. The Chemin de l’Epinglier 2 ground lease which expires in July 2074 contains potential inflation increases which are not reflected in the table above. The Paul van Vlissingenstraat and Clonshaugh Industrial Estate amounts are translated at the June 30, 2006 exchange rate of $1.25 per € 1.00. The 16 Chemin de l’Epinglier 2 amounts are translated at the June 30, 2006 exchange rate of $0.80 per Swiss Franc.

We are obligated to pay the seller of the 350 East Cermak Road a contingent fee of up to $20.0 million in the event a new real estate tax classification for the property is obtained prior to December 31, 2006. We have also agreed with the seller to share a portion, not to exceed $135,000 per month, of rental revenue, adjusted for our costs to lease the premises, from the lease of the 263,000 square feet of space held for redevelopment. This revenue sharing agreement will terminate in May 2013. As part of the acquisition of Paul van Vlissingenstraat 16, we entered into an agreement with the seller, whereby, for twelve months from the execution of the purchase and sale agreement, our purchase price may increase dependant upon future leasing activity as a result of actions by the seller. The amount of the potential commitment is not currently quantifiable as it is based on a 10% cap rate on the incremental operating income from qualifying new leases that are closed or binding during the participation period. We have no liability for these contingent liabilities on our consolidated balance sheets as of June 30, 2006 and December 31, 2005.

We have entered into interest rate swap agreements to hedge variability in cash flows related to LIBOR based mortgage

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loans for approximately $241.7 million of our variable rate debt as of June 30, 2006. Under these swaps, we receive variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amounts. See Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

Outstanding Consolidated Indebtedness

The table below summarizes our debt, at June 30, 2006. These amounts exclude a $26.0 million loan related to 7979 East Tufts Avenue, a property classified as held for sale as of June 30, 2006 and which we sold on July 12, 2006 (in millions):

Debt Summary:
Fixed rate	$	367.2
Variable rate—hedged by interest rate swaps		217.3
Total fixed rate		584.5
Variable rate—unhedged		236.0
Total		820.5
Percent of Total Debt:
Fixed rate (including swapped debt)		71.2	%
Variable rate		28.8	%
Total		100.0	%
Effective Interest Rate at June 30, 2006:
Fixed rate (including swapped debt)		5.77	%
Variable rate—unhedged		6.70	%
Effective interest rate		6.04	%

At June 30, 2006, we had approximately $820.5 million of outstanding consolidated long-term debt as set forth in the table above. Our ratio of debt to total market capitalization was approximately 32% (based on the closing price of our common stock on June 30, 2006 of $24.69). The variable rate debt shown above bears interest at interest rates based on various LIBOR rates ranging from one to twelve months, depending on the agreement governing the debt. The debt secured by our properties at June 30, 2006 had a weighted average term to initial maturity of approximately 5.2 years (approximately 5.9 years assuming exercise of extension options).

Unsecured Credit Facility. At June 30, 2006, we had an unsecured revolving line of credit facility (credit facility) under which we can borrow up to $350.0 million (we further increased the line to $500.0 million on July 24, 2006). Borrowings under the credit facility currently bear interest at a rate of based on LIBOR plus a margin ranging from 1.250% to 1.625%, depending on our Operating Partnership’s overall leverage. This margin was 1.50% as of June 30, 2006, resulting in an interest rate at this date of 6.43%. The credit facility matures in October 2008, subject to a one-year extension option, which we may exercise if certain conditions are met. The credit facility has a $150.0 million sub-facility for foreign exchange advances in Euros and British Sterling. At June 30, 2006 we had outstanding $211.6 million under the credit facility and $91.5 million was available for use.

Off-Balance Sheet Arrangements

As of June 30, 2006 we were a party to interest rate cap agreements in connection with debt and interest rate swap agreements related to $241.7 million of outstanding principal on our variable rate debt. See Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

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Cash Flows

The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Comparison of Six Months Ended June 30, 2006 to Six Months Ended June 30, 2005

The following table shows cash flows and ending cash and cash equivalent balances for the six months ended June 30, 2006 and 2005, respectively (in thousands):

	Six Months Ended June 30,
	2006			2005			Change
Net cash provided by operating activities (including discontinued operations)	$	44,456		$	34,318		$	10,138
Net cash used in investing activities		(177,510	)		(326,578	)		149,068
Net cash provided by financing activities		136,193			291,685			(155,492	)
Net increase (decrease) in cash and cash equivalents	$	3,139		$	(575	)	$	3,714

The increase in net cash provided by operating activities was primarily due to revenues from the properties added to our portfolio which was partially offset by increased operating and interest expenses. We acquired 17 properties during the twelve months ended June 30, 2006.

Net cash used in investing activities primarily relates to new properties acquired during the six months ended June 30, 2006 and 2005. The decrease in net cash used in investing activities was primarily due to lower expenditures to acquire properties in the six months ended June 30, 2006 compared to the same period in 2005.

Net cash flows from financing activities consisted of the following amounts (in thousands):

	Six Months Ended June 30,
	2006			2005			Change
Net proceeds from borrowings	$	96,189		$	232,231		$	(136,042	)
Net proceeds from issuance of stock		94,955			98,703			(3,748	)
Dividend and distribution payments		(54,880	)		(37,556	)		(17,324	)
Other		(71	)		(1,693	)		1,622
Net cash provided by financing activities	$	136,193		$	291,685		$	(155,492	)

Proceeds from issuance of stock were primarily related to our common stock sale in May 2006 and preferred stock offering in February 2005. Dividend and distribution payments increased primarily as a result of our July 2005 offering of common and preferred stock. We obtained a mortgage loan on our 600 West Seventh Street property for $60.0 million in the first quarter of 2006, and a $100.0 million loan when we acquired our East Cermark property in May 2005.

Minority interest

Minority interests relate to the interests in the Operating Partnership that are not owned by us, which, at June 30, 2006, amounted to 42.7% of the Operating Partnership common units. In conjunction with our formation, GI Partners received common units, in exchange for contributing ownership interests in properties to the Operating Partnership. Also in connection with acquiring real estate interests owned by third parties, the Operating Partnership issued common units to those sellers.

Limited partners who acquired common units in the formation transactions have the right to require the Operating Partnership to redeem part or all of their common units for cash based upon the fair market value of an equivalent number

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of shares of our common stock at the time of the redemption. Alternatively, we may elect to acquire those common units in exchange for shares of our common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. Pursuant to registration rights agreements we entered into with GI Partners and the other third party contributors, we filed a shelf registration statement covering the issuance of the shares of our common stock issuable upon redemption of the common units, and the resale of those shares of common stock by the holders. GI Partners distributed 4,030,184 Operating Partnership common units to its owners and these units were converted into shares of our common stock on March 29, 2006 and sold to third parties on April 3, 2006.

During the three months ended June 30, 2006, third parties converted 675,665 Operating Partnership units into shares of our common stock. These conversions were recorded as a reduction to minority interest and an increase to common stock and additional paid in capital based on the book value per unit in the accompanying condensed consolidated balance sheet. We did not receive any cash proceeds upon conversion of these Operating Partnership units.

Inflation

Substantially all of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above.

New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. We do not expect the impact of the adopting this Interpretation will have a material impact on our consolidated balance sheet or statement of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments depend upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors.

Analysis of debt between fixed and variable rate.

We use interest rate swap agreements and fixed rate debt to reduce our exposure to interest rate movements. As of June 30, 2006, our consolidated debt (excluding a $26.0 million loan related to 7979 East Tufts Avenue, a property classified as held for sale as of June 30, 2006 and which we sold on July 12, 2006) was as follows (in millions):

Fixed rate debt:
Fair value of fixed rate debt	$	364.2
Carrying value of fixed rate debt		367.2
Excess of fair value over carrying value	$	(3.0	)
Total outstanding debt:
Principal on mortgage loans		606.8
Debt premium on two mortgage loans		2.1
Notes payable under line of credit		211.6
Total outstanding debt	$	820.5
Variable rate debt ignoring interest rate swaps	$	453.3
Variable rate debt after interest rate swaps	$	236.0
Variable rate debt after interest rate swaps as percentage of total outstanding debt		28.8	%

Interest rate swaps included in this table and their fair values as of June 30, 2006 were as follows (in thousands):

Current Notional Amount	Strike Rate		Effective Date	Expiration Date	Fair Value
$  43,000	3.250	%	Nov. 26, 2004	Sept. 15, 2006	$	189
20,835	3.754		Nov. 26, 2004	Jan. 2, 2009		812
20,000	3.824		Nov. 26, 2004	Apr. 1, 2009		856
8,775	3.331		Nov. 26, 2004	Dec. 1, 2006		77
100,000	4.025		May 26, 2005	Jun. 15, 2008		2,662
24,399	4.944		Jul. 10, 2006	Apr. 10, 2011		158
14,325	3.981		May 17, 2006	Jul. 18, 2013		28
10,334	4.070		Jun. 23, 2006	Jul. 18, 2013		(33	)
$241,668					$	4,749

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Sensitivity to changes in interest rates.

The following table shows the effect if assumed changes in interest rates occurred:

Assumed event	Interest rate change (basis points)		Change ($ millions)
Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates	53		$	2.6
Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates	(53	)		(2.7	)
Increase in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% increase in interest rates	53			0.1
Decrease in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% increase in interest rates	53			(0.1	)
Increase in fair value of fixed rate debt following a 10% decrease in interest rates	(53	)		10.7
Decrease in fair value of fixed rate debt following a 10% increase in interest rates	53			(11.4	)

Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

Foreign currency forward exchange risk

As of June 30, 2006, we have foreign operations in the United Kingdom, Switzerland, Ireland, Canada and The Netherlands and as such are subject to risk from the effects of exchange rate movements of foreign currencies, which may affect future costs and cash flows. Our foreign operations are conducted in the Euro, Swiss Francs and the British Pound. For these currencies we are a net receiver of the foreign currency (we receive more cash then we pay out) and therefore our foreign investments benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currency. For the six months ended June 30, 2006, operating revenues from properties outside the United States contributed $5.5 million which represented 4.4% of our operating revenues.

As of June 30, 2006, we have not entered into any foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates. Prior to January 2006, we were party to a foreign currency forward sale contract with a notional value of approximately £7.9 million. We terminated this contract in January 2006 and received cash of approximately $0.7 million.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that has occurred during the fiscal quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1 – Legal Proceedings.

None.

ITEM 1A – Risk factors.

See our risk factors set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds.

None.

ITEM 3 – Defaults Upon Senior Securities.

None.

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ITEM 4 – Submission of Matters to a Vote of Security Holders.

On May 1, 2006 the company held its Annual Meeting of Stockholders. The following resolutions were passed:

• Election of the following six individuals as directors of the company for a one year term which will expire at the 2007 Annual Meeting of Stockholders:

	Votes for	Votes withheld
Richard A. Magnuson	25,173,565	148,407
Michael F. Foust	25,314,272	7,700
Laurence A. Chapman	25,315,372	6,600
Kathleen Earley	22,283,958	3,038,014
Ruann F. Ernst, Ph.D.	25,313,893	8,079
Dennis E. Singleton	25,315,372	6,600

• Ratification of KPMG LLP as the company’s independent registered public accounting firm for the year ending December 31, 2006. This resolution was passed with 25,298,412 votes for, 20,835 votes against and 2,725 abstentions, and there were 0 broker non-votes.

ITEM 5 – Other Information.

(a) None.

(b) None.

ITEM 6—Exhibits

Exhibit
10.1	Amendment No. 3 to the Credit Agreement, dated as of May 3, 2006, among Digital Realty Trust, L.P., Citicorp North America, Inc., as administrative agent, the financial institutions named therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent, Bank of America, N.A., KeyBank National Association and Royal Bank of Canada, as co-documentation agents, and Citigroup Global Markets Inc. and Merrill Lynch, as the arrangers (incorporated by reference to our Quarterly Report on Form 10-Q for the period ended March 31, 2006).
10.2	Amendment No. 4 to the Credit Agreement, dated as of July 24, 2006, among Digital Realty Trust, L.P., Citicorp North America, Inc., as administrative agent, the financial institutions named therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent, Bank of America, N.A., KeyBank National Association and Royal Bank of Canada, as co-documentation agents, and Citigroup Global Markets Inc. and Merrill Lynch, as the arrangers.
10.3	Purchase and Sale Agreement, dated as of July 25, 2006, by and between Sterling Network Exchange, LLC and Digital Phoenix Van Buren, LLC.
10.4	Securities Purchase Agreement, dated as of July 25, 2006, among Sterling Telecom Holdings, LLC, George D. Slessman, William D. Slessman and Anthony L. Wanger and Digital Phoenix Van Buren, LLC, Digital Services Phoenix, LLC and Fund Management Services, LLC, as the Seller Representative.
12.1	Statement of Computation of Ratios
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements 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.

	DIGITAL REALTY TRUST, INC.
August 4, 2006	/s/ MICHAEL F. FOUST
	Michael F. Foust
	Chief Executive Officer
August 4, 2006	/s/ A. WILLIAM STEIN
	A. William Stein
	Chief Financial Officer and Chief Investment Officer
	(principal financial officer)
August 4, 2006	/s/ EDWARD F. SHAM
	Edward F. Sham
	Vice President and Controller
	(principal accounting officer)

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EX-10.2

Exhibit 10.2

EXECUTION COPY

AMENDMENT NO. 4 TO THE

CREDIT AGREEMENT

Dated as of July 24, 2006

AMENDMENT NO. 4 TO THE CREDIT AGREEMENT (this “Amendment”) among Digital Realty Trust, L.P. (the “Borrower”); Citicorp North America, Inc. (“CNAI”), as administrative agent (the “Administrative Agent”), the financial institutions party to the Credit Agreement referred to below (collectively, the “Lender Parties”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), as syndication agent (the “Syndication Agent”), Bank of America, N.A., KeyBank National Association and Royal Bank of Canada (the “Co-Documentation Agents”), and Citigroup Global Markets Inc. and Merrill Lynch (the “Arrangers”).

PRELIMINARY STATEMENTS:

(1) The Borrower, Digital Realty Trust, Inc. (the “Parent Guarantor”), the subsidiaries of the Borrower party thereto, the Lenders Party thereto (the “Existing Lenders”), the other Lender Parties, the Administrative Agent, the Syndication Agent and the Co-Documentation Agents have entered into a Revolving Credit Agreement dated as of November 3, 2004 (as amended prior to the date hereof, the “Credit Agreement”). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement.

(2) Each Person named as a Lender on the signature pages of this Amendment not previously named as a Lender under the Credit Agreement (each, a “New Lender”) has agreed to become a party to the Credit Agreement (as amended hereby) as a Lender, on the terms and subject to the conditions set forth in this Amendment and the Credit Agreement, as amended hereby.

(3) The Borrower and the Existing Lenders have agreed to amend the Credit Agreement, including for the purpose of including each New Lender as a Lender thereunder, on the terms and subject to the conditions hereinafter set forth.

SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, upon the occurrence of the Amendment Effective Date (as defined in Section 4 below), hereby amended as follows:

(a) The cover page of the Credit Agreement is hereby amended by deleting the reference to “$350,000,000” thereon.

(b) Section 1.01 of the Credit Agreement is hereby amended by adding the following new definitions in their appropriate alphabetical order:

“Amendment No. 4 Effective Date” means the date on which all of the conditions to effectiveness of Amendment No. 4 to the Credit Agreement dated as of July 24, 2006 have been satisfied.

“Charlotte Asset” means the Assets collectively known as the Teleco and Internet Gateway Facility, located at 113 North Myers Street and 125 North Myers Street, Charlotte, Mecklenburg County, North Carolina 28202.

“Section 1.01 of the Credit Agreement is hereby amended by deleting the definition of “Unencumbered Asset Value”.

(c) Section 1.01 of the Credit Agreement is hereby amended to restate the following definitions set forth therein in their entirety to read as follows:

“Adjusted Net Operating Income” means, with respect to any Asset, (a) the product of (i) four (4) times (ii) (A) Net Operating Income attributable to such Asset less (B) the amount, if any, by which (1) 3% of all rental and other income from the operation of such Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, exceeds (2) all management fees payable in respect of such Asset for such fiscal period less (b) the Capital Expenditure Reserve for such Asset.

“Asset Value” means, at any date of determination, (a) in the case of any Office Asset acquired on or prior to October 31, 2005, the Capitalized Value thereof; provided, however, that in the case of any Office Asset acquired after such date, Asset Value of such Office Asset shall be limited, during the first 12 months following the date of such acquisition, to the lesser of (i) the acquisition price thereof or (ii) the Capitalized Value thereof, provided further that an upward adjustment shall be made to Asset Value (in the reasonable discretion of the Administrative Agent) as new Tenancy Leases are entered into in respect of such Office Asset, (b) in the case of any Development Asset, the book value of such Development Asset as determined in accordance with GAAP, (c) in the case of any Joint Venture Asset that, but for such Asset being owned by a Joint Venture, would qualify as an Office Asset under the definition thereof, the JV Pro Rata Share of the Capitalized Value of such Asset; provided, however, that in the case of any Joint Venture Asset acquired after October 31, 2005, Asset Value of such Joint Venture Asset shall be limited, during the first 12 months following the date of such acquisition, to the JV Pro Rata Share of the lesser of (i) the acquisition price thereof or (ii) the Capitalized Value thereof, provided further that an upward adjustment shall be made to Asset Value (in the reasonable discretion of the Administrative Agent) as new leases, subleases, licenses and occupancy agreements are entered into in respect of such Joint Venture Asset in the ordinary course of business and (d) in the case of any Joint Venture Asset not described in clause (c) above, the JV Pro Rata Share of the book value of such Joint Venture Asset as determined in accordance with GAAP.

“Capitalized Value” means, in the case of any Asset, the Adjusted Net Operating Income of such Asset divided by 9.0%.

“Net Operating Income” means, with respect to any Asset, the total rental revenue and other income from the operation of such Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, minus (i) all expenses and other proper charges incurred by the applicable Loan Party in connection with the operation and maintenance of such Asset during such fiscal period, including, without limitation, management fees, repairs, real estate and chattel taxes and bad debt expenses, but before payment or provision for debt service charges, income taxes and depreciation, amortization and other non-cash expenses, all as determined in accordance with GAAP, provided that there shall be no rent leveling adjustments made (and only actual cash rents will be used) when computing Net Operating Income.

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“Patriot Act” has the meaning specified in Section 9.11.

“Recourse Debt” means Consolidated Debt of the Parent Guarantor and its Subsidiaries (whether or not secured by any Liens) for which the Parent Guarantor, the Borrower or any of their respective Subsidiaries has personal or recourse liability in whole or in part, exclusive of any such Debt for which such personal or recourse liability is limited to obligations under Customary Carve-Out Agreements.

“Total Unencumbered Asset Value” means an amount equal to the sum of the Asset Values of all Unencumbered Assets; provided, however, that, if at any time (a) there shall be fewer than three Unencumbered Assets, (b) the sum of the Asset Values of all Unencumbered Assets shall not be equal to or greater than $115,000,000 or (c) the weighted average occupancy of all Unencumbered Assets shall not be greater than or equal to 85%, the Total Unencumbered Asset Value shall be zero; and provided further that if the sum of the Asset Values of all Unencumbered Assets located in Canada shall exceed 15% of the Total Unencumbered Asset Value, then Total Unencumbered Asset Value shall be reduced by the amount of such excess (“Excess Canada Value”) other than for purposes of calculating compliance with the financial covenant set forth in Section 5.04(b)(i), with respect to which such reduction shall not apply.

“Unsecured Debt” means, at any date of determination, the amount at such time of all Consolidated Debt of the Parent Guarantor and its Subsidiaries, including, without limitation, the Facility Exposure (as defined herein), that is not secured by any Liens.

(d) The Credit Agreement is hereby amended by deleting all references to “Unsecured Debt Exposure” and substituting therefor references to “Unsecured Debt”.

(e) Section 2.06(b)(i) of the Credit Agreement is hereby amended and restated to read as follows:

“(i) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Swing Line Advances and the Letter of Credit Advances and deposit an amount in the L/C Cash Collateral Account in an amount equal to (A) the amount by which the Facility Exposure exceeds the Facility on such Business Day, and (B) after taking into account any payments made pursuant to clause (A), the amount by which Unsecured Debt exceeds 60% of the Total Unencumbered Asset Value on such Business Day, provided that any deposit in the L/C Cash Collateral Account made pursuant to this subsection shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility.”

(f) Section 3.02(a) of the Credit Agreement is hereby amended (i) by inserting “(a)” immediately before the words “The obligation of” on the second line thereof, and (ii) deleting the words “Facility Exposure” in clause (y)(iii) thereof and substituting therefor the words “Unsecured Debt”.

(g) Section 4.01(k) of the Credit Agreement is hereby amended be deleting the following sentence therefrom:

“Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party or Subsidiary of a Loan Party that is a partnership or a limited

3

liability company, as applicable, is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.”

(h) Section 4.01(m) of the Credit Agreement is hereby amended and restated to read as follows:

“(m) Each of the Assets listed on Schedule II hereto satisfies all Unencumbered Asset Conditions, except to the extent as otherwise waived in writing by the Lenders. The Loan Parties are the legal and beneficial owners of the Unencumbered Assets free and clear of any Lien, except for the Liens permitted under the Loan Documents.”

(i) Section 5.01(j)(i) of the Credit Agreement is hereby amended by adding the words “(other than a Foreign Subsidiary)” immediately after the words “Excluded Subsidiary” in the third line thereof.

(j) Section 5.01(j)(iii)(A)(2) of the Credit Agreement is hereby amended and restated to read as follows:

“(2) a certificate of the Chief Financial Officer (or other Responsible Officer) of the Borrower confirming that (v) such Asset satisfies all Unencumbered Asset Conditions, (w) the addition of such Asset as an Unencumbered Asset shall not cause or result in a Default or Event of Default, (x) insurance of the types and amounts required by Section 5.01(d) and otherwise consistent with the insurance coverages maintained by the Loan Parties in respect of other Unencumbered Assets is in full force and effect with respect to such Asset, (y) all environmental matters of the type that would be disclosed on Schedule 4.01(s) hereto if the representations set forth in Section 4.01(s) were remade by the Loan Parties with respect to such Asset are set forth on a schedule to such certificate, and (z) set forth on a schedule to such certificate are the projected deferred maintenance and capital expenditure costs for such Asset for a period of not less than five years,”

(k) Section 5.01(j)(iii)(A)(4) of the Credit Agreement is hereby amended and restated to read as follows:

“(4) (x) an American Land Title Association/American Congress on Surveying and Mapping form survey for which all necessary fees have been paid, dated no more than 180 days before the date of its delivery to the Administrative Agent and reasonably acceptable to the Administrative Agent with respect to such Asset, showing a metes and bounds description of such property, all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects reasonably acceptable to the Administrative Agent, and (y) a current record owner and lien search performed by a title insurer acceptable to the Administrative Agent showing that the applicable Loan Party is the current record title holder of such Asset and showing no Liens of record other than Permitted Liens, and”

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(l) Clause (i) of the proviso to Section 5.01(j)(iii)(A) of the Credit Agreement is hereby amended and restated to read as follows:

“(i) the failure to comply with one or more of the Unencumbered Asset Conditions or clauses (2) or (4) above shall not preclude the addition of any Proposed Unencumbered Asset as an Unencumbered Asset so long as the Required Lenders shall have expressly consented to the addition of such Asset as an Unencumbered Asset notwithstanding such failure,”

(m) Clause (iii) of the proviso to Section 5.01(j)(iii)(A) of the Credit Agreement is hereby amended by deleting the word “and” at the end thereof.

(n) Clause (iv) of the proviso to Section 5.01(j)(iii)(A) of the Credit Agreement is hereby amended by deleting all references therein to “Telco/Internet Gateway Property” and substituting therefor references to “Charlotte Asset”.

(o) Section 5.01(r) of the Credit Agreement is hereby amended by adding the words “(other than a Foreign Subsidiary)” immediately after the word “Subsidiaries” in the second line.

(p) Section 5.02(b)(ii)(D) of the Credit Agreement is hereby amended and restated to read as follows: “(D) [intentionally omitted]”.

(q) Section 5.02(b)(ii)(F) of the Credit Agreement is hereby amended by deleting the word “unsecured” and substituting therefor the word “Unsecured”.

(r) Section 5.02(b)(ii)(H) of the Credit Agreement is hereby amended and restated to read as follows: “(H) [intentionally omitted]”.

(s) Section 5.02(b)(iii) of the Credit Agreement is hereby amended and restated to read as follows:

“(iii) in the case of the Parent Guarantor or any of its Subsidiaries:

(A) Debt under Customary Carve-Out Agreements,

(B) the Surviving Debt described on Schedule 4.01(o) hereto and any Refinancing Debt, extending, refunding or refinancing such Surviving Debt, and

(C) Recourse Debt (whether secured or unsecured) in an amount not to exceed in the aggregate the sum of (1) 10% of Total Asset Value, plus (2) the Revolving Credit Facility (as defined herein); provided, however, that if at any time the Parent Guarantor shall maintain a Debt Rating from S&P of at least BBB – or a Debt Rating from Moody’s of at least Baa3, then the limitation set forth above in this clause (C) shall not apply and Recourse Debt shall be permitted to the extent the incurrence of such Recourse Debt would not result in a Default or Event of Default by the Parent Guarantor in respect of its financial covenants in Section 5.04(a);”

(t) Section 5.02(b)(iv) of the Credit Agreement is hereby amended by renumbering the “(iv)” at the commencement of such Section to be “(v)”.

5

(u) A new Section 5.02(b)(iv) is hereby added to the Credit Agreement immediately following Section 5.02(b)(iii) as follows:

“(iv) in the case of the Parent Guarantor, Debt under the Loan Documents; and”

(v) Section 5.02(o) of the Credit Agreement is hereby amended (i) by adding the words “(other than a Foreign Subsidiary)” immediately after the word “Subsidiary” in the second line, and (ii) by deleting the reference to “Section 5.02(b)(ii)(H)” therein and substituting therefor a reference to “Section 5.02(b)(iii)(C)”.

(w) Section 5.04(b) of the Credit Agreement is hereby amended by deleting the heading of clause (i) and replacing it with the following heading: “Maximum Unsecured Debt to Total Unencumbered Asset Value”.

(x) Schedule I to the Credit Agreement is hereby amended and replaced in its entirety with Annex A attached hereto.

(y) Exhibit B to the Credit Agreement is hereby amended by deleting paragraph (C) on page 2 thereof and substituting therefor the following:

“(C) (i) 60% of the Total Unencumbered Asset Value equals or exceeds the Unsecured Debt that will be outstanding after giving effect to the Proposed Borrowing, (ii) before and after giving effect to the Proposed Borrowing, the Parent Guarantor shall be in compliance with the covenants contained in Section 5.04 of the Credit Agreement and (iii) all supporting information provided to the Administrative Agent and in the case of Eurocurrency Rate Advances, the Sub-Agent, contemporaneously with this Notice of Borrowing was prepared in good faith and accurately shows the computations used in determining compliance with the covenants contained in Section 5.04 of the Credit Agreement.”

(z) Exhibit F to the Credit Agreement is hereby amended and replaced in its entirety with Annex B attached hereto.

SECTION 2. New Lender Assumptions; Reallocation of Pro Rata Shares. (a) On the Amendment Effective Date, each New Lender shall be deemed (without executing an Assignment and Acceptance or Assumption Agreement) to have (i) become a party to the Credit Agreement (as amended hereby) and have the rights and obligations of a Lender thereunder, (ii) represented and warranted that it is legally authorized to enter into the Credit Agreement and this Amendment; (iii) confirmed that it has received a copy of the Credit Agreement and this Amendment, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Credit Agreement (as amended hereby); (iv) agreed that it will, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement (as amended hereby); (v) represented and warranted that its name set forth on Annex A hereto is its legal name; (vi) confirmed that it is an Eligible Assignee; (vii) appointed and authorized the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (viii) agreed that it will perform in accordance with

6

their terms all of the obligations that by the terms of the Credit Agreement (as amended hereby) are required to be performed by it as a Lender Party; and (ix) agreed that it will promptly deliver any U.S. Internal Revenue Service forms required under Section 2.12 of the Credit Agreement (as amended hereby).

(b) On the Amendment Effective Date, to the extent the Advances then outstanding and owed to any Lender immediately prior to the effectiveness of this Amendment shall be less than such Lender’s Pro Rata Share (calculated immediately following the effectiveness of this Amendment) of all Advances then outstanding and owed to all Lenders (each such Lender, including any New Lender, a “Purchasing Lender”), then such Purchasing Lender, without executing an Assignment and Acceptance, shall be deemed to have purchased an assignment of a pro rata portion of the Advances then outstanding and owed to each Lender that is not a Purchasing Lender (a “Selling Lender”) in an amount sufficient such that following the effectiveness of all such assignments the Advances outstanding and owed to each Lender shall equal such Lender’s Pro Rata Share (calculated immediately following the effectiveness of this Amendment) of all Revolving Credit Advances then outstanding and owed to all Lenders; provided, however, that no Purchasing Lender that is a Lender solely with respect to the U.S. Dollar Revolving Credit Facility shall be deemed pursuant to this Section 2(b) to have purchased any Advances denominated in a Committed Foreign Currency. The assignments deemed made pursuant to this Section 2(b) shall not be subject to the $3,500 processing and recordation fee set forth in Section 9.07(a) of the Credit Agreement.

(c) The Administrative Agent shall calculate the net amount to be paid by each Purchasing Lender and received by each Selling Lender in connection with the assignments effected hereunder on the Amendment Effective Date. Each Purchasing Lender shall make the amount of its required payment available to the Administrative Agent, in same day funds, at the office of the Administrative Agent not later than 12:00 P.M. (New York time) on the Amendment Effective Date. The Administrative Agent shall distribute on the Amendment Effective Date the proceeds of such amount to each of the Selling Lenders entitled to receive such payments at its Applicable Lending Office. If in connection with the transactions described in this Section 2 any Lender shall incur any losses, costs or expenses of the type described in Section 9.04(c) of the Credit Agreement, then the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for such losses, costs or expenses reasonably incurred.

SECTION 3. Representations and Warranties. The Borrower hereby represents and warrants that the representations and warranties contained in each of the Loan Documents (as amended or supplemented to date, including pursuant to this Amendment) are true and correct on and as of the Amendment Effective Date (defined below), before and after giving effect to this Amendment (including, without limitation, the representation and warranty set forth in Section 4.01(g) of the Credit Agreement, as amended by this Amendment), as though made on and as of such date (except for any such representation and warranty that, by its terms, refers to an earlier date, in which case as of such earlier date).

SECTION 4. Conditions of Effectiveness. This Amendment shall become effective as of the first date (the “Amendment Effective Date”) on which, and only if, each of the following conditions precedent shall have been satisfied:

(a) The Administrative Agent shall have received (i) counterparts of this Amendment executed by the Borrower and each Lender or, as to any of the Lenders, advice

7

satisfactory to the Administrative Agent that such Lender has executed this Amendment, (ii) the consent attached hereto (the “Consent”) executed by each of the Guarantors, and (iii) a Note payable to the order of each Lender requesting the same in a principal amount equal to such Lender’s respective Revolving Credit Commitment as of the Amendment Effective Date.

(b) The representations and warranties set forth in each of the Loan Documents shall be correct in all material respects on and as of the Amendment Effective Date, before and after giving effect to this Amendment, as though made on and as of such date (except for any such representation and warranty that, by its terms, refers to a specific date other than the Amendment Effective Date, in which case as of such specific date).

(c) No event shall have occurred and be continuing, or shall result from the effectiveness of this Amendment, that constitutes a Default.

(d) All of the fees and expenses of the Administrative Agent (including the reasonable fees and expenses of counsel for the Administrative Agent) due and payable on the Amendment Effective Date shall have been paid in full.

(e) Certified copies of (i) the resolutions of the Board of Directors, general partner or managing member, as applicable, of (A) the Borrower approving this Amendment and the matters contemplated hereby and thereby and (B) each Guarantor approving the Consent and the matters contemplated hereby and thereby and (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment, the Consent and the matters contemplated hereby and thereby.

(f) A certificate of the Secretary or an Assistant Secretary of (i) the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Amendment and (ii) each Guarantor certifying the names and true signatures of the officers of such Guarantor authorized to sign the Consent.

The effectiveness of this Amendment is conditioned upon the accuracy of the factual matters described herein. This Amendment is subject to the provisions of Section 9.01 of the Credit Agreement.

SECTION 5. Reference to and Effect on the Credit Agreement, the Notes and the Loan Documents. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.

(b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

SECTION 6. Costs and Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery and

8

administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent) in accordance with the terms of Section 9.04 of the Credit Agreement.

SECTION 7. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

[Balance of page intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWER:
DIGITAL REALTY TRUST, L.P.
By:	DIGITAL REALTY TRUST, INC.,     its sole general partner
	By	/s/ Michael F. Foust
		Name:	Michael F. Foust
		Title:	Chief Executive Officer

Signature Page

ADMINISTRATIVE AGENT, SWING LINE BANK, AN EXISTING LENDER AND A LENDER:
CITICORP NORTH AMERICA, INC.
By	/s/ Niraj Shah
	Name:	Niraj Shah
	Title:	Vice President

Signature Page

ISSUING BANK:
CITIBANK, N.A.
By	/s/ David Bouth
	Name:	David Bouth
	Title:	Vice President

Signature Page

OTHER LENDER PARTIES:
MERRILL LYNCH CAPITAL CORPORATION, as an Existing Lender and a Lender
By	/s/ John C. Rowland
	Name:	John C. Rowland
	Title:	Vice President

Signature Page

BANK OF AMERICA, N.A., as an Existing Lender and a Lender
By	/s/ Allison M. Gauthier
	Name:	Allison M. Gauthier
	Title:	Senior Vice President

Signature Page

KEYBANK NATIONAL ASSOCIATION, as an Existing Lender and a Lender
By	/s/ Jane E. McGrath
	Name:	Jane E. McGrath
	Title:	Vice President

Signature Page

ROYAL BANK OF CANADA, as an Existing Lender and a Lender
By	/s/ Dustin Craven
	Name:	Dustin Craven
	Title:	Authorized Signatory

Signature Page

CREDIT SUISSE, CAYMAN ISLANDS BRANCH (F/K/A CREDIT SUISSE FIRST BOSTON, ACTING THROUGH ITS CAYMAN ISLANDS BRANCH), as an Existing Lender and a Lender
By		/s/ Bill O’Daly
	Name:	Bill O’Daly
	Title:	Director

By		/s/ Cassandra Droogan
	Name:	Cassandra Droogan
	Title:	Vice President

Signature Page

UBS LOAN FINANCE LLC, as an Existing Lender and a Lender
By		/s/ Richard L. Tavrow
	Name:	Richard L. Tavrow
	Title:	Director

By		/s/ Toba Lumbantobing
	Name:	Toba Lumbantobing
	Title:	Associate Director

Signature Page

EMIGRANT SAVINGS BANK, as an Existing Lender and a Lender
By		/s/ Patricia Goldstein
	Name:	Patricia Goldstein
	Title:	Senior Executive Vice President

Signature Page

UNITED OVERSEAS BANK LIMITED, NEW YORK AGENCY, as an Existing Lender and a Lender
By		/s/ George Lim
	Name:	George Lim
	Title:	FVP & General Manager

By		/s/ Mario Sheng
	Name:	Mario Sheng
	Title:	AVP

Signature Page

HSBC BANK USA, NATIONAL ASSOCIATION, as a New Lender and a Lender
By		/s/ Robert P. Reynolds
	Name:	Robert P. Reynolds
	Title:	First Vice President

Signature Page

RAYMOND JAMES BANK, FSB, as a New Lender and a Lender
By		/s/ Thomas F. Macina
	Name:	Thomas F. Macina
	Title:	Vice President

Signature Page

SOCIÉTÉ GÉNÉRALE, as a New Lender and a Lender
By		/s/ Mark Vigil
	Name:	Mark Vigil
	Title:	Managing Director

Signature Page

CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH, as a New Lender and a Lender
By		/s/ Jim C.Y. Chen
	Name:	Jim C.Y. Chen
	Title:	Vice President & General Manager

Signature Page

CONSENT

Dated as of July 24, 2006

Each of the undersigned, as a Guarantor under the Credit Agreement referred to in the foregoing Amendment, hereby consents to such Amendment and hereby confirms and agrees that notwithstanding the effectiveness of such Amendment, the Guaranty contained in the Credit Agreement is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of such Amendment, each reference in the Loan Documents to “Credit Agreement”, “thereunder”, “thereof” or words of like import shall mean and be a reference to the Credit Agreement, as amended by such Amendment.

GUARANTORS:
DIGITAL REALTY TRUST, INC.
By		/s/ Michael F. Foust
	Name:	Michael F. Foust
	Title:	Chief Executive Officer

DIGITAL SERVICES, INC.
By		/s/ Michael F. Foust
	Name:	Michael F. Foust
	Title:	Chief Executive Officer

GLOBAL ASML, LLC
By:	DIGITAL REALTY TRUST, L.P.,     its member and manager
	By:	DIGITAL REALTY TRUST, INC.,     its sole general partner
		By		/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

Signature Page

GLOBAL LAFAYETTE STREET HOLDING COMPANY, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
GLOBAL LAFAYETTE STREET, LLC
By:	GLOBAL LAFAYETTE STREET     HOLDING COMPANY, LLC,
	its member and manager
	By:	DIGITAL REALTY TRUST, L.P.,
		its member and manager
		By:	DIGITAL REALTY TRUST, INC.,
			its sole general partner
			By	/s/ Michael F. Foust
				Name:	Michael F. Foust
				Title:	Chief Executive Officer
GIP FAIRMONT HOLDING COMPANY, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

Signature Page

GIP FAIRMONT, LLC
By:	GIP FAIRMONT HOLDING COMPANY, LLC,
	its member and manager
	By:	DIGITAL REALTY TRUST, L.P.,
		its member and manager
		By:	DIGITAL REALTY TRUST, INC.,
			its sole general partner
			By	/s/ Michael F. Foust
				Name:	Michael F. Foust
				Title:	Chief Executive Officer
GLOBAL INNOVATION SUNSHINE HOLDINGS LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
GLOBAL GOLD CAMP, LLC
By:	GLOBAL GOLD CAMP HOLDING
	COMPANY, LLC, its member and manager
	By:	DIGITAL REALTY TRUST, L.P.,
		its member and manager
		By:	DIGITAL REALTY TRUST, INC.,
			its sole general partner
			By	/s/ Michael F. Foust
				Name:	Michael F. Foust
				Title:	Chief Executive Officer

Signature Page

GLOBAL GOLD CAMP HOLDING COMPANY, LLC
By:	DIGITAL REALTY TRUST, L.P.,     its member and manager
	By:	DIGITAL REALTY TRUST, INC.,     its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

DIGITAL 833 CHESTNUT, LLC
By:	DIGITAL REALTY TRUST, L.P.,     its member and manager
	By:	DIGITAL REALTY TRUST, INC.,     its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

DIGITAL CONCORD CENTER, LLC
By:	DIGITAL REALTY TRUST, L.P., its member and manager
	By:	DIGITAL REALTY TRUST, INC.,     its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

Signature Page

DIGITAL PRINTER SQUARE, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
GLOBAL KATO HG, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
DIGITAL GREENSPOINT, L.P.
By:	DRT GREENSPOINT, LLC,
	its general partner and manager
	By:	DIGITAL REALTY TRUST, L.P.,
		its member and manager
		By:	DIGITAL REALTY TRUST, INC.,
			its sole general partner
			By	/s/ Michael F. Foust
				Name:	Michael F. Foust
				Title:	Chief Executive Officer

Signature Page

DRT GREENSPOINT, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
DIGITAL GREENSPOINT, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
DIGITAL 113 N. MYERS, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

Signature Page

DIGITAL 125 N. MYERS, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer
DIGITAL TORONTO BUSINESS TRUST
By	/s/ Michael F. Foust
	Name:	Michael F. Foust
	Title:	Trustee and President
DIGITAL AQUILA, LLC
By:	DIGITAL REALTY TRUST, L.P.,
	its member and manager
	By:	DIGITAL REALTY TRUST, INC.,
		its sole general partner
		By	/s/ Michael F. Foust
			Name:	Michael F. Foust
			Title:	Chief Executive Officer

Signature Page

EX-10.3

Exhibit 10.3

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of the 25th day of July, 2006 (the “Effective Date”), by and between STERLING NETWORK EXCHANGE, LLC, a Delaware limited liability company (“Seller”), and DIGITAL PHOENIX VAN BUREN, LLC, a Delaware limited liability company (“Purchaser”).

RECITALS

A. Pursuant to that certain Securities Purchase Agreement (the “SNS Purchase Agreement”) dated as of the date hereof by and between Purchaser and Digital Services Phoenix, LLC, a Delaware limited liability company (collectively, the “SNS Purchaser”), on the one hand, and Sterling Telecom Holdings, LLC, a Delaware limited liability company (“STH”), George D. Slessman, an individual (“G. Slessman”), William D. Slessman, an individual (“W. Slessman”) and Anthony L. Wanger, an individual (“Wanger”, together with STH, G. Slessman and W. Slessman, collectively, the “SNS Sellers”), on the other hand, Purchaser is acquiring all of the outstanding equity interests in Sterling Network Services, LLC, a Delaware limited liability company (“SNS”) from the SNS Sellers.

B. Seller is the owner of the Property (as such term is hereinafter defined).

C. On the condition that the transactions contemplated under the SNS Purchase Agreement shall close immediately preceding or concurrently with the closing of the transaction contemplated hereunder (and the parties hereto agree that the transactions under each of the SNS Purchase Agreement and this Agreement will be closed by way of and in accordance with the Closing Escrow Agreement (defined below)), Seller desires to sell the Property to Purchaser, and Purchaser desires to purchase the Property from Seller, upon and subject to the terms and conditions of this Agreement.

THEREFORE, in consideration of the terms and conditions contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

1. PURCHASE AND SALE OF PROPERTY

Subject to the terms and conditions of this Agreement, Seller shall sell and convey, and Purchaser shall purchase, the following described property (all of which is hereinafter collectively referred to as the “Property”):

1.1 Land. That certain tract of real estate located in the City of Phoenix, County of Maricopa, State of Arizona, which real estate is commonly known as 120 E. Van Buren Street, Phoenix, Arizona, and which is legally described on Exhibit “A” attached hereto, together with all easements, covenants, rights, privileges, tenements, hereditaments and appurtenances thereunto now or hereafter belonging or appertaining thereto (collectively, the “Land”).

1.2 Improvements. All of the buildings, structures, fixtures and other improvements owned by Seller, including, without limitation, that certain three (3) story data center telecommunications building (the “Building”) and any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, landscaping, roadways, sidewalks, recreational facilities, security devices, signs and light fixtures, located on the Land which are owned by Seller (collectively, the “Improvements”) (the Land and Improvements, collectively, are referred to as the “Real Property”).

1.3 Tangible Personal Property. All fixtures, machinery, maintenance vehicles and equipment, tools, parts, carpeting, window treatments, and other tangible personal property of every kind, including, without limitation, office equipment, furniture and supplies, situated in, on, over and under the Real Property and owned by Seller, together with all replacements and substitutions therefor made prior to Closing and owned by Seller (the “Tangible Personal Property”), including but not limited to those items set forth on Exhibit ”B” attached hereto.

1.4 Leases and Contracts. All right, title and interest of Seller in and to the Leases and the Contracts (as such terms are defined below), including, without limitation, Seller’s rights and obligations, to the extent transferable, under the Environmental Condition Agreements (hereinafter defined). As used herein, “Environmental Condition Agreements” shall mean only (a) the Prospective Purchase Agreement, (b) the Consent Decree, (c) the ADEQ Access Agreement and (d) the PNI Access Agreement (as such terms are defined in Exhibit “R”, attached hereto).

1.5 Intangibles. All right, title and interest of Seller, if any, in and to any transferable warranties or guaranties issued in connection with the Improvements or the Tangible Personal Property, and any other intangible personal property owned by Seller and used in connection with the Property or the business transacted thereon (collectively, the “Intangible Personal Property”) including, without limitation, to the extent assignable, all land use entitlements, development rights, leases and licenses, permits, authorizations, names, and telephone exchange numbers, plans, specifications, claims, causes of action with respect to matters for which Purchaser assumes liability pursuant to any of the other agreements to which Purchaser and Seller are parties delivered in connection with this Agreement (or for which Purchaser may be subject to liability following the Closing (defined below)), computer software and books and records.

2. PURCHASE PRICE

The total consideration to be paid by Purchaser to Seller for the Property under this Agreement shall consist of the Closing Purchase Price (defined below) to be paid by Purchaser to Seller at the Closing pursuant to the provisions of this Agreement.

2.1 Closing Purchase Price.

2.1.1 Definitions

2.1.1.1 “Closing Escrow Agent” is defined in the SNS Purchase Agreement.

2.1.1.2 “Closing Escrow Agreement is defined in the SNS Purchase Agreement. The Closing Escrow Agreement shall be executed by Purchaser, Seller, the SNS Sellers and Closing Escrow Agent concurrently herewith. The form of the Closing Escrow Agreement is attached hereto as Exhibit “E”.

2.1.1.3 “Closing Purchase Price” means Forty-Nine Million Three Hundred Twelve Thousand Eight Hundred and NO/100 Dollars ($49,312,800.00).

2.2 Payment. At the Closing, the Purchaser shall (a) deliver or cause to be delivered to the Closing Escrow Agent, by wire transfer of immediately available funds, an amount equal to the Closing Purchase Price, subject to such adjustments (the “Proration Adjustments”) as are required by this Agreement, including, without limitation, under Section 5.3, below (the “Adjusted Closing Purchase Price”), (b) shall instruct the Closing Escrow Agent to deliver or cause to be delivered to Seller by wire transfer of immediately available funds, an amount equal to the Adjusted Closing Purchase Price less $1,972,512 (the “SNE Escrow Amount”) and (c) shall instruct the Closing Escrow Agent to deliver or cause to be delivered to the General Escrow Agent (as defined in the SNS Purchase Agreement) by wire transfer of immediately available funds, an amount equal to the SNE Escrow Amount.

2.3 Allocation of the Purchase Price. Seller and Purchaser agree to allocate the Purchase Price as follows:

Asset	Allocated Purchase Price
Personal Property	Tax basis – approximately $1,000,000 as of 5/31/06
Land and Building	Remainder

Seller and Purchaser each agree to report the federal, state and local income and other tax consequences of the transactions contemplated herein, and shall not take any position inconsistent with the foregoing upon examination of any tax return, in any refund claim, in any litigation, investigation or otherwise unless required to do so by applicable law after notice to and discussions with the other Party, or with such other Party’s prior consent.

3. [INTENTIONALLY OMITTED]

4. STATUS OF PROPERTY

4.1 [Intentionally Omitted]

4.2 Conveyance of Title. At Closing, Commonwealth Land Title Company (“Title Company”) shall issue to Purchaser an American Land Title Association owner’s policy of title insurance (Form 1970 B, amended 10/17/70) covering the Property, dated and effective as of the Closing Date in the full amount of the Closing Purchase Price, together with the endorsements requested by Purchaser from the Title Company on or before Closing (collectively the “Title Policy”) in the form of the Pro Forma Title Policy (the “Pro Forma Title Policy”) attached hereto as Exhibit “C”. In order to assure issuance of the Title Policy at the Closing, on or prior to the Closing, as necessary or as requested by Purchaser, Seller shall execute and deliver to the Title Company commercially reasonable undertakings, agreements, affidavits

and/or indemnity agreements as required by Title Company. The Property shall be conveyed subject to the following matters, which shall be deemed to be “Permitted Exceptions”:

4.2.1 the rights of Tenants (defined below) under the Leases;

4.2.2 the lien of all nondelinquent ad valorem real estate taxes not yet due and payable as of the Closing Date, subject to adjustment as herein provided; and

4.2.3 the title exceptions, encumbrances and other title matters affecting the Property set forth on Schedule B of the Pro Forma Title Policy.

4.3 Environmental. Purchaser acknowledges all of the following with respect to the environmental condition of the Property:

4.3.1 The Purchaser has received copies of (a) all of the Environmental Condition Agreements and (b) all of the reports and documents listed on Exhibit “S” (the “Environmental Documents”).

4.3.2 Seller is a party to each of the Environmental Condition Agreements.

4.3.3 That the Property was previously owned by Phoenix Newspaper, Inc. (“PNI”) and was previously used as a printing, publishing and distribution facility of newspapers and other printed materials.

4.3.4 That the Property is located in OU-3 of the Motorola 52d Street National Priorities List CERCLA Site (the “CERCLA Site”); that PNI has received an EPA “special notice letter” as a designated “potentially responsible party” (PRP) for groundwater contamination at the CERCLA Site; that EPA and PNI signed an Administrative Order on Consent in 2005 requiring PNI to conduct investigations; and that PNI is in the process of carrying out its investigation under the Consent Order.

5. CLOSING

5.1 Closing Date. The “Closing” of the transaction contemplated by this Agreement (that is, the payment of the Closing Purchase Price, the transfer of title to the Property, and the satisfaction of all conditions precedent set forth in Section 9 of this Agreement, unless waived by the party to whose benefit any condition runs) shall occur on July 25, 2006 (the “Scheduled Closing Date”) or on such other date as Purchaser and Seller shall mutually elect in writing (the “Closing Date”), at the office of the Closing Escrow Agent, or at such other place as Seller and Purchaser shall agree in writing.

5.2 Closing Documents.

5.2.1 Seller. On the Closing Date, Seller shall deliver to Closing Escrow Agent each of the following (duly executed by Seller, if applicable):

5.2.1.1 one (1) original, duly executed and acknowledged special warranty deed (the “Deed”) in the form of Exhibit “F”, sufficient to transfer and convey to Purchaser fee simple title to the Real Property as required by this Agreement (subject only to the Permitted Exceptions), and otherwise in form acceptable to the Title Company for purposes of issuing the Title Policy;

5.2.1.2 four (4) original, duly executed counterparts of a bill of sale (the “Bill of Sale”) in the form of Exhibit “G” attached hereto;

5.2.1.3 four (4) original duly executed counterparts of an Assignment of the Leases, Approved Contracts and Intangible Personal Property in the form of Exhibit “J” attached hereto (the “Assignment of Leases, Approved Contracts and Intangibles”);

5.2.1.4 two (2) fully executed and notarized copies of each of the notices (the “Environmental Assignment Notices”) included in Parts 1, 2 and 3 of Exhibit “P” attached hereto sent by Seller to ADEQ (and, where applicable, to PNI), and pursuant to which, upon the Closing, the Environmental Condition Agreements shall be transferred to Purchaser;

5.2.1.5 four (4) original duly executed counterparts, executed by Seller, of a Transfer and Assignment of Environmental Condition Agreements, in the form of Exhibit “Q” attached hereto (the “Assignment of Environmental Agreements”)

5.2.1.6 four (4) original duly executed counterparts, executed by Seller, of an Assignment of Parking Agreement, in the form of Exhibit “V” attached hereto (the “Assignment of Parking Agreement”);

5.2.1.7 four (4) original duly executed counterparts, executed by Seller only, of an Assignment of Chilled Water Agreement, in the form of Exhibit “W” attached hereto (the “Assignment of Chilled Water Agreement”);

5.2.1.8 two (2) original, duly executed by each of Purchaser and Sterling Real Estate Services, LLC (the “Existing Manager”), copies of an agreement in form and substance satisfactory to Purchaser, terminating that certain Property Management Agreement for 120 E. Van Buren, Phoenix, Arizona, dated November 1, 2004, between Seller and the Existing Manager, with such termination being made effective on or before the Closing Date (the “Termination of Existing Management Agreement”);

5.2.1.9 one (1) original, duly executed statement (the “FIRPTA Affidavit”) stating, under penalty of perjury, Seller’s U.S. taxpayer identification number and that Seller is not a foreign person within the meaning of Section 1445 of the Internal Revenue Code of 1986 (as amended, the “Code”) (and any similar affidavit that may be required under state law);

5.2.1.10 one (1) original Certificate of Compliance duly issued by the City of Phoenix and dated not more than twenty five (25) business days prior to the Closing Date certifying that all business privilege taxes payable to the City of Phoenix as of the date of such certificate have been paid in full;

5.2.1.11 a letter to each of the Tenants under the Leases, in the form of Exhibit “H” attached hereto;

5.2.1.12 a letter to each of the other parties to the Approved Contracts, in the form of Exhibit “I” attached hereto;

5.2.1.13 original fully executed assignments of all non-cash security deposits under the Leases, together with the original instrument representing the non-cash security deposits;

5.2.1.14 all original Tenant Estoppels (as defined in Section 9.1.8, below) received by Seller;

5.2.1.15 all of the original Leases and Contracts (or if unavailable, copies thereof certified by Seller as true and complete);

5.2.1.16 any and all books, records, documentation or items constituting Intangible Personal Property in the possession of Seller, the Existing Manager, the Property Manager, any Seller Affiliate;

5.2.1.17 to the extent in the possession or control of Seller, the Existing Manager, the Property Manager, any Seller Affiliate (or their agents), all keys and passcards for the Property, with identification of the lock to which each such item relates;

5.2.1.18 documentation to establish to Title Company’s reasonable satisfaction the due authorization of Seller’s sale of the Property and Seller’s delivery of the documents required to be delivered by Seller pursuant to this Agreement; and

5.2.1.19 any and all affidavits, undertakings, certificates or other documents required to be delivered by Seller or, subject to the reasonable approval of Seller and its counsel, otherwise customarily required by the Title Company in order to cause it to issue the Title Policy in the form of the Pro Forma Title Policy (defined below);

5.2.1.20 all other documents reasonably and customarily required in order to complete the conveyance, transfer and assignment of the Property to Purchaser pursuant to the terms of this Agreement, provided that such documents are consistent with the terms of this Agreement, and do not increase Seller’s obligations hereunder or subject Seller to additional liability not otherwise contemplated by this Agreement.

5.2.2 Purchaser. On the Closing Date, Purchaser shall deliver or cause to be delivered to Seller at Closing each of the following (duly executed by Purchaser, if applicable):

5.2.2.1 the Adjusted Closing Purchase Price;

5.2.2.2 four (4) original, duly executed counterparts of the Assignment of Leases, Approved Contracts and Intangibles;

5.2.2.3 four (4) original duly executed counterparts of the Assignment of Environmental Agreements;

5.2.2.4 four (4) original duly executed counterparts of the Assignment of Parking Agreement;

5.2.2.5 four (4) original duly executed counterparts of the Assignment of Chilled Water Agreement;

5.2.2.6 any and all documents customarily required from a purchaser by the Title Company in order to cause it to issue the Title Policy, subject to the reasonable approval of Purchaser and its counsel;

5.2.2.7 all other documents reasonably and customarily required in order to complete the conveyance, transfer and assignment of the Property to Purchaser pursuant to the terms of this Agreement, provided that such documents are consistent with the terms of this Agreement, and do not increase Purchaser’s obligations hereunder or subject Purchaser to additional liability not otherwise contemplated by this Agreement;

5.2.2.8 documentation to establish to Title Company’s reasonable satisfaction the due authorization of Purchaser’s acquisition of the Property and Purchaser’s delivery of the documents required to be delivered by Purchaser pursuant to this Agreement;

5.2.3 Joint. On the Closing Date, Purchaser and Seller shall deliver to the other duly executed counterparts of (i) a closing statement (to be prepared by Title Company or Seller and approved by Purchaser) and (ii) any transfer tax declarations, change of ownership forms or other similar instruments as may be required by law.

5.3 Credits and Prorations.

5.3.1 Prorations. The following shall be apportioned with respect to the Property, based on the number of days Seller and Purchaser each own the Property in the month (or year if applicable) in which the Closing occurs, as of 12:01 a.m. on the Closing Date, as if Purchaser were vested with title to the Property during the entire day on the Closing Date:

5.3.1.1 all collected rents and other sums received under Leases, including prepaid rents (“Rents”);

5.3.1.2 nondelinquent taxes (and to the extent the same are Permitted Exceptions, assessments) (including personal property taxes on the Personal Property and taxes on rents (if any)) levied against the Property;

5.3.1.3 pre-payments and accrued amounts due under any Approved Contracts (defined below) relating to the Property;

5.3.1.4 gas, electricity, water and other utility charges for which Seller is liable, if any; such charges to be apportioned at Closing on the basis of the most recent meter reading occurring prior to Closing (which Seller shall use reasonable efforts to cause to be read not more than two (2) business days prior to Closing) or, if unmetered, on the basis of a current bill for each such utility;

5.3.1.5 environmental insurance premium in an amount equal to 93/96th of the sum of the $136,878.34 premium and $14,980 legal expenses, or a $147,112.77 credit to Seller;

5.3.1.6 all other ordinary expenses pertaining to the Property (other than insurance premiums which, except as provided otherwise in Section 5.3.1.5, above) shall not be prorated).

5.3.2 Closing Mechanics and Method of Prorations.

5.3.2.1 At the Closing, (A) Seller shall credit to the account of Purchaser the amount of all security deposits (together with interest required to be paid thereon) under Leases not previously applied in accordance with the terms of the Leases; (B) Purchaser shall credit to the account of Seller all refundable cash or other deposits posted with utility companies serving the Property which are duly assigned to Purchaser at the Closing (and Seller shall be entitled to recover from the utility companies any such deposits that are not so assigned and credited).

5.3.2.2 Purchaser and Seller agree to prorate all nondelinquent real estate and personal property taxes (and assessments to the extent the same shall constitute Permitted Exceptions) for the period for which such nondelinquent real estate and personal property taxes (on the Tangible Personal Property) are assessed, regardless of when payable. Any nondelinquent real estate and personal property taxes (on the Tangible Personal Property) paid at or prior to Closing shall be prorated based upon the amounts actually paid. If nondelinquent real estate and personal property taxes (on the Tangible Personal Property) (and, to the extent the same are Permitted Exceptions, assessments) for the fiscal year in which Closing occurs have been determined but have not been paid before Closing, Seller shall be charged and Purchaser credited at Closing with an amount equal to that portion of such taxes and assessments which relates to the period before the Closing Date. If the actual real estate and personal property taxes (on the Tangible Personal Property) and assessments are not known at Closing, the proration shall be based upon the most recent assessed values and tax rates. To the extent that the actual real estate and personal property taxes (on the Tangible Personal Property) and assessments paid differ from the amount apportioned at Closing, the parties shall make all necessary adjustments by appropriate payments between themselves within 30 days of the issuance of final tax bills, subject to the terms of Section 5.3.2.7, with the parties hereto agreeing that all Proration Adjusting Payments (defined in Section 7.4.3.6, below) that required to be made by Seller to Purchaser under this Section 5.3.2.2 shall be paid from the Escrow Fund (as defined in the General Escrow Agreement), and Seller hereby agrees to direct General Escrow Agent to pay such amounts from the Escrow Fund in accordance with Section 7.4.3.6, below. Notwithstanding anything to the contrary herein, (a) Purchaser acknowledges and agrees that any real estate tax refunds relating to any pre-Closing period, including without limitation, as it

relates to any pending appeal of any assessment that affects any real estate tax payment made with respect to any tax period prior to Closing, shall be the exclusive property of Seller, subject only to any contractual obligations of Seller to any Tenants pursuant to any Leases as in effect during the period for the period for which such refunds of real estate taxes pertain and (b) Seller acknowledges and agrees that Seller shall be responsible for payment of any and all personal property taxes with respect to the Tangible Personal Property that are either delinquent as of the Closing Date or that are otherwise payable with respect to any period prior to the Closing Date.

5.3.2.3 Seller shall be responsible for and shall pay all Tenant Inducement Costs (defined below) and Commissions (defined below) that are payable with respect to any Lease entered into prior to the date hereof. Tenant Inducement Costs and Commissions that are payable with respect to any Lease entered into after the date hereof shall be borne by Purchaser. For purposes hereof, the term “Tenant Inducement Costs” shall mean any payments required under a Lease to be paid by the landlord thereunder to (or for the direct benefit of) the tenant thereunder which is in the nature of a tenant inducement, including specifically, but without limitation, tenant improvement costs, design and refurbishment allowances, free rent or legal fees.

5.3.2.4 All Rent collected by Seller and Purchaser after the Closing Date shall be delivered by the recipient as follows. Subject to the provisions of this Section 5.3.2.4, within fifteen (15) days after the receipt thereof, Seller and Purchaser agree that all Rent received by Seller or Purchaser shall be applied first to then current Rents, and then to delinquent rents, in inverse order of maturity. At the Closing, Seller shall deliver to Purchaser a schedule of all past due but uncollected Rent and other sums owed by tenants, and Purchaser shall include the amount of such Rent and other sums in the first bills thereafter submitted to the tenants in question after the Closing, and shall continue to do so for six (6) months thereafter and shall make good faith efforts to collect such amounts during such six (6) month period. Following the Closing, Seller shall not separately pursue Tenants (by litigation or otherwise) for payment of delinquent Rent unless the Tenant in question is no longer a tenant of the Property.

5.3.2.5 Seller, as landlord under the Leases, is currently collecting from certain of the Tenants additional rent to cover taxes, insurance, utilities, maintenance and other operating costs and expenses incurred by Seller in connection with the ownership, operation, maintenance and management of the Property (such expenses, collectively “Expenses” and such collections actually received, collectively “Collections”). Collections for the month in which Closing occurs shall be prorated in the same manner as other Rents. Prior to Closing, Seller shall reconcile all Collections and Expenses for the calendar year preceding the year in which the Closing occurs with the tenants. Subsequent to Closing, Purchaser shall calculate adjustments for Expenses incurred and Collections received for the year of Closing, which reconciliation as to electricity usage in Tenant’s premises will be done on a monthly, quarterly or annual basis depending on the terms of the applicable Lease. Purchaser shall prepare and present to Seller a calculation of the Collections received and Expenses incurred by each of Seller and Purchaser attributable to each party’s period of ownership, together with reasonable verification of same. The parties shall make the appropriate adjusting payments between them within 30 days after delivery to Seller of Purchaser’s calculation, with the parties hereto agreeing that all Proration Adjusting Payments (defined in Section 7.4.3.6, below) that required to be made by Seller to Purchaser under this Section 5.3.2.5 shall be paid from the

Escrow Fund (as defined in the General Escrow Agreement), and Seller hereby agrees to direct General Escrow Agent to pay such amounts from the Escrow Fund in accordance with Section 7.4.3.6, below. Seller shall indemnify, defend and hold Purchaser harmless from and against any and all Claims, Damages and Expenses arising out of Seller’s collection of Expenses from tenants of the Property for all calendar years preceding the years in which the Closing occurs.

5.3.2.6 Seller shall pay all utility charges and other operating expenses attributable to the Property for all periods prior to the Closing Date (except for those utility charges and operating expenses payable directly to the utility company or service provider by Tenants in accordance with the Leases (“Direct Charges”)), and Purchaser shall pay all utility charges and other operating expenses (other than Direct Charges) attributable to the Property for the periods on or after the Closing Date. To the extent that the amount of actual consumption of any utility services is not determined prior to the Closing Date, a proration shall be made at Closing based on the last available reading and post-closing adjustments between Purchaser and Seller shall be made within twenty (20) days after the date that actual consumption for such pre-closing period is determined, with the parties hereto agreeing that all Proration Adjusting Payments (defined in Section 7.4.3.6, below) that required to be made by Seller to Purchaser under this Section 5.3.2.6 shall be paid from the Escrow Fund (as defined in the General Escrow Agreement), and Seller hereby agrees to direct General Escrow Agent to pay such amounts from the Escrow Fund in accordance with Section 7.4.3.6, below. Seller shall assign to Purchaser any deposits which Seller has with any of the utility services or companies servicing the Property and Seller shall receive a credit for such amounts as an adjustment to the Closing Purchase Price. Purchaser shall arrange with such services and companies to have accounts opened in Purchaser’s name beginning on the Closing Date. Seller shall take no action to cause any interruption in any utility service to the Property and shall reasonably cooperate (at no expense to Seller) with Purchaser’s requests designed to avoid interruptions in service.

5.3.2.7 If at any time following the Closing Date, the amount of an item listed or prorated in any section of this Article 5 shall prove to be incorrect (whether as a result of an error in calculation or lack of complete and accurate information as of the Closing), the party in whose favor the error was made shall promptly pay to the other party the sum necessary to correct such error upon receipt of reasonable proof of such error. The provisions of this Section 5.3.2.7 shall survive the Closing for a period expiring on the date that is six (6) full calendar months after the Closing Date.

5.3.3 Closing Costs. Each party will pay its own expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation (a) all costs and expenses stated herein to be borne by a party, and (b) all of their respective consulting, accounting, legal and appraisal fees. Seller, in addition to its other expenses, shall pay at the Closing (i) the cost of recording the Deed, (ii) one-half of all escrow fees and the cost of the CLTA portion of the premium for the Title Policy and (iii) all sale, documentary, stamp or transfer taxes. Purchaser, in addition to its other expenses, shall pay at the Closing (A) the cost of the ALTA portion of the title insurance premium for the Title Policy, (B) the cost of all endorsements to the Title Policy and (C) one-half of all escrow fees. Seller shall be separately responsible for the payment of all fees and commissions owing to or claimed by any real estate broker or finder engaged by Seller pursuant to Section 10 hereof.

5.3.4 Survival. The obligations under this Section 5.3 shall survive the Closing and delivery of the Deed to Purchaser.

5.3.5 Possession. Upon Closing, Seller shall deliver to Purchaser possession of the Property, subject to the Permitted Exceptions.

6. [INTENTIONALLY OMITTED]

7. REPRESENTATIONS AND WARRANTIES

7.1 Seller hereby makes the following representations and warranties to Purchaser, all of which (i) are material and being relied upon by Purchaser, (ii) shall survive through the date that is six (6) months after the Closing Date and (iii) are true and accurate and complete, in all material respects as the Closing Date.

EXCEPT AS EXPLICITLY PROVIDED IN THIS AGREEMENT, IN THE TRANSACTION DOCUMENTS, IN THE SNS PURCHASE AGREEMENT AND IN THE ANCILLARY AGREEMENTS (AS DEFINED IN THE SNS PURCHASE AGREEMENT), (A) PURCHASER AGREES TO PURCHASE THE PROPERTY IN “AS-IS”, “WHERE-IS” CONDITION AND “WITH ALL FAULTS” AS THEY EXIST ON THE CLOSING DATE, SPECIFICALLY INCLUDING ALL EXISTING ENVIRONMENTAL CONDITIONS, WHETHER KNOWN OR UNKNOWN, WITH NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, EITHER ORAL OR WRITTEN, MADE BY SELLER OR ANY AGENT OR REPRESENTATIVE OF SELLER, (B) NEITHER SELLER NOR ANY MEMBER, OFFICER, PERSON, FIRM, AGENT OR REPRESENTATIVE PURPORTING TO REPRESENT SELLER, HAS ASSUMED ANY RESPONSIBILITY WITH RESPECT TO THE CONDITION OR REPAIR OF THE PROPERTY, (C) PURCHASER ACKNOWLEDGES THAT SELLER HAS REQUESTED THAT PURCHASER INSPECT, OR CAUSE TO BE INSPECTED, THE PROPERTY, AND INVESTIGATE ALL MATTERS RELEVANT THERETO, UP TO AND INCLUDING THE DATE SET FOR CLOSING, (D) IT IS SELLER’S INTENT THAT BY AFFORDING PURCHASER FULL ACCESS TO THE PROPERTY AND ALL BOOKS AND RECORDS AND MATTERS RELEVANT THERETO, PURCHASER WILL HAVE A FULL OPPORTUNITY TO CONSIDER THE INFORMATION ABOUT THE PROPERTY. EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, IN THE TRANSACTION DOCUMENTS, IN THE SNS PURCHASE AGREEMENT OR IN THE ANCILLARY AGREEMENTS, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS, METHODOLOGY OF PREPARATION OR OTHERWISE CONCERNING THE CONTENT OF SUCH MATERIALS. PURCHASER ACKNOWLEDGES THAT ANY DISCLOSURE, EXCLUSION OR EXCEPTION CONTAINED IN THE BODY OF ONE REPRESENTATION OR WARRANTY OR IN THE DISCLOSURE SCHEDULE SHALL BE DEEMED TO BE A DISCLOSURE, EXCLUSION OR EXCEPTION AS TO ALL OTHER APPLICABLE REPRESENTATIONS AND WARRANTIES. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OR ANY TERMINATION OF THIS AGREEMENT AND SHALL NOT MERGE WITH THE DEED OR OTHER CONVEYANCE OF THE PROPERTY AT CLOSING.

7.1.1 Authority.

(a) Seller is a Delaware limited liability company duly organized or formed, validly existing and in good standing under the laws of the State of Delaware and is in good standing and qualified to do business in the State of Arizona. The execution and delivery of this Agreement by Seller and the performance of Seller’s obligations hereunder have been duly authorized by all necessary action. The execution and delivery of this Agreement by Seller and the consummation of the transactions contemplated hereby will not, to Seller’s Knowledge (i) violate any judgment, order, injunction, or regulation of any governmental entity or (ii) conflict with, or constitute a default under the organizational documents of Seller, any indebtedness, deed of trust, lease or other material agreement to which Seller is a party or by which Seller may be bound. No consent, waiver or approval is required from any person or entity (that has not already been obtained) in connection with the execution, delivery or performance of this Agreement by Seller;

(b) Sterling Network Manager, LLC is the managing member of Seller.

7.1.2 No Other Agreements. Seller has not entered into any currently effective agreement to dispose of or transfer its interest in the Property or any part thereof, except for this Agreement.

7.1.3 Books and Records; Material Communications. To Seller’s Knowledge, Seller has made available to Purchaser at the Property or at Seller’s offices in Northbrook, Illinois, all material books, records, reports, documents, notices, orders, correspondence or engineering or other studies relevant to the ownership, construction, development, entitlements, maintenance, leasing, the Leases, the Tenants, the environmental and/or physical condition or operation of the Property (the “Books and Records”) and all Material Communications (defined below) which are in the possession of Seller, its constituent members, its Affiliates or the Existing Manager or any of their respective employees. For purposes hereof, “Material Communications” means all written notices, communications and other correspondence that are (i) received by Seller or the Existing Manager from, or (ii) delivered by Seller or the Existing Manager to any governmental agency, any insurance company, any Tenant under any of the Leases or any other party to any Contract, in each case, that relate to or affect the ownership or operation of the Property in any material respect, including, without limitation, in all cases, any written notices, communication or correspondence so received or delivered: (a) asserting or pertaining to any claims of default, liability or breach on the part of Seller, (b) exercising any rights, including, without limitation, any rights of expansion, extension, contraction, operating expense audit, or termination, (c) relating to any inquiry by any governmental official or agency or to any actual, prospective or potential violation, disapproval, termination or revocation of any Law, insurance policy, legal entitlement, permit, or contractual obligation (or any application by Seller with respect thereto), (d) relating in any manner to any Hazardous Materials (defined below) (or any adverse environmental condition) located or released (or potentially located or released) in, on, about, under, or adjacent to the Real Property or any physical defect or unhealthy or dangerous condition in, on or about the Real Property, (e) relating to any change (or potential change) in zoning, approvals, land use entitlements or property taxes or assessments affecting the Property, and (f) any written

communication from any Tenant or prospective tenant expressing the need to obtain, expand, vacate, or sublease any leased space in the Real Property or requesting consent to any sublease or assignment, or otherwise providing any material information concerning the financial standing of any Tenant.

7.1.4 Leases and Tenants. All of the leases, licenses and occupancy agreements (as the same may be amended) affecting the Property and all amendments and guarantees thereof (collectively, “Leases”) (and all of the existing tenants under such Leases (the “Tenants”)) are listed on the rent roll (the “Rent Roll”) attached hereto as Exhibit “K”. To Seller’s Knowledge, the only parties entitled to possession of any part of the Real Property are listed on the Rent Roll (other than subtenants occupying space under valid subleases which have either been expressly consented to by the landlord thereunder or for which no such consent is required and subtenants or licensees of SNS). All information described on the Rent Roll is true, complete and correct in all material respects. No rent has been prepaid under any Lease more than thirty (30) days in advance. Seller is the owner of the landlord’s interest under each Lease and has not assigned (other than as collateral for existing financing to be paid off and discharged at the Closing) any interest therein to any other person. All of the security deposits previously deposited with the “landlord” under the Leases are described on the Rent Roll and as of the Closing, the landlord under such Leases shall have no obligation to any Tenant with respect to any security or other deposit except for the obligation to return those security deposits described on the Rent Roll. Except as described on the Disclosure Schedule, there are no noncash security deposits under the Leases. Except as described on the Disclosure Schedule, Seller has completed all construction and tenant improvements obligations (and all cash amounts and allowances disbursement obligations) which are the responsibility of the landlord under the Leases (other than maintenance, repair and casualty or condemnation restoration obligations thereunder) and has performed all other obligations of the landlord thereunder which are to be performed prior to the date of this representation and warranty. Seller has not given to, and to Seller’s Knowledge, Seller has not received from, any Tenant any written notice of default under any Lease except as contained in the Books and Records. To Seller’s Knowledge, except as described on the Disclosure Schedule, neither Seller (as the landlord under the Leases) nor any of the Tenants is in default under any of the Leases and there exist no facts or circumstances that, with the passage of time or the giving of notice, or both, would constitute a material default or material breach by any party under any Lease. To Seller’s Knowledge, there does not exist any right of offset or abatement or claims in favor of any Tenant under any Lease or any defense against enforcement of any of the material terms of (or Tenant obligations under) any Lease, and no such rights of offset or abatement, claims or defenses have been asserted or threatened in writing (which remain outstanding).

7.1.5 Brokerage Agreements. Except as described on Exhibit “L” attached hereto (the “Disclosure Schedule”), Seller has no obligation, and following the Closing, Purchaser (as owner of the Property) will have no obligation, to pay any broker’s or finder’s commission, fee or other compensation (which remains unpaid) with respect to any past, present or future Lease, lease renewal, license, lease expansion, sale, financing or similar transaction affecting the Property or any portion thereof (other than any such obligation created by the acts of Purchaser).

7.1.6 Contracts. All of the service, management, maintenance, repair, parking, employment, union, construction, and other contracts or obligations relating to the ownership, management, construction, renovation, design, marketing, alteration, security, maintenance, repair or operation of the Property, whether written or oral, binding on Seller or the Property, (other than the Leases) are listed on Exhibit “M” attached hereto (the “Contracts”). All of the Contracts listed on Exhibit “M”, other than the Contracts listed at Nos. 8 and 11 on Exhibit “M”, constitute the “Approved Contracts”. Seller has not given to, or received from, any other party to any Contract any written notice of default or breach, and to Seller’s Knowledge, (a) no party to any Contract is in default under such Contract and (b) there exist no facts or circumstances that, with the passage of time or the giving of notice, or both, would constitute a material default or material breach by any party under any Contract.

7.1.7 Foreign Person. Seller is not a “foreign person” as defined in Internal Revenue Code Section 1445 and any related regulations, and is not subject to the provisions of Sections 897(a) or 1445 of the Code related to the withholding of sales proceeds to foreign persons. Seller shall execute at the Closing such certificates or affidavits reasonably necessary to document the inapplicability of the Code sections referred to in this subparagraph. At the Closing, Purchaser will have no duty to collect withholding taxes for Seller pursuant to the Foreign Investment in U.S. Real Property Tax Act of 1980, as amended (or pursuant to any comparable state or local statutes or ordinances).

7.1.8 Bankruptcy. Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets; or (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets.

7.1.9 Litigation. Except as disclosed on the Disclosure Schedule, (a) Seller has not been served with or received any written notice of, and has no Knowledge of any pending litigation, legal proceeding or claim with respect to the Property or any portion thereof or otherwise affecting Seller’s ability to consummate the transactions contemplated by this Agreement and to Seller’s Knowledge no such litigation, legal proceedings or claims are threatened, (b) Seller has not received any written notice of any filed, pending or contemplated condemnation, zoning, entitlements, governmental, nuisance or other proceeding affecting all or any portion of the Property (which remains outstanding), and to Seller’s Knowledge no such actions or proceedings are threatened and (c) there are no material outstanding claims on Seller’s insurance policies which relate to the Property.

7.1.10 Violations. Except as described in the Disclosure Schedule and the Environmental Documents, to Seller’s Knowledge Seller has not received from any governmental authority any written notice of any currently existing non-compliance or violation (excluding any noncompliance matters for which there is no obligation of Seller to rectify or cure by a particular date). Except as described in the Disclosure Schedule, to Seller’s Knowledge, Seller has not received any notice of any violation (and there does not exist any violation) by Seller or the Property (or any portion thereof) of any reciprocal easement agreement, easement agreement, or covenant, condition or restriction with respect to the Property (or any portion thereof). Except as described in the Disclosure Schedule, to Seller’s Knowledge, all permits

required to be obtained by the Seller (as owner of the Property) with regard to use or occupancy of the Property have been obtained, have not been revoked, and any conditions to the continued effectiveness of such permits and approvals have been complied with in all material respects.

7.1.11 Hazardous Materials.

(a) Definitions. For purposes of this Agreement:

(i) “Environmental Law(s)” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., and the Clean Water Act, 33 U.S.C. Sections 1251 et seq., and the Arizona Environmental Quality Act A.R.S. Section 49-101, et seq., as said laws have been supplemented or amended to date, the regulations promulgated pursuant to said laws and any other federal, state or local law, statute, rule, regulation or ordinance applicable to the Property or any portion thereof which regulates or proscribes the use, storage, disposal, presence, cleanup, transportation or release or threatened release into the environment of any Hazardous Materials, or requires disclosures relating to the same.

(ii) “Hazardous Materials” means and includes (i) any substance which is designated, defined, classified or regulated as a hazardous substance, hazardous material, hazardous waste, pollutant or contaminant under any applicable Environmental Law, as currently in effect or as hereafter amended or enacted prior to the Closing Date (ii) any petroleum hydrocarbon, including crude oil or any fraction thereof and all petroleum products, (iii) PCBs, (iv) lead, (v) asbestos and asbestos containing materials (collectively, “ACM”), (vi) any flammable explosive, (vii) any infectious material and (viii) any radioactive material.

(b) Environmental Condition Agreements.

(i) Seller has provided to Purchaser a true and correct and materially complete copy of each of the Environmental Condition Agreements. Seller has not at any time asserted, and to the Knowledge of Seller, the State of Arizona (nor ADEQ) has not at any time asserted in writing, that either the Prospective Purchaser Agreement or the Consent Decree are, for any reason, not valid, binding and/or enforceable. Seller has not at any time asserted, and to the Knowledge of Seller, neither the State of Arizona (nor ADEQ) nor PNI, as applicable, has at any time asserted in writing, that either the ADEQ Access Agreement or the PNI Access Agreement are, for any reason, not valid, binding and/or enforceable.

(ii) All of the representations and certifications made by Seller (A) in the Prospective Purchaser Agreement, including, without limitation, under Section IV of the Prospective Purchaser Agreement, and (B) in the Consent Decree, including, without limitation, in Section IX if the Consent Decree, are true and correct and complete in all respects (and, were and have been true and correct and complete in all respects at all times from and after the date that such representations and certifications were first made).

(iii) Seller has performed all of its obligations under the Prospective Purchaser Agreement and under the Consent Decree, and Seller has received no notice of any default by Seller under (and to the Knowledge of Seller, no default exists under) either the Prospective Purchaser Agreement or the Consent Decree. Seller has performed all of its obligations under the ADEQ Access Agreement and the PNI Access Agreement, and Seller has received no notice of any default by Seller under (and to the Knowledge of Seller, no default exists under) either the ADEQ Access Agreement or the PNI Access Agreement.

(iv) Except as described in or pursuant to the ADEQ Access Agreement, the PNI Access Agreement and the Environmental Documents, neither the State of Arizona (nor any department, agency or contractor of the State of Arizona, including, without limitation, ADEQ) nor any other person or entity has entered the Property for the purpose of performing remedial actions in, on, under or about the Property during the period of time that Seller (or any Affiliate of Seller) has owned the Real Property.

(v) Neither the State of Arizona nor the United States has made any written claim or pursued any civil, criminal or remedial action against Seller or the owner of the Property for any of the reasons (A) described in Paragraph 26 of Section VIII of the Prospective Purchaser Agreement or (B) described in Subparagraphs A through H of Paragraph 35 of Section VIII of the Consent Decree or in Subparagraphs (a) through (f) of Paragraph 54 of Section XII of the Consent Decree.

(vi) Seller has provided, or prior to Closing, will provide, in a timely manner all notices required for the transfer of all of the rights, privileges, benefits and obligations (A) of the “Purchaser” (as such term is used in the Prospective Purchaser Agreement) under the Prospective Purchaser Agreement (such that following consummation of the transactions contemplated hereunder, it is intended that Purchaser shall have all of the rights, privileges, benefits and obligations of the “Purchaser” under the Prospective Purchaser Agreement), (B) of “Sterling” (as such term is used in the Consent Decree) under the Consent Decree (such that following consummation of the transactions contemplated hereunder, it is intended that Purchaser shall have, jointly with Seller, all of the rights, privileges, benefits and obligations of “Sterling” under the Prospective Purchaser Agreement), (C) of the “Owner” (as such term is used in the ADEQ Access Agreement) under the ADEQ Access Agreement (such that following consummation of the transactions contemplated hereunder, it is intended that Purchaser shall have, jointly with Seller, all of the rights, privileges, benefits and obligations of “Owner” under the ADEQ Access Agreement) and (D) the “Owner” (as such term is used in the PNI Access Agreement) under the PNI Access Agreement (such that following consummation of the transactions contemplated hereunder, it is intended that Purchaser shall have, jointly with Seller, all of the rights, privileges, benefits and obligations of “Owner” under the PNI Access Agreement).

(c) Seller has not received written notice of any violation of Environmental Laws relating to any act or omission that occurred during the period of time that Seller has owned the Real Property. Except as disclosed in the Environmental Condition Agreements, the Environmental Documents, and the Disclosure Schedule, to the Knowledge of Seller, (i) there are no Hazardous Materials present in, on, or under the Real Property in a condition requiring remediation under Environmental Laws in effect as of the Closing Date, (ii)

no Hazardous Materials are stored on, in, under or within the Real Property by Seller or any tenant, occupant or user of the Property, except for fuel, batteries and other materials specifically permitted to be used by the Tenants under the Leases in the ordinary course of the Tenants’ business, (iii) there are not now any underground storage tanks located in, on or under the Real Property, (iv) there is no friable or other ACM in, on or under the Real Property, and (v) no permits or approvals are required or are now in force which are applicable to the Real Property or any portion thereof and which are required under any Environmental Laws on account of any storage, use, disposal, manufacture, treatment, release, remediation or transport of any Hazardous Materials to, from, on, under, at or in the Real Property.

(d) Environmental Insurance.

(i) The Environmental Insurer has not at any time asserted, in writing any claim that the Environmental Insurance Policy is, for any reason, not valid, binding and/or enforceable. Seller has not made any claim under the Environmental Insurance Policy (or under any prior or other environmental insurance policy carried by Seller with respect to the Real Property). “Environmental Insurance Policy” shall mean that certain Pollution Legal Liability Select Policy dated April 21, 2006 issued by American International Lines Specialty Insurance Company (the “Environmental Insurer”).

7.1.12 Employees. Following the Closing, (a) other than by reason of the promises of Purchaser made in writing to such employees (if any), to do so, Purchaser shall have no obligation to continue to engage the Existing Manager or the Property Manager or to employ any persons currently employed by Seller, the Existing Manager or the Property Manager and (b) Purchaser shall have no obligation or liability to any current or former employee of Seller, the Existing Manager or the Property Manager.

7.1.13 Personal Property Taxes. The Company has duly filed Maricopa County Self Reporting Business Personal Property Registrations with the Maricopa County Tax Assessor.

When used in this Agreement, the terms “Seller’s Knowledge” and “Knowledge of Seller” shall mean the actual knowledge of Tony Wanger and Jeff Perelman, without investigation.

7.2 [INTENTIONALLY OMITTED]

7.3 Purchaser’s Representations and Warranties. Purchaser hereby makes the following representations and warranties to Seller, which representations and warranties (i) are material and are being relied upon by Seller, (ii) shall survive through the date that is six (6) months after the Closing Date, and (iii) are true and accurate and complete, in all material respects as of the Closing Date:

7.3.1 Authority, etc. Purchaser is a limited liability company duly formed and validly existing under the laws of the State of Delaware. Purchaser has full power and lawful authority under Purchaser’s organizational documents to enter into this Agreement and on or prior to the Closing shall have full power and lawful authority under Purchaser’s organizational documents to execute and deliver all documents which are contemplated by this

Agreement. In the event Purchaser elects to close this transaction at the Closing, all actions necessary to confer such power and authority upon the persons executing this Agreement (and all documents which are contemplated by this Agreement to be executed on behalf of Purchaser) have been taken.

7.3.2 No Bankruptcy. Purchaser has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets or (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets.

7.3.3 Solvency. The Purchaser does not intend to incur indebtedness beyond its ability to pay such indebtedness as it matures (taking into account the timing and amounts of cash to be payable or in respect of its indebtedness). To the Knowledge of Purchaser, there exist no facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within six (6) months from the Closing Date.

When used in this Agreement, the terms “Purchaser’s Knowledge” and “Knowledge of Purchaser” shall mean the actual knowledge of Scott Peterson, Chris Crosby, Jim Trout and Glen Benoist, without investigation.

7.4 Indemnification.

7.4.1 Seller’s Indemnification. In the event of the successful consummation and closing of the purchase of the Property by Purchaser contemplated by this Agreement, subject to the terms and conditions set forth in Section 7.4 of this Agreement, Seller agrees to indemnify, defend, protect and hold Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Purchaser Indemnified Party”) harmless from and against any and all Liabilities (as defined in the SNS Purchase Agreement), losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including attorneys’ and consultants’ fees and expenses) actually suffered or incurred by them (including any Action (as defined in the SNS Purchase Agreement) brought or otherwise initiated by any of them), specifically excluding punitive, incidental and consequential damages, other than punitive, incidental and consequential damages incurred pursuant to any Third Party Claim (defined below) (collectively, “Claims, Damages and Expenses”) arising out of or resulting from:

(a) any breach of any representation or warranty by Seller contained in this Agreement or any other Transaction Document (as defined in the SNS Purchase Agreement);

(b) the breach of any covenant or agreement by Seller contained in this Agreement or any other Transaction Document;

(c) any personal injury or property damage occurring in, under, on or around the Real Property prior to the Closing; but only to the extent that such injury or damage would be within the scope of coverage of a standard commercial general liability insurance policy;

(d) any claim by the other contracting party thereto of any breach or default by Seller occurring prior to the Closing under any Contract or any Environmental Condition Agreement; provided, however, that subject to Section 7.4.1(e), below, Seller shall not indemnify Purchaser for any Claims, Damages or Expenses arising out of the Existing Contamination (as defined in the Prospective Purchaser Agreement); and

(e) any (i) claim by (or the pursuit of civil or remedial action by) the State of Arizona (or any department or agency of the State of Arizona or any other governmental authority) and/or (ii) the failure of the Consent Decree to be enforceable against any third party claim for contribution for (or with respect to) any of the reasons described in Paragraph 26 of Section VIII of the Prospective Purchaser Agreement or described in Subparagraphs A through H of Paragraph 35 of Section VIII of the Consent Decree or in Subparagraphs (a) through (f) of Paragraph 54 of Section XII of the Consent Decree and that arises out of or relates to any act or omission of Seller, any party claiming through or under Seller or any employee, agent or contractor of any such party at any time prior to the Closing.

7.4.2 Purchaser’s Indemnification. In the event of the successful consummation and closing of the purchase of the Property by Purchaser contemplated by this Agreement, subject to the terms and conditions set forth in Section 7.4 of this Agreement, Purchaser agrees to indemnify, defend and hold harmless Seller and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Seller Indemnified Party”), from and against any and all Claims, Damages and Expenses arising out of or resulting from:

(a) any breach of any representation or warranty by Purchaser contained in this Agreement or any other Transaction Document;

(b) the breach of any covenant or agreement by Seller contained in this Agreement or any other Transaction Document;

(c) any personal injury or property damage occurring in, under, on or around (or with respect to) the Property following the Closing, but only to the extent that such injury or damage would be within the scope of coverage of a standard commercial general liability insurance policy;

(d) any claim by the other contracting party thereto of any breach or default by Purchaser occurring after the Closing under any Contract or any Environmental Condition Agreement; provided, however, that subject to Section 7.4.2(e), below, Purchaser shall not indemnify Seller for any Claims, Damages or Expenses arising out of the Existing Contamination (as defined in the Prospective Purchaser Agreement); and

(e) any (i) claim by (or the pursuit of civil or remedial action by) the State of Arizona (or any department or agency of the State of Arizona or any other governmental authority) and/or (ii) the failure of the Consent Decree to be enforceable against any third party claim for contribution for (or with respect to) any of the reasons described in Paragraph 26 of Section VIII of the Prospective Purchaser Agreement or described in Subparagraphs A through

H of Paragraph 35 of Section VIII of the Consent Decree or in Subparagraphs (a) through (f) of Paragraph 54 of Section XII of the Consent Decree and that arises out of or relates to any act or omission of Purchaser, any party claiming through or under Purchaser or any employee, agent or contractor of any such party at any time following the Closing (and during Purchaser’s ownership of the Property).

7.4.3 Survival; Limitations. The obligations of the parties pursuant to this Section 7.4 above shall be subject to the following conditions and limitations:

7.4.3.1 Survival. With respect to any indemnity claim that any Indemnified Party (defined below) has or may have under Section 7.4.1 or Section 7.4.2, as applicable, such Indemnified Party must give written notice to the Indemnifying Party of any such claims in each instance on or before the date that is six (6) months after the date hereof. In the event any Indemnified Party fails to provide such notice within the required time period, such Indemnified Party shall have no right to bring any such claim under Section 7.4.1 or Section 7.4.2, as applicable, against the Indemnifying Party under this Agreement.

7.4.3.2 Basket.

7.4.3.2.1 Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Section 7.4), the Seller shall have no liability to any Purchaser Indemnified Party pursuant to Section 7.4.1(a) of this Agreement unless and until the Claims, Damages and Expenses incurred by all Purchaser Indemnified Parties as a result thereof, together with all Losses (as defined in the SNS Purchase Agreement) incurred by the Purchaser Indemnified Parties (as defined in the SNS Purchase Agreement) for which the Sellers (as defined in the SNS Purchase Agreement) are liable under Section 6.07 or Section 8.02(a) of the SNS Purchase Agreement, exceed, in the aggregate, the Basket Amount (as defined in the SNS Purchase Agreement); provided, however, that in the event that such Claims, Damages and Expenses together with such Losses, in the aggregate, exceed the Basket Amount, Seller shall fully indemnify the Purchaser Indemnified Parties for all Claims, Damages and Expenses in excess of the Basket Amount that are incurred by the Purchaser Indemnified Parties and that are within the indemnification obligations of Seller under Section 7.4.1(a).

7.4.3.2.2 Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Section 7.4), the Purchaser shall have no liability to any Seller Indemnified Party pursuant to Section 7.4.2(a) of this Agreement unless and until the Claims, Damages and Expenses incurred by the Seller Indemnified Parties as a result thereof, together with the Losses incurred by Seller Indemnified Parties (as defined in the SNS Purchase Agreement) for which the SNS Purchaser is liable under Section 6.07 or Section 8.03(a) of the SNS Purchase Agreement, exceed, in the aggregate, the Basket Amount, provided, however, that in the event such Claims, Damages and Expenses together with such Losses, in the aggregate, exceed the Basket Amount, the Purchaser shall fully indemnify the Seller Indemnified Parties for all Claims, Damages and Expenses in excess of the Basket Amount that are incurred by the Seller Indemnified Parties and that are within the indemnification obligations of the Purchaser under Section 7.4.2(a).

7.4.3.3 Immaterial Claims.

7.4.3.3.1 Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Section 7.4), the Seller shall not be liable to any Purchaser Indemnified Party under Section 7.4.1, nor shall any such claim or series of related claims be counted toward the Basket Amount, unless the Claims, Damages and Expenses incurred by the applicable Purchaser Indemnified Parties as a result of any such claim or series of related claims exceed $10,000; provided, however, that the limitations on the liability of Seller contained in this Section 7.4.3.3.1 shall apply only with respect to the first fifteen (15) claims of which (i) the Purchaser Indemnified Parties have given the Seller written notice or the Purchaser Indemnified Parties (as defined in the SNS Purchase Agreement) have given written notice to the SNS Sellers, and (ii) for which Seller would be liable to the Purchaser Indemnified Parties under Section 7.4.1 or the SNS Sellers would be liable to the Purchaser Indemnified Parties (as defined in the SNS Purchase Agreement) under Section 6.07 or Section 8.02 of the SNS Purchase Agreement, as applicable, but for this Section 7.4.3.3.1 (or Section 8.05(c) of the SNS Purchase Agreement), and from and after the date on which the fifteenth (15th) such claim shall have occurred, this Section 7.4.3.3.1 shall have no further force or effect.

7.4.3.3.2 Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Section 7.4), the Purchaser shall not be liable to any Seller Indemnified Party under Section 7.4.2, nor shall any such claim or series of related claims be counted toward the Basket Amount, unless the Claims, Damages and Expenses incurred by the applicable Seller Indemnified Parties as a result of any such claim or series of related claims exceed $10,000; provided, however, that the limitations on the liability of Purchaser contained in this Section 7.4.3.3.2 shall apply only with respect to the first fifteen (15) claims (regardless of amount) of which (i) the Seller Indemnified Parties have given the Purchase written notice or the Seller Indemnified Parties (as defined in the SNS Purchase Agreement) have given written notice to the SNS Purchaser, and (ii) for which Purchase would be liable to the Seller Indemnified Parties under Section 7.4.2 or the SNS Purchaser would be liable to the Seller Indemnified Parties (as defined in the SNS Purchase Agreement) under Section 6.07 or Section 8.03 of the SNS Purchase Agreement, as applicable, but for this Section 7.4.3.3.2 (or Section 8.05(d) of the SNS Purchase Agreement), and from and after the date on which the fifteenth (15th) such claim shall have occurred, this Section 7.4.3.3.2 shall have no further force or effect.

7.4.3.4 Cap. Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Documents (other than, to the extent provided therein, the SNS Purchase Agreement), the Purchaser shall not be liable to any Seller Indemnified Party under the Transaction Documents, to the extent that the aggregate amount of (a) Claims, Damages and Expenses incurred by the Seller Indemnified Parties pursuant to the Transaction Documents or in connection with the transactions contemplated hereby or thereby or as a result thereof and (b) Losses incurred by the Seller Indemnified Parties (as defined in the SNS Purchase Agreement) pursuant to the Transaction Documents or in connection with the transactions contemplated thereby or as a result thereof, exceed, in the aggregate, $7,000,000; provided, however, that claims arising out of fraud shall not be subject to the limitations set forth in this Section 7.4.3.4. For the avoidance of doubt, the parties hereto agree that, other than with respect to claims for fraud (and except as expressly provided otherwise in the SNS Purchase Agreement), the liability of the Purchaser under this Agreement and the Transaction Documents together with the liability of the SNS Purchaser under the SNS Purchase Agreement and the

Transaction Documents, shall not in any event, exceed $7,000,000, in the aggregate; provided, however, that nothing in this Section 7.4.3.4 shall in any manner limit (or be construed to limit) any liability of the SNS Purchasers for any claims which, pursuant to the express provisions of Section 8.05(e) of the SNS Purchase Agreement, are not subject to the limitations on the liability of the SNS Purchasers set forth in such Section 8.05(e).

7.4.3.5 Exclusive Remedy.

7.4.3.5.1 Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Documents (other than the SNS Purchase Agreement), recovery against the Escrow Amount pursuant to this Section 7.4 and the General Escrow Agreement constitutes the Purchaser Indemnified Parties’ sole and exclusive recourse and remedy for any and all Claims, Damages and Expenses or other claims relating to or arising from this Agreement, any other Transaction Document (other than, to the extent provided therein, the SNS Purchase Agreement), or in connection with the transactions contemplated hereby or thereby; provided, however, that claims arising out of fraud shall not be subject to the limitations set forth in this Section 7.4.3.5.1; provided, further, however, that nothing in this Section 7.4.5 shall in any manner limit (or be construed to limit) any liability of the SNS Sellers for any claims which, pursuant to the express provisions of Section 8.06 of the SNS Purchase Agreement, are not subject to the limitations on the liability of the SNS Sellers set forth in such Section 8.06. Seller acknowledges and agrees that all or any portion of the Escrow Amount owed to Seller may be applied in satisfaction of the indemnification obligations of Seller or any of the SNS Sellers.

7.4.3.5.2 Other than as set forth in the SNS Purchase Agreement, the indemnification provisions and procedures contained in this Section 7.4 shall constitute the sole and exclusive recourse and remedy of the Purchaser Indemnified Parties and the Seller Indemnified Parties with respect to any Claims, Damages and Expenses resulting from, arising out of or in connection with any matters subject to indemnification under this Section 7.4; provided, however, that claims arising out of fraud shall not be subject to the limitations set forth in this Section 7.4.3.5.2.

7.4.3.6 Proration Adjusting Payments. All amounts due from Seller to Purchaser as a result of an adjusting payment (a “Proration Adjusting Payment”) made after the Closing Date under Section 5.3.2.2, 5.3.2.5 or 5.3.2.6 shall be paid to the Purchaser by the General Escrow Agent from the funds deposited in the Escrow Fund (as defined in the General Escrow Agreement) and Seller hereby agrees (a) to execute with Purchaser a written instruction irrevocably authorizing and directing the General Escrow Agent to release to Purchaser any such amounts and (b) that the limitations contained in Sections 7.4.3.2 or 7.4.3.3, above, do not apply to any Proration Adjusting Payment required to be made under this Agreement.

7.4.4 Notice of Claims; Indemnification Procedure for Third Party Claims.

7.4.4.1 Definitions.

7.4.4.1.1 “Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

7.4.4.1.2 “Indemnifying Party” means the Seller pursuant to Section 7.4.1 and the Purchaser pursuant to Section 7.4.2, as the case may be.

7.4.4.2 An Indemnified Party shall give the Indemnifying Party notice of any matter which an Indemnified Party has determined has given or could reasonably be expected to give rise to a right of indemnification under this Agreement or any Transaction Document, within 30 days of such determination, stating the amount of the Claims, Damages and Expenses, if known, and method of computation thereof, and containing a reasonably detailed description of such matter and a reference to the provisions of this Agreement or any Transaction Document in respect of which such right of indemnification is claimed or arises.

7.4.4.3 If an Indemnified Party shall receive notice of any action, audit, demand or assessment (each, a “Third Party Claim”) against it which gives or could reasonably be expected to give rise to a claim for Claims, Damages and Expenses under this Section 7.4, within 30 days of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim together with a brief statement of information then known to the Indemnified Party with respect thereto and a reference to the provisions of this Agreement or any Transaction Document in respect of which such right of indemnification is claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article 7 except to the extent that the Indemnifying Party is actually and materially prejudiced by such failure. If the Indemnifying Party acknowledges in writing the obligation to indemnify the Indemnified Party hereunder against any Claims, Damages and Expenses that may result from such Third Party Claim, subject to the provisions of this Section 7.4.4 and Section 7.4.3, then the Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense, subject to the provisions of this Section 7.4.4 and Section 7.4.3, and through counsel of its choice upon written notice of its intention to do so to the Indemnified Party within 10 days of the receipt of the such notice from the Indemnified Party. If the Indemnifying Party elects to assume such control, the Indemnified Party shall have the right to retain counsel to act on its behalf, but the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents in writing to the retention of such counsel or unless there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of the Indemnified Party (based upon advice of counsel) for the same counsel to represent both the Indemnified Party and the Indemnifying Party. In the event of such conflict, the Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the Indemnified Party determines counsel is required, at the expense of the Indemnifying Party. If the Indemnifying Party, having elected to assume such control, thereafter fails to vigorously defend the Third Party Claim, and such failure continues for ten (10) days after the Indemnifying Party is given written notice of such failure, the Indemnified Party shall be entitled to assume such control; provided, however, that if the Indemnified Party gives a notice of such a failure at any time with respect to any Third Party Claim, it shall not thereafter as a condition to the assumption of control of a Third Party Claim have any obligation to give an Indemnifying Party any other notice of such a failure with respect to such Third Party Claim. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third

Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party, subject to considerations with respect to the maintenance of privilege. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party, subject to considerations with respect to the maintenance of privilege. No such Third Party Claim may be settled by the Indemnifying Party without the prior written consent of the Indemnified Party unless (i) such settlement involves only the payment of money damages for which the Indemnifying Party is fully liable hereunder, (ii) the settlement does not include or constitute any admission of liability on the part of the Indemnified Party, and (iii) such settlement includes a full release of the Indemnified Party with respect to all liability with respect thereto.

7.4.5 Exclusion of Other Remedies. Other than with respect to fraud, the indemnification provisions and provisions set forth in this Article 7 constitute the sole and exclusive recourse and remedies of the parties for recovery of Claims, Damages, and Expenses arising out of or relating to any matters subject to indemnification under this Article 7.

7.4.6 No Right of Set-Off. Under no circumstances may Purchaser or Seller, as applicable, exercise or assert any right to set off against or reduce any other payment obligation to the other or any Affiliate thereof, with respect to any claim for indemnification hereunder.

7.4.7 Other Limitations. Any liability for indemnification under this Agreement shall be determined without duplication of recovery (i) by reason of the state of facts giving rise to such liability constituting a breach of more than one representation or warranty or (ii) with respect to any liability to the extent that the dollar value thereof is included in the calculation of any Proration Adjustment. Claims, Damages and Expenses shall be reduced by the amount of any insurance proceeds for such Claims, Damages and Expenses actually received by the Indemnified Party with respect to the matters causing such Claims, Damages and Expenses. The Indemnified Parties shall use their respective commercially reasonable efforts to mitigate the amount of any Claims, Damages and Expenses, where practicable and feasible, so long as the applicable Indemnifying Parties reimburse all such Indemnified Parties for all good faith out-of-pocket expenses incurred with respect to such efforts promptly upon written request therefor accompanied by documentation thereof.

8. [Intentionally Omitted]

9. CONDITIONS PRECEDENT

9.1 Purchaser’s Conditions Precedent. The obligations of Purchaser under this Agreement are contingent upon the satisfaction (or written waiver by Purchaser) of each and

all of the following conditions precedent (“Conditions Precedent”) on or before the Closing Date and prior to the Closing:

9.1.1 Representations. The representations and warranties of Seller set forth in Section 7.1 above shall be true, complete and correct in all material respects as of the Closing Date.

9.1.2 Title Policy. As of the Closing, the Title Company shall be irrevocably committed in form satisfactory to Purchaser to issue the Title Policy (in the form, with the endorsements and subject only to the Permitted Exceptions called for by Section 4.2) at and as of Closing in accordance with Section 4.2 hereof. In addition, at the Closing, the Property shall be subject to no liens, exceptions or encumbrances other than the Permitted Exceptions.

9.1.3 No Default. Seller shall not be in material default under any, and shall have otherwise performed in all material respects all, of its obligations to be performed under this Agreement at or prior to the Closing.

9.1.4 No Bankruptcy. Neither Seller nor any Material Tenant shall have filed (nor have had filed against it) any proceeding in bankruptcy, receivership or any similar proceeding.

9.1.5 Environmental Condition Agreement. Neither Purchaser nor Seller shall have received any notice from ADEQ (or, with respect to the PNI Access Agreement, PNI) that the ADEQ (or, in the case of the PNI Access Agreement, PNI) objects to (or will require additional information prior to) the transfer of the Environmental Condition Agreements to Purchaser.

9.1.6 Environmental Insurance. The Environmental Insurer shall be committed in a writing reasonably acceptable to Purchaser to add Purchaser as a named insured under and to add this Agreement as an insured contract under the Environmental Insurance Policy.

9.1.7 Delivery. Seller shall have delivered to Closing Escrow Agent or Purchaser all of the items that Seller is required to deliver under Section 5.2.1, above.

9.1.8 Tenant Estoppel Certificates. Purchaser shall have received and approved (in Purchaser’s sole but good faith discretion) an executed estoppel certificate substantially in the form of Exhibit “O” attached hereto or, with respect to any Lease that specifies a form of estoppel certificate, such form, and otherwise in form and substance reasonably satisfactory to Purchaser (a “Tenant Estoppel”) from each of (a) Sterling Network Services, LLC, (b) Toyota Motor Sales, U.S.A., Inc., (c) SunGard Availability Services, LP, (d) XO Arizona, Inc., and (e) Viawest Internet Services (collectively, the “Material Tenants”).

9.1.9 Prior Closing of SNS Transaction. The transactions contemplated under the SNS Purchase Agreement shall have closed.

9.2 Seller’s Conditions Precedent. The obligations of Seller under this Agreement are contingent upon the satisfaction (or written waiver by Seller) of each and all of the following Conditions Precedent on or before the Closing Date and prior to the Closing:

9.2.1 No Default. Purchaser shall not be in material default under any of its material obligations to be performed hereunder at or prior to the Closing.

9.2.2 Representations. The representations and warranties of Purchaser set forth in Section 7.2 above shall be true, complete and correct in all material respects as of the Closing Date.

9.2.3 Delivery. Purchaser shall have delivered to Closing Escrow Agent or Seller all of the items that Purchaser is required to deliver under Section 5.2.2, above.

9.2.4 Prior Closing of SNS Transaction. The transactions contemplated under the SNS Purchase Agreement shall have closed.

10. BROKERAGE

Except for Signal Hill Capital Group, LLC representing Seller (“Seller’s Broker”), neither party has had any contact or dealings regarding the Property, through any licensed real estate broker or other persons who can claim a right to a commission or finder’s fee in connection with this transaction. The parties agree that Seller shall be responsible for the payment of any compensation to Seller’s Broker pursuant to separate agreement with Seller’s Broker. In the event that any other party claims a commission or finder’s fee in this transaction, the party through whom the party makes its claim shall be responsible for said commission or fee and shall indemnify the other against all costs and expenses (including reasonable attorneys’ fees) incurred in defending against the same. This indemnification obligation shall survive the Closing or termination of this Agreement for any cause.

11. DEFAULTS AND REMEDIES

11.1 Return of Materials. In the event that the transactions contemplated under this Agreement shall fail to be consummated for any reason, Purchaser shall, and shall cause its agents, affiliates and representatives to, (a) return to Seller any and all informational materials provided by on behalf of Seller pursuant to or in connection with this Agreement and the transactions contemplated hereby, regardless of whether such information or materials are confidential and (b) promptly deliver to Seller, without representation or warranty, copies of all material data and written third party final reports or findings obtained or generated by Purchaser as a result of Purchaser’s investigation of the environmental condition of the Property, and (c) cause any material damage to the Property caused by Purchaser’s investigation of the environmental or physical condition of the Property to be repaired and restored.

11.2 Limited Liability of Purchaser. The liabilities and obligations of Purchaser under this Agreement (and under all of the Transaction Documents shall be the liabilities of Purchaser only, and shall not be the liabilities or obligations of Digital Realty Trust, L.P., a Maryland limited partnership (“Digital LP”), a member and manager of Purchaser, Digital Realty Trust, Inc., a Maryland corporation (“General Partner”) (the general partner of

Digital LP), any Affiliate, or any present or future officer, director, employee, trustee, member, shareholder, partner, beneficiary, internal investment contractor, manager, investment manager or agent of Purchaser, or Digital LP or General Partner. Any recourse by Seller for any breach of default of Purchaser under this Agreement or any of the Transaction Documents, or with respect to any liability or obligation related thereto shall be solely against Purchaser and the assets of Purchaser and there shall be no recourse on account of any such breach or default (or with respect to any such liability or obligation) against any Affiliate of Purchaser, or Digital LP or General Partner or any present or future officer, director, employee, trustee, member, shareholder, partner, beneficiary, internal investment contractor, manager, investment manager or agent of any of the same.

11.3 Survival. The provisions of this Section 11 shall survive the Closing or termination of this Agreement for any cause.

12. MISCELLANEOUS

12.1 [Intentionally Omitted]

12.2 Entire Agreement. This document represents the final and complete agreement between the parties with respect to the subject matter hereof and supersedes all other prior or contemporaneous agreements, communications or representations, whether oral or written, express or implied. The parties acknowledge and agree that they may not and are not relying on any representation, promise, inducement, or other statement, whether oral or written and by whomever made, that is not contained expressly in this Agreement. This Agreement may only be modified by a written instrument signed by representatives authorized to bind both parties. Oral modifications are unenforceable.

12.3 Time. Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or legal holiday.

12.4 Notices. All notices, demands, and requests that may be given or that are required to be given by either party to the other hereunder shall be in writing and any such notices, demands and requests shall be deemed to have been delivered and received (i) when actually delivered, (ii) one (1) day after being deposited with a nationally recognized overnight courier service, charges prepaid, and properly addressed, or (iii) when sent by facsimile properly addressed and a confirmation of transmission is received by the sender. For purposes of this Contract, the proper address of the parties hereto shall be as follows:

SELLER:
c/o Sterling Partners, LLC	with a copy to:
1033 Skokie Blvd., Suite 600	Sterling Network Services, LLC
Northbrook, IL 60062	120 E. Van Buren, Suite 100
Attn: Jeff Perelman	Phoenix, AZ 85004
Ph.: 847.480.4000	Attn: Tony Wanger
Fax: 847.480.0199	Ph.: 602.682.2204
	Fax: 602.682.2212

	and to:
	Katten Muchin Rosenman LLP
	Attn: Saul Rudo
	525 W. Monroe Street
	Chicago, IL 60661
	Ph.: 312.902.5664
	Fax: 312.577.8870
PURCHASER:
	with a copy to:
Digital Phoenix Van Buren, LLC
c/o Digital Realty Trust, L.P.	Digital Realty Trust
560 Mission St., Ste 2900	560 Mission St., Ste 2900
San Francisco, California 94105	San Francisco, CA 94105
Attn: Mr. Scott Peterson	Attn: Joshua Mills, Esq.
Phone: (415) 738-6510	Phone: (415) 738-6516
Fax: (415) 738-6501	Fax: (415) 738-6521
	and to:
	Paul, Hastings, Janofsky & Walker LLP
	515 S. Flower Street, 25th Floor
	Los Angeles, CA 90071
	Attn: Patrick A. Ramsey, Esq.
	Phone: (213) 683-6000
	Fax: (213) 627-0705

Either party may, by written notice delivered to the other, change the address to which delivery shall thereafter be made. Such change of address shall be effective three (3) business days after notice thereof is sent to the other party.

12.5 Law. This Agreement is entered into and shall be governed by and construed in accordance with the laws of the State of Arizona (without giving effect to its choice of law principles).

12.6 Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and is intended to be binding when all parties have delivered their signatures to the other parties. Signatures may be delivered by facsimile transmission. All counterparts shall be deemed an original of this Agreement.

12.7 Waiver. No consent or waiver by either party to or of any breach or nonperformance of any representation, condition, covenant or warranty shall be enforceable unless in a writing signed by the party entitled to enforce performance, and such signed consent or waiver shall not be construed as a consent to or waiver of any other breach or non-performance of the same or any other representation, condition, covenant, or warranty.

12.8 Severability. If any term, covenant or condition of this Agreement or its application to any person or circumstances shall be held to be illegal, invalid or unenforceable, the remainder of this Agreement or the application of such term or provisions to other persons or circumstances shall not be affected, and each term hereof shall be legal, valid and enforceable to the fullest extent permitted by law, unless an essential purpose of this Agreement would be defeated by the loss of the illegal, unenforceable, or invalid provision. In the event of such partial invalidity, the parties shall seek in good faith to agree on replacing any such legally invalid provisions with valid provisions which, in effect, will, from an economic viewpoint, most nearly and fairly approach the effect of the invalid provision and the intent of the parties in entering into this Agreement.

12.9 Jury. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER REGARDING ANY MATTERS ARISING OUT OF THIS AGREEMENT.

12.10 Further Assurances. Each party agrees to perform, execute and deliver, on and after the Closing, such further actions and documents as may be reasonably necessary or requested to more fully effectuate the purposes, terms and intent of this Agreement and the conveyances contemplated herein, provided that such documents are consistent with the terms of this Agreement, and do not increase Seller’s or Purchaser’s obligations hereunder or subject Seller or Purchaser to additional liability not otherwise contemplated by his Agreement.

12.11 Attorneys’ Fees. In the event of any dispute between the parties, whether based on contract, tort or other cause of action or involving bankruptcy or similar proceedings, in any way related to this Agreement or the Property, the non-prevailing party shall pay to the prevailing party all reasonable attorneys’ fees and costs and expenses of any type, without restriction by statute, court rule or otherwise, incurred by the prevailing party in connection with any action or proceeding (including arbitration proceedings, any appeals and the enforcement of any judgment or award), whether or not the dispute is litigated or prosecuted to final judgment. Notwithstanding any provision of this Agreement to the contrary, any fees and costs incurred in enforcing a judgment shall be recoverable separately from any other amount included in the judgment and shall survive and not be merged in the judgment and shall not be subject to any limitations set forth in Section 11.

12.12 Construction. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. The captions preceding the text of each Section are included for convenience of reference only and shall be disregarded in the construction and interpretation of this agreement.

12.13 No Third-Party Beneficiaries. This Agreement shall benefit only Purchaser and Seller, and their permitted successors and assigns, and no other person or entity shall have any rights hereunder.

12.14 Reporting Person. In order to comply with the information reporting requirements of Section 6045(e) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder, the parties agree (i) to execute an IRS Form 1099-S Designation Agreement to designate the Closing Escrow Agent as the party who shall be responsible for reporting the contemplated sale of the Property to the Internal Revenue Service (the “IRS”) on IRS Form 1099-S and (ii) to provide the Closing Escrow Agent with the information necessary to complete Form 1099-S.

12.15 Cooperation with Purchaser’s Auditors and SEC Filing Requirements. Upon the request of Purchaser, post-Closing, Seller shall provide to Purchaser (at Purchaser’s expense) copies of, or shall provide Purchaser access to, such factual information as may be reasonably and timely requested by Purchaser, and in the possession or control of Seller, Seller’s property manager, Affiliates or accountants to enable Purchaser (and/or its Affiliates) to file its or their Current Report on Form 8-K, including all amendments thereto, if, as and when such filing may be required by the Securities and Exchange Commission (“SEC”). At Purchaser’s sole cost and expense, post-Closing, Seller shall allow Purchaser’s independent public accounting firm (the “Auditor”) to conduct an audit of the income statements of the Property for most recently completed two fiscal years, and shall cooperate (at no cost to Seller) with the Auditor in the conduct of such audit. In addition, post-Closing (but not more than ten (10) business days after Purchaser’s request therefor), Seller agrees to provide to the Auditor a letter of representation (at no cost to Seller) in substantially the form of Exhibit “T” (the “Representation Letter”) and, if requested by the Auditor, historical financial statements for the Property, including income and balance sheet data for the Property. Without limiting the foregoing, post-Closing (i) Purchaser or the Auditor may audit Seller’s operating statements of the Property, at Purchaser’s expense; and Seller shall provide such documentation as Purchaser or the Auditor may reasonably request in order to complete such audit, (ii) Seller shall furnish to Purchaser such financial and other information as may be reasonably required by Purchaser to make any required filings with the SEC or other governmental authority; provided, however, that the foregoing obligations of Seller shall be limited to providing such information or documentation as may be in the possession of, or reasonably obtainable by, Seller, Seller’s property manager, Affiliates or accountants, at no cost to Seller, and in the format that Seller, Seller’s property manager, Affiliates or accountants have maintained such information; and (iii) the Representation Letter will not expand, extend, supplement or increase any of the representations or warranties set forth in this Agreement or any Transaction Document in any manner or to expose Seller to any risk of liability to the Purchaser, the Purchaser’s Affiliates or any third parties, other than the Auditor as expressly set forth in the Representation Letter.

Notwithstanding anything to the contrary, the provisions of this Section shall survive Closing for a period of nine (9) months. All matters under this paragraph which are at Purchaser’s expense and at no out-of pocket cost to Seller, shall be paid by Purchaser to Seller on demand.

12.16 Intentionally Omitted.

12.17 Acknowledgment by Purchaser. THE REPRESENTATIONS AND WARRANTIES BY SELLER SET FORTH IN THIS AGREEMENT, IN THE TRANSACTION DOCUMENTS, IN THE SNS PURCHASE AGREEMENT AND IN THE ANCILLARY AGREEMENTS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER TO PURCHASER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND PURCHASER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ENVIRONMENTAL CONDITIONS, ASSETS OR LIABILITIES OR PROSPECTS OF THE PROPERTY) ARE SPECIFICALLY DISCLAIMED BY SELLER. PURCHASER ACKNOWLEDGES THAT IT DID NOT RELY ON ANY REPRESENTATION OR WARRANTY NOT CONTAINED IN THIS AGREEMENT, IN THE TRANSACTION DOCUMENTS, IN THE SNS PURCHASE AGREEMENT OR IN THE ANCILLARY AGREEMENTS WHEN MAKING ITS DECISION TO ENTER INTO THIS AGREEMENT AND WILL NOT RELY ON ANY SUCH REPRESENTATION OR WARRANTY IN DECIDING TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. Purchaser further acknowledges that in connection with any request for an estoppel certificate, consent or notification given by Seller pursuant to this Agreement, to the extent that any material non-public information with respect to Purchaser, Digital Realty Trust, L.P. or Digital Realty Trust, Inc. or any of their affiliates is disclosed, Purchaser consents to such disclosure.

12.18 1031 Exchange. Purchaser and Seller understand that either party (the “Exchanging Party”) may designate any individual property in connection with an exchange pursuant to the provisions of Internal Revenue Code Section 1031 (a “Like Kind Exchange”). In the event an Exchanging Party desires to structure the sale as a Like Kind Exchange, the other party (the “Non-Exchanging Party”) shall cooperate with the Exchanging Party and with any lender/accommodator to achieve a successful Like-Kind Exchange; provided, however, that the Non-Exchanging Party shall not have any obligation to incur any costs, expenses or liabilities in connection with any such Like-Kind Exchange (and all such costs shall be borne entirely by the Exchanging Party). The Exchanging Party shall indemnify Non-Exchanging Party from and against all loss, costs and expense incurred by reason of said exchange. This transaction is not contingent upon, and the Closing shall not be delayed as a result of, the success or failure of any such Like-Kind Exchange. The Non-Exchanging Party shall not be required to take title to other property involved in any such exchange or to incur any expenses or liability in connection with any such Like-Kind Exchange. Subject to this Section 12.18, the Non-Exchanging Party agrees to execute any and all commercially reasonable documents and instruments reasonably necessary to effectuate such a Like-Kind Exchange; provided, however, that no such documents shall release or relieve the Exchanging Party of any of its obligations under this Agreement or any of the Transaction Documents. Neither party makes any warranty whatsoever to the other with respect to the qualification of the transaction for tax deferred exchange treatment under Section 1031 of the Code, and neither party shall have any responsibility obligation or liability with respect to the tax consequences to the other.

IN WITNESS WHEREOF, this Agreement was executed on the day and year first above written.

SELLER:
STERLING NETWORK EXCHANGE, LLC a Delaware limited liability company
By:	Sterling Network Manager, L.L.C.
Its:	Managing Member
	By:	/s/ Steven M. Taslitz
	Name:	Steven M. Taslitz
	Title:	Managing Member
PURCHASER:
DIGITAL PHOENIX VAN BUREN, LLC a Delaware limited liability company
By:	DIGITAL REALTY TRUST, L.P.,
	a Maryland limited partnership, its sole member and manager
	By:	DIGITAL REALTY TRUST, INC., a Maryland corporation, its general partner
		By:	/s/ Michael Foust
		Name:	Michael Foust
		Title:	CEO

EX-10.4

Exhibit 10.4

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

Among

STERLING TELECOM HOLDINGS, LLC

a Delaware limited liability company

GEORGE D. SLESSMAN

an individual

WILLIAM D. SLESSMAN

an individual

and

ANTHONY L. WANGER

an individual

AND

DIGITAL PHOENIX VAN BUREN, LLC

a Delaware limited liability company

and

DIGITAL SERVICES, PHOENIX, LLC

a Delaware limited liability company

AND

FUND MANAGEMENT SERVICES, LLC

a Delaware limited liability company,

as the Seller Representative,

solely in its capacity as such and not in any other capacity

Dated as of July 25, 2006

TABLE OF CONTENTS

		PAGE
ARTICLE I     DEFINITIONS		1
SECTION 1.01	Certain Defined Terms	1
SECTION 1.02	Interpretation and Rules of Construction	10
ARTICLE II     PURCHASE AND SALE		10
SECTION 2.01	Purchase and Sale of the Securities	10
SECTION 2.02	Purchase Price	10
SECTION 2.03	Closing	11
SECTION 2.04	Closing Deliveries by the Sellers	11
SECTION 2.05	Closing Deliveries by the Purchaser	12
SECTION 2.06	Closing Purchase Price Allocation	13
ARTICLE III     REPRESENTATIONS AND WARRANTIES OF THE SELLERS		13
SECTION 3.01	Organization, Authority and Qualification of the Sellers	13
SECTION 3.02	Organization, Authority and Qualification of the Company	14
SECTION 3.03	No Subsidiaries	14
SECTION 3.04	Capitalization	15
SECTION 3.05	No Conflict	15
SECTION 3.06	Governmental Consents and Approvals	15
SECTION 3.07	Financial Information; Books and Records	16
SECTION 3.08	Absence of Liabilities	16
SECTION 3.09	Receivables	16
SECTION 3.10	Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions	16
SECTION 3.11	Litigation	19
SECTION 3.12	Compliance with Laws	19
SECTION 3.13	Material Contracts	19
SECTION 3.14	Intellectual Property	21
SECTION 3.15	Real Property	23
SECTION 3.16	Tangible Personal Property	23
SECTION 3.17	Assets	24
SECTION 3.18	Customers	24
SECTION 3.19	Suppliers	24
SECTION 3.20	Employee Benefit Matters	24
SECTION 3.21	Labor Matters	27
SECTION 3.22	Employees	28
SECTION 3.23	Certain Interests	28
SECTION 3.24	Taxes	29
SECTION 3.25	Insurance	30
SECTION 3.26	Certain Business Practices	30
SECTION 3.27	Brokers	30

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TABLE OF CONTENTS

(continued)

		PAGE
ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		31
SECTION 4.01	Organization and Authority of the Purchaser	31
SECTION 4.02	No Conflict	31
SECTION 4.03	Governmental Consents and Approvals	32
SECTION 4.04	Securities Laws	32
SECTION 4.05	Litigation	32
SECTION 4.06	Brokers	32
SECTION 4.07	Third Party Contacts	32
SECTION 4.08	Restrictions on Conduct of the Business	32
SECTION 4.09	Solvency	32
SECTION 4.10	Tax Status of Purchasers	32
ARTICLE V     ADDITIONAL AGREEMENTS		33
SECTION 5.01	Access to Information	33
SECTION 5.02	Confidentiality	33
SECTION 5.03	Use of Intellectual Property	34
SECTION 5.04	Further Action	34
SECTION 5.05	Employee Matters	34
SECTION 5.06	Non-competition; Non-solicitation; Non-Disparagement	34
SECTION 5.07	Cooperation Regarding Assignment of Fiber Optics Communication System License	34
SECTION 5.08	Transition Services	34
SECTION 5.09	Conduct of Business Prior to Closing	34
ARTICLE VI     TAX MATTERS		35
SECTION 6.01	Books & Records; Cooperation	35
SECTION 6.02	Allocation of Taxes	35
SECTION 6.03	Covenants Regarding Certain Filings	36
SECTION 6.04	Notices	36
SECTION 6.05	Withholding Certificates	36
SECTION 6.06	Transfer Taxes	36
SECTION 6.07	Tax Indemnification	37
SECTION 6.08	Characterization of Payments	37
ARTICLE VII     CONDITIONS TO CLOSING		37
SECTION 7.01	Conditions to Obligations of the Sellers	37
SECTION 7.02	Conditions to Obligations of the Purchaser	38
ARTICLE VIII     INDEMNIFICATION		39
SECTION 8.01	Survival of Representations and Warranties	39
SECTION 8.02	Indemnification by the Sellers	40

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TABLE OF CONTENTS

(continued)

		PAGE
SECTION 8.03	Indemnification by the Purchaser	40
SECTION 8.04	Notice of Loss; Third Party Claims	41
SECTION 8.05	Certain Limitations on Remedies	42
SECTION 8.06	No Right of Setoff	43
SECTION 8.07	Exclusive Remedy	43
SECTION 8.08	Other Limitations	43
ARTICLE IX     GENERAL PROVISIONS		43
SECTION 9.01	Seller Representative	43
SECTION 9.02	Expenses	45
SECTION 9.03	Notices	45
SECTION 9.04	Public Announcements	45
SECTION 9.05	Severability	45
SECTION 9.06	Entire Agreement	46
SECTION 9.07	Assignment	46
SECTION 9.08	Amendment	46
SECTION 9.09	Waiver	46
SECTION 9.10	No Third Party Beneficiaries	46
SECTION 9.11	Governing Law; Exclusive Jurisdiction	47
SECTION 9.12	Waiver of Jury Trial	47
SECTION 9.13	Counterparts	47
SECTION 9.14	Attorneys’ Fees	48
SECTION 9.15	Remedies Cumulative; Specific Performance	48
SECTION 9.16	Cooperation with Purchaser’s Auditors and SEC Filing Requirements	48
SECTION 9.17	Acknowledgement by Purchaser	49
SECTION 9.18	Limited Liability of Purchaser	49

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EXHIBIT INDEX

Exhibit A	Closing Escrow Agreement
Exhibit B	General Escrow Agreement
Exhibit C	Sellers’ Counsel Legal Opinions
Exhibit D	Sellers’ Release
Exhibit E	Amended Operating Agreement
Exhibit F	Representation Letter
Exhibit G	Consent of Spouse
Exhibit H	Pay-Off Letter
Exhibit I	Assignment (Receivables)
Exhibit J	Collection Services Agreement
Exhibit 1 to Schedule 2.02 Closing Purchase Price Statement

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SCHEDULE INDEX

Schedule 1.01(b)	Current Asset Value
Schedule 1.01(c)	Current Liability Value
Schedule 1.01(d)	Sellers’ Pro Rata Share; Securities
Schedule 2.04(j)	Required Third Party and Governmental Consents
Schedule 4.03	Governmental Consents and Approvals – Purchaser
Schedule 5.03	Company Marks
Schedule 6.03	Receivables Distributed to Sellers
Disclosure Schedule
Section 3.02	Organization, Authority and Qualification of the Company
Section 3.05	No Conflicts
Section 3.06	Governmental Consents and Approvals
Section 3.08	Absence of Liabilities
Section 3.09	Receivables
Section 3.10	Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions
Section 3.10(f)	Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions – Capital Expenditures
Section 3.10(j)	Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions - Creditor Claims
Section 3.11	Litigation
Section 3.12	Compliance with Laws
Section 3.13(a)	Material Contracts – Service Agreements
Section 3.13(b)	Material Contracts – Vendor Contracts
Section 3.13(c)	Material Contracts – Other Material Contracts
Section 3.13(e)	Material Contracts – Enforceability
Section 3.14(a)	Intellectual Property
Section 3.14(c)	Intellectual Property
Section 3.16	Tangible Personal Property
Section 3.17	Assets
Section 3.18	Customers
Section 3.19	Suppliers
Section 3.20(a)	Employee Benefit Matters – Employee Benefit Plans
Section 3.20(e)	Employee Benefit Matters – Absence of Certain Liabilities and Events
Section 3.21(n)	Labor Matters
Section 3.22	Employees
Section 3.23	Certain Interests
Section 3.24	Taxes
Section 3.28	Suite 310/320 Construction

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This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of July 25, 2006, among STERLING TELECOM HOLDINGS, LLC, a Delaware limited liability company, GEORGE D. SLESSMAN, an individual, WILLIAM D. SLESSMAN, an individual, and ANTHONY L. WANGER, an individual (each, individually, a “Seller” and collectively, the “Sellers”), and DIGITAL PHOENIX VAN BUREN, LLC, a Delaware limited liability company (“Digital VB”), DIGITAL SERVICES PHOENIX, LLC, a Delaware limited liability company (“Digital Services”, with Digital VB and Digital Services each being referred to herein as a “Purchaser” and, collectively being referred to herein as the “Purchaser”), and Fund Management Services, LLC, a Delaware limited liability company, as the Seller Representative, solely in its capacity as such and not in any other capacity.

RECITALS

WHEREAS, the Sellers own all of the membership interests (collectively, the “Securities”) of Sterling Network Services, LLC, a Delaware limited liability company (the “Company”);

WHEREAS, the Company is engaged in the business of providing co-location or data center space at the Downtown Phoenix Technology Exchange located at 120 E. Van Buren St., Phoenix, Arizona for lease or license to third parties (the “Business”); and

WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase from the Sellers, the Securities, upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Certain Defined Terms. For purposes of this Agreement:

“Additional Agreement” means any Sellers Additional Agreement or Purchaser Additional Agreement.

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

“Affiliate” means, with respect to any specified Person, (i) any other Person that, alone or acting together with any other Person, directly or indirectly through one or more intermediaries, controls, or is controlled by or is under common control with such Person (or in the case of a natural Person, any of such Person’s immediate family members), or (ii) in the case of a natural Person, any of such Person’s immediate family members, or any trust solely for the benefit of such Person or such Person’s immediate family members. For purposes of this definition, “control” (including the correlative terms “controlled by” and “under common control

with”), as used in respect of any Person, means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract, credit arrangement or proxy, as trustee, executor, agent or otherwise, and “immediate family member” means, with respect to any natural Person, such natural Person’s spouse, siblings, lineal descendants (including by means of adoption) and living ancestors, and spouses of any of the foregoing.

“Ancillary Agreements” means the Closing Escrow Agreement, the General Escrow Agreement, the Collection Services Agreement, the Assignment and the Additional Agreements.

“Assets” means the assets and properties of the Company, including, without limitation, the Leased Real Property, the Tangible Personal Property and the books and records of the Company (with the parties agreeing that the Property (which is owned by SNE) is not included in the Assets).

“Auditor” is defined in Section 9.16.

“Balance Sheet Date” is defined in Section 3.07(a).

“Basket Amount” is defined in Section 8.05(a).

“Building Code” means the Phoenix Construction Code, as amended and adopted, as then in effect.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of Phoenix, Arizona.

“Chilled Water Agreement” means that certain Chilled Water Services Agreement entered into as of January 30, 2006 by and between Northwind Phoenix, LLC, a Delaware limited liability company and SNE.

“Claims” means any and all administrative, regulatory or judicial actions, suits, petitions, appeals, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements.

“Client Central Software” means the contract management system used in connection with the Business in the ordinary course of business.

“Closing” is defined in Section 2.03.

“Closing Date” means the date on which the Closing occurs.

“Closing Escrow Agent” means Commonwealth Land Title Company, 915 Wilshire Blvd., Suite 2100, Los Angeles, CA 90017, Attn: Elaine Edgeman.

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“Closing Escrow Agreement” means that certain closing escrow agreement and instructions to be entered into by and among SNE, the Sellers, the Purchaser and the Closing Escrow Agent in the form attached hereto as Exhibit A.

“Closing Net Working Capital Amount” means the result (whether such number is positive or negative) of (a) the Current Asset Value of the Company as of the Closing Date, less (b) the Current Liability Value of the Company as of the Closing Date.

“Code” means the Internal Revenue Code of 1986, as amended through the date hereof.

“Collection Services Agreement” means a collection services agreement by and among Sellers, the Purchaser and the Company in the form attached as Exhibit J hereto.

“Company Intellectual Property” means Intellectual Property owned by the Company.

“Company IP Agreements” means (a) licenses of Intellectual Property by the Company to any third party, (b) licenses of Intellectual Property by any third party to the Company, and (c) agreements between the Company and any third party relating to the development or use of Intellectual Property.

“Company Marks” is defined in Section 5.03.

“Company Software” means all Software (a) material to the operation of the Business or (b) manufactured, distributed, sold, licensed or marketed by the Company.

“Company Transaction Costs” means any and all costs and expenses incurred by the Company for consulting, accounting, investment banker, broker, legal and appraisal services prior to the Closing in connection with the transactions contemplated hereunder.

“Current Asset Value” means, as of the Closing Date, the value of the cash, inventory, fuel, excess construction materials, prepaid expenses and other current assets of the Company, determined in accordance with GAAP and the principles and exceptions set forth on Schedule 1.01(b).

“Current Liability Value” means, as of the Closing Date, the value of the accounts payable, accrued expenses and other current liabilities of the Company, determined in accordance with GAAP and the principles and exceptions set forth on Schedule 1.01(c).

“Customer” means any Person (other than the Company) that is a party to and has rights and obligations under an agreement with the Company to provide data center services in the Leased Real Property.

“Customer Information” is defined in Section 3.14(j).

“Digital” means Digital Realty Trust, L.P., a Maryland limited partnership.

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“Disclosure Schedule” means the Seller Disclosure Schedule attached hereto, dated as of the date hereof, delivered by the Sellers to the Purchaser in connection with this Agreement.

“Disregarded Entity” is defined in Section 6.03(b).

“Encumbrance” means any security interest, pledge, hypothecation, mortgage, lien (including environmental and Tax liens), violation, charge, lease, license, encumbrance, easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

“Environmental Laws” means all Laws, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety, natural resources or Hazardous Materials, including CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C. §§ 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq.

“Environmental Permits” means all permits, approvals, identification numbers, licenses and other authorizations required under or issued pursuant to any applicable Environmental Law.

“ERISA” is defined in Section 3.20(a).

“ERISA Affiliate” means any individual, trade, or business, whether or not incorporated that, together with the Company, would be treated as a single employer under Section 4001(b) of ERISA or Section 414(b), (c), (m), or (o) of the Code.

“Escrow Account” has the meaning set forth in the General Escrow Agreement.

“Escrow Amount” means $7,000,000 to be deposited with the General Escrow Agent in the Escrow Account, $5,027,488 of which (the “SNS Escrow Amount”) shall be deposited with the General Escrow Agent in accordance with this Agreement, and $1,972,512 of which shall be deposited with the General Escrow Agent in the Escrow Account in accordance with the Real Estate Purchase Agreement.

“Fiber Optics Communication System License” means that certain Fiber Optics Communication System License dated March 22, 2000 issued by the City of Phoenix to SNE.

“Financial Statements” is defined in Section 3.07(a).

“GAAP” means United States generally accepted accounting principles and practices as then in effect applied consistently throughout the periods involved.

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“General Escrow Agent” means Wells Fargo Bank, National Association.

“General Escrow Agreement” means that certain escrow agreement to be entered into by and among the Sellers, the Purchaser and the General Escrow Agent in the form attached hereto as Exhibit B.

“Governmental Authority” means any federal, national, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

“Governmental Order” means any written order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“General Partner” is defined in Section 9.18.

“Hazardous Materials” means (a) petroleum and petroleum products, radioactive materials, asbestos containing materials, urea formaldehyde foam insulation, transformers or other equipment that contain polychlorinated biphenyls and radon gas, (b) any other chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants” or “pollutants,” or words of similar import, under any applicable Environmental Law, and (c) any other chemical, material or substance which is regulated by any Environmental Law.

“HSR Act” means the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, other than trade payables incurred in the ordinary course of business, (b) all obligations of such Person for the deferred purchase price of property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar debt instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person under letters of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness

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against loss, (iii) to supply funds to or in any other manner invest in the debtor primarily for the purpose of enabling the debtor directly or indirectly to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, or (iv) otherwise to assure a creditor against loss, and (i) all Indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.

“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

“Indemnifying Party” means the Sellers pursuant to Section 8.02 and the Purchaser pursuant to Section 8.03, as the case may be.

“Intellectual Property” means (i) patents, patent applications and inventions (whether or not patentable), (ii) trademarks, service marks, domain name registrations, trade dress, logos, trade names, corporate names, and other identifiers of source or goodwill, including registrations and applications for registration thereof and including the goodwill of the business symbolized thereby or associated therewith, (iii) mask works and copyrights, including copyrights in computer software, and registrations and applications for registration thereof, and (iv) confidential and proprietary information, including Trade Secrets.

“Interim Financial Statements” is defined in Section 3.07(a).

“IRS” means the Internal Revenue Service of the United States.

“Knowledge” and “knowledge” means, (a) with respect to Sellers, the actual knowledge of any of George D. Slessman, William D. Slessman or Anthony L. Wanger and (b) with respect to Purchaser, the actual knowledge of Scott Peterson, Jim Trout, Glen Benoist and Chris Crosby.

“Law” means any federal, national, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law), other than the Building Code.

“Leased Real Property” means the real property leased by the Company as tenant (including, without limitation, pursuant to the SNS Master Lease), together with, to the extent leased by the Company, all buildings and other structures, facilities or improvements currently or hereafter located thereon, and all easements, licenses, rights and appurtenances relating to the foregoing.

“Liabilities” means any and all Indebtedness, debts, liabilities and obligations (including for Taxes), whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law (including any Environmental Law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking whether in writing or oral.

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“Licensed Intellectual Property” means Intellectual Property licensed to the Company pursuant to any Company IP Agreement.

“Loss” or “Losses” is defined in Section 8.02.

“Management Member” means George D. Slessman, William D. Slessman or Anthony L. Wanger (and they are collectively, the “Management Members”).

“Material Adverse Change” means any circumstance, change in or effect on the Business or the Company that, individually or in the aggregate with all other circumstances, changes in or effects on the Business or the Company: (a) is or is reasonably likely to be materially adverse to the business, operations, assets or liabilities (including contingent liabilities), employee relationships, customer or supplier relationships, results of operations or the condition (financial or otherwise) of the Business or the Company, or (b) is reasonably likely to materially adversely effect the ability of the Purchaser to operate or conduct the Business in the manner in which it is currently or contemplated to be operated or conducted by the Company; provided, however, that for purposes of Section 7.02(d) no action taken by any Seller or the Company at the written request of the Purchaser shall be deemed to constitute, nor shall be taken into account in determining whether there has been, a Material Adverse Change.

“Material Contracts” is defined in Section 3.13(d).

“Non-compete Period” is defined in Section 5.06(a).

“Non-solicit Period” is defined in Section 5.06(b).

“Off-Balance Sheet Transactions” means any Off-Balance Sheet Arrangement as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended, to which the Company is a party.

“Owned Real Property” means real property in which the Company has fee title (or equivalent) interest, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, and all easements, licenses, rights and appurtenances relating to the foregoing.

“Permitted Encumbrances” means (a) Encumbrances for Taxes not yet due and payable or, if due, not delinquent or being contested in good faith by appropriate proceedings, (b) statutory liens or Encumbrances securing payments not yet due, including carriers’, warehouseman’s, mechanics’, materialmen’s, repairmen’s or other similar liens or Encumbrances, (c) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation, (d) title retention or security interests under conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business listed on Section 3.13(c) of the Disclosure Schedule, (e) Encumbrances relating to purchase money obligations listed on Section 3.13(c) of the Disclosure Schedule and (f) minor imperfections of title, none of which, individually or in the aggregate, materially detracts from the value of or impairs the use or marketability of the Securities or the assets of the Company.

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“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Plans” is defined in Section 3.20(a).

“Post-Closing Tax Period” means any Tax period beginning after the Closing Date and that portion of any Straddle Period beginning after the Closing Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

“Pro Rata Share” for any Seller means that certain percentage set forth opposite such Seller’s name on Schedule 1.01(d) attached hereto.

“Property” is defined in the Real Estate Purchase Agreement.

“Property Purchaser” means Digital VB.

“Purchase Price Bank Account” for each Seller means a bank account in the United States designated by such Seller in a written notice to the Purchaser prior to the Closing.

“Purchaser Additional Agreements” is defined in Section 8.01(b).

“Purchaser Indemnified Parties” is defined in Section 8.02.

“Real Estate Closing Purchase Price” means the “Closing Purchase Price” as such terms is defined in the Real Estate Purchase Agreement.

“Real Estate Purchase Agreement” means that certain Purchase and Sale Agreement dated as of the date hereof, between Purchaser, as purchaser, and SNE, as seller.

“Receivables” means any and all accounts receivable, rents and license fees, notes and other amounts receivable from third parties, including licensees, customers and employees, arising from the conduct of the Business before the Closing, whether or not in the ordinary course, together with any unpaid financing charges accrued thereon.

“Regulations” means the Treasury Regulations under the Code.

“REIT” means a real estate investment trust under the Code.

“Representation Letter” is defined in Section 9.16.

“Sellers Additional Agreements” is defined in Section 8.01(a).

“Seller Indemnified Parties” is defined in Section 8.03.

“Seller Representative” is defined in Section 9.01.

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“Service Agreement” is defined in Section 3.13(a).

“SNE” means Sterling Network Exchange, LLC, a Delaware limited liability company.

“SNS Master Lease” means that certain Third Amended and Restated Lease, made and entered into as of June 1, 2006, by and between SNE, as landlord, and the Company, as tenant.

“Software” means computer software, including source code and object code.

“Software Support Services” means any services that Purchaser requests be performed by William D. Slessman pursuant to Section 5.08(b).

“Straddle Period” means any Tax period beginning before and ending after the Closing Date.

“Subsidiaries” means any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Company.

“Support Services” means any services that Purchaser requests to be performed by any Management Member pursuant to Section 5.08(a).

“SVB” means Silicon Valley Bank.

“SVB Loan” means that certain loan by SVB to the Company as evidenced by the SVB Loan Documents.

“SVB Loan Documents” means the agreements and documents listed in items 1.a through 1.i of Section 3.13(c) of the Disclosure Schedule and all other agreements, documents and instruments executed in connection with SVB Loan.

“Tangible Personal Property” means all data center equipment and all other machinery, equipment, tools, supplies, furniture, fixtures, personality, vehicles, rolling stock and other tangible personal property used in the Business or owned or leased by the Company, including, without limitation, all fixtures, systems, equipment and items of personal property of the Company attached or appurtenant to all Leased Real Property.

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative, minimum, add-on minimum, sales, use, transfer, value added, excise, severance, occupation, premium, windfall profit, real property, personal property, intangibles, withholding, social security, unemployment, disability, payroll, employee or other tax of any kind whatsoever, including any interest, penalties, or additions to tax in respect of the foregoing whether disputed or not.

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“Tax Return” means any return, declaration, report, claim for refund, information return or statement relating to any Taxes, including any schedule or attachment thereto and including any amendment thereof.

“Third Party Claim” is defined in Section 8.04(b).

“Trade Secrets” means trade secrets, know how and other confidential or proprietary technical, business and other information, including manufacturing and production processes and techniques, research and development information, technology, drawings, specifications, designs, plans, proposals, technical, customer, financial, marketing and business data, pricing and cost information, business and marketing plans, customer and supplier lists and information, and all rights in any jurisdiction to limit the use or disclosure thereof.

“Transaction Cost Certificate” is defined in Section 2.04(n).

“Transaction Documents” means, collectively, this Agreement, the Ancillary Agreements, the Real Estate Purchase Agreement and the RE Transaction Documents (as defined in the Real Estate Purchase Agreement).

“Transfer Taxes” is defined in Section 6.06.

SECTION 1.02 Interpretation and Rules of Construction. The parties hereto agree that (i) all parties hereto shall be deemed to have drafted this Agreement and the Ancillary Agreements and (ii) any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement or any Ancillary Agreement. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d) unless expressly provided otherwise herein, the words “hereof,” “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;

(e) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(f) the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders; and

(g) references to a Person are also to its successors and permitted assigns.

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ARTICLE II

PURCHASE AND SALE

SECTION 2.01 Purchase and Sale of the Securities. Upon the terms and subject to the conditions of this Agreement, at the Closing, each Seller shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to Purchaser, the Securities set forth after such Seller’s name on Schedule 1.01(d) hereto free and clear of all Encumbrances, and the Purchaser shall purchase the Securities from the Sellers free and clear of all Encumbrances other than resale restrictions under applicable federal securities Laws.

SECTION 2.02 Purchase Price. The total consideration to be paid by Purchaser to Sellers for the Securities shall consist of the Closing Purchase Price (as defined in Schedule 2.02) which shall be paid by Purchaser to Sellers pursuant to the provisions of this Agreement.

(a) Determination and Payment of Closing Purchase Price. The Closing Purchase Price shall be determined and paid pursuant to the procedures set forth in Schedule 2.02 attached hereto.

(b) Transaction Expenses. Subject to Section 6.06, each party will pay (i) its own expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation (A) all costs and expenses stated herein to be borne by a party, and (B) all of their respective consulting, accounting, investment banker, broker, legal and appraisal fees and (ii) one-half of all Closing Escrow Agent and General Escrow Agent fees. In addition, each Seller shall be severally responsible for the payment of its Pro Rata Share of all Company Transaction Costs to the extent not paid pursuant to Schedule 2.02 following submission to the Seller Representative by Purchaser of reasonable documentation of such unpaid Company Transaction Costs.

(c) Suite 310/320 Construction Costs. Each Seller shall be severally obligated to pay to Purchaser such Seller’s Pro Rata Share of any costs and expenses in excess of $670,000 incurred by the Company after the Closing with respect to the construction and installation of the improvements, alterations, fixtures, upgrades, utility services and equipment in the portions of the Leased Property commonly known as Suite 310 and Suite 320 that was completed prior to the Closing. Any payment to be made by Sellers pursuant to this Section 2.02(c) shall be made following submission to the Seller Representative by Purchaser of reasonable documentation of such costs and expenses.

SECTION 2.03 Closing. Subject to the terms and conditions of this Agreement (including, without limitation, the full satisfaction or waiver of all of the conditions to Closing set forth in Sections 7.01 and 7.02), the sale and purchase of the Securities contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of Paul, Hastings, Janofsky & Walker LLP, 515 S. Flower St., 25th Floor, Los Angeles, CA 90071 at 10:00 A.M., Los Angeles time, on the date hereof.

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SECTION 2.04 Closing Deliveries by the Sellers. At the Closing, the Sellers shall deliver or cause to be delivered to the Closing Escrow Agent:

(a) the certificates evidencing the Securities to be transferred by each Seller pursuant hereto, accompanied by a duly executed assignment thereof;

(b) a written withdrawal of each Seller as a member of the Company;

(c) executed counterparts by each Seller of each Ancillary Agreement and exhibit thereto to be executed at the Closing to which such Seller is a party;

(d) for each Seller organized as a limited liability company, a true and complete copy, certified by the manager of such Seller, of the resolutions duly and validly adopted by the members of such Seller evidencing their authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which such Seller is a party and the consummation of the transactions contemplated hereby and thereby;

(e) for each Seller organized as a limited liability company, a certificate of the manager of such Seller certifying the names and signatures of the officers of such Seller authorized to sign this Agreement and the Ancillary Agreements to which such Seller is a party and the other documents to be executed by such Seller hereunder and thereunder;

(f) the resignations, effective as of the Closing, of all of the managers, directors and officers of the Company, except for such persons, if any, as shall have been designated in writing prior to the Closing by the Purchaser to the Sellers;

(g) a copy of (i) the certificates of formation, as amended (or similar organizational documents), of the Company, certified by the Secretary of State of Delaware as of a date not earlier than five (5) Business Days prior to the Closing and accompanied by a certificate of each Seller, dated as of the Closing, stating that no amendments have been made to such certificate of formation (or similar organizational documents) since such date, and (ii) the operating agreement (or similar organizational documents) of the Company, including all amendments thereto, certified by each Seller;

(h) good standing certificates for the Company from the Secretary of State of Delaware and from the Secretary of State in each other jurisdiction in which the Company is qualified to do business as a foreign company, in each case dated as of a date not earlier than five (5) Business Days prior to the Closing;

(i) a legal opinion from (i) Katten Muchin Rosenman LLP, counsel to the Sellers, addressed to the Purchaser and dated as of the Closing, substantially in the form of Exhibit C-1, (ii) The Phoenix Law Group of Feldman Brown Wala Hall & Agena, PLC, counsel to George D. Slessman, William D. Slessman and Anthony L. Wanger, addressed to the Purchaser and dated as of the Closing, substantially in the form of Exhibit C-2 and (iii) Morris, Nichols, Arsht & Tunnell LLP, special Delaware counsel to Sterling Telecom Holdings, LLC, addressed to the Purchaser and dated as of the Closing, substantially in the form of Exhibit C-3.

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(j) all authorizations, consents, orders and approvals of all third parties and Governmental Authorities and officials set forth on Schedule 2.04(j), in form and substance satisfactory to the Purchaser in its sole discretion;

(k) a release executed by each Seller substantially in the form of Exhibit D;

(l) fully executed documents requested by Purchaser terminating all outstanding authorizations and resolutions regarding authorized persons in connection with bank accounts of the Company;

(m) a consent of spouse in the form attached hereto as Exhibit G of each Seller which is a natural person with respect to the transactions contemplated hereby in a form reasonably acceptable to the Purchaser;

(n) a certificate in a form acceptable to Purchaser of each Seller certifying as to the amount of the Company Transaction Costs (the “Transaction Cost Certificate”);

(o) a pay-off letter from SVB in the form attached hereto as Exhibit H (the “Pay-Off Letter”);

(p) a true and complete copy, certified by a Co-Managing Director of the Company, of the resolutions duly and validly adopted by the Operating Board of the Company evidencing its authorization of the distribution of the Receivables described in Section 6.03(a); and

(q) a duly executed assignment by the Company in the form attached hereto as Exhibit I (the “Assignment”);

SECTION 2.05 Closing Deliveries by the Purchaser. At the Closing, Purchaser shall deliver or cause to be delivered to the Closing Escrow Agent:

(a) an amount equal to the Estimated Closing Purchase Price (as defined in Schedule 2.02) by wire transfer of immediately available funds;

(b) executed counterparts by the Purchaser and the Company of each Ancillary Agreement and exhibit thereto to be executed at the Closing to which the Purchaser or the Company, as applicable, is a party;

(c) an executed copy of the amended and restated operating company agreement of the Company, substantially in the form of Exhibit E attached hereto (the “Amended Operating Agreement”);

(d) a true and complete copy, certified by the manager of the Purchaser, of the resolutions duly and validly adopted by the members of the Purchaser evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby; and

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(e) a certificate of the manager of the Purchaser certifying the name(s) and signature(s) of the officers of the Purchaser authorized to sign this Agreement and the Ancillary Agreements and the other documents to be delivered hereunder and thereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE SELLERS

As an inducement to the Purchaser to enter into this Agreement, each Seller, severally and not jointly based upon its Pro Rata Share, hereby represents and warrants to the Purchaser as follows, subject to the specific exceptions and qualifications set forth in the Sections of the Disclosure Schedule, which shall be read in conjunction with only the specific representations and warranties to which they relate as identified in the Disclosure Schedule; provided, however, that any fact or item that is specifically disclosed on any Section of the Disclosure Schedule that reasonably appears on its face, based on the location and content of such disclosure, to be an exception with respect to or qualification of another Section or subsection of this Agreement shall also be deemed to be an exception with respect to or qualify such other Section or subsection of this Agreement.

SECTION 3.01 Organization, Authority and Qualification of the Sellers.

(a) If such Seller is organized as a limited liability company, such Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each Seller who is a natural person has the necessary power and capacity to enter into this Agreement and the Ancillary Agreements to which he is a party, to carry out his obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. If such Seller is organized as a limited liability company, such Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to so license or qualify would not, individually or in the aggregate, have a Material Adverse Change.

(b) The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party by any such Seller organized as a limited liability company, the performance of its obligations hereunder and thereunder and the consummation by any such Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of any such Seller and its members. This Agreement has been, and upon their execution the Ancillary Agreements to which such Seller is a party shall have been, duly executed and delivered by such Seller, and (assuming due authorization, execution and delivery by the Purchaser) this Agreement constitutes, and upon their execution the Ancillary

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Agreements executed by such Seller shall constitute, legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms, except to the extent that (i) enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or similar law as is now or hereinafter in effect relating to creditors’ rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court or other authority or person before which any proceeding therefor may be brought.

(c) On or prior to the Closing Date, each Seller who is a natural person shall have delivered to the Closing Escrow Agent a Consent of Spouse in the form attached hereto as Exhibit G duly executed by such Seller’s spouse, and each such Consent of Spouse shall be valid and in full force and effect as of the Closing.

SECTION 3.02 Organization, Authority and Qualification of the Company.

(a) The Company is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Business as it is currently conducted.

(b) The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to so license or qualify would not, individually or in the aggregate, have a Material Adverse Change. All limited liability company actions taken by the Company have been duly authorized, and the Company has not taken any action that in any material respect conflicts with, constitutes a default under or results in a violation of any provision of its certificate of formation or operating agreement. True and correct copies of the certificate of formation and operating agreement of the Company, each as in effect on the date hereof are attached hereto as Section 3.02 to the Disclosure Schedule. As of the Closing, all of the managers, directors and officers of the Company, except for such persons, if any, as shall have been designated in writing prior to the Closing by the Purchaser to the Sellers, have resigned from such positions.

SECTION 3.03 No Subsidiaries. The Company (a) has no Subsidiaries, (b) is not a member or partner of (nor is any part of the Business conducted through) any limited liability company or partnership, respectively, (c) is not a participant in any joint venture or similar arrangement, and (d) does not own any direct or indirect equity interest in any other Person.

SECTION 3.04 Capitalization.

(a) The Securities have been duly authorized and validly issued and no member has any obligation to make any additional capital contribution or make any other payment to the Company and were issued in compliance with all Laws. None of the Securities were issued in violation of any preemptive rights. At the Closing, each Seller shall cause to be delivered to Purchaser certificates evidencing the Securities to be transferred by such Seller pursuant hereto, accompanied by a duly executed assignment thereof. Other than the limited

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liability agreement of the Company, there are no options, warrants, convertible securities, preemptive rights, rights of first refusal, or other rights, agreements, arrangements or commitments of any character relating to the Securities or obligating any Seller or the Company to issue or sell, or restricting any Seller or the Company from issuing or selling any Securities, or any other interest in the Company. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Securities or to provide funds to, or make any investment (in the form of a interest purchase, loan, capital contribution or otherwise) in, any other Person. The Securities constitute all of the outstanding membership interests of the Company and are owned of record and beneficially by such Seller as set forth in Schedule 1.01(d), free and clear of all Encumbrances other than resale restrictions under applicable federal securities Laws. Upon consummation of the transactions contemplated by this Agreement, (a) each Seller will have withdrawn as a member of the Company and (b) the Purchaser will own all of the outstanding membership interests of the Company free and clear of all Encumbrances other than resale restrictions under applicable federal securities Laws. There are no voting trusts, agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Securities.

(b) The name and address of each Person owning Securities, and the name and class of Securities held by such Person are set forth on Schedule 1.01(d).

SECTION 3.05 No Conflict. Assuming that all consents, approvals, authorizations and other actions described in Section 3.06 have been obtained and all filings and notifications listed in Section 3.06 of the Disclosure Schedule have been made, the execution, delivery and performance of this Agreement and the Ancillary Agreements by each Seller do not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of formation or limited liability company agreement of such Seller, as applicable, or the Company, (b) conflict with or violate (or cause a Material Adverse Change as a result of) any Law or Governmental Order applicable to such Seller, or the Company, or any of their respective assets, properties or businesses, or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the Securities or any of the Assets pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Company or such Seller is a party or by which any of the Securities or any of such assets or properties is bound or affected.

SECTION 3.06 Governmental Consents and Approvals. Except as set forth on Section 3.06 of the Disclosure Schedule, the execution, delivery and performance by such Seller of this Agreement and each Ancillary Agreement to which it is a party do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any third party or Governmental Authority.

SECTION 3.07 Financial Information; Books and Records.

(a) True and complete copies of (i) the unaudited balance sheet of the Company for each of the two fiscal years ended as of December 31, 2004 and December 31, 2005

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(the “Balance Sheet Date”), respectively, and the related unaudited statements of income of the Company, together with all related notes and schedules thereto, if any (collectively referred to herein as the “Financial Statements”) and (ii) the unaudited balance sheet (the “Balance Sheet”) of the Company as of April 30, 2006, and the related statement of income, together with all related notes and schedules thereto, if any (collectively referred to herein as the “Interim Financial Statements”) have been delivered by the Sellers to the Purchaser. The Financial Statements and the Interim Financial Statements (i) were prepared in accordance with the books of account and other financial records of the Company, (ii) present fairly in all material respects the financial condition of the Company and results of operations of the Company as of the dates thereof or for the periods covered thereby, and (iii) have been prepared in accordance with GAAP applied on a basis consistent with the past practices of the Company.

(b) The books of account and other financial records of the Company reflect all items of income and expense and all assets and Liabilities required to be reflected therein in accordance with GAAP applied on a basis consistent with the past practices of such Company. No Off-Balance Sheet Transactions exist or have occurred. All books of account, financial records and other books, records and documents of the Company or relating to the Business are located at the Leased Real Property.

(c) As of the Closing, all outstanding authorizations and resolutions regarding authorized persons in connection with bank accounts of the Company have been terminated.

(d) The Company does not maintain minute books with respect to the meetings of its members or managers.

SECTION 3.08 Absence of Liabilities. Except as set forth on Section 3.08 of the Seller Disclosure Schedule, the Company does not have any Liabilities except (a) as reflected in the Financial Statements or the Interim Financial Statements, (b) as incurred in the ordinary course of business since the date of the Interim Financial Statements, and (c) Liabilities which have arisen in the ordinary course pursuant to and in accordance with the contracts, agreements or other arrangements to which the Company is a party or by which it is bound listed on Sections 3.13(a), 3.13(b) and 3.13(c) of the Disclosure Schedule or which are not required to be listed thereon. Without limiting the foregoing, as of the Closing, the Company shall (i) be released from all obligations and Liabilities under or in any manner relating to the SVB Loan and the SVB Loan Documents and (ii) all Encumbrances held by or in favor of SVB in connection with the SVB Loan will be terminated.

SECTION 3.09 Receivables. Section 3.09 of the Disclosure Schedule sets forth separately those Receivables that had been outstanding from the invoice date of such Receivable as of June 30, 2006 for (a) 29 days or less, (b) 30 to 59 days, (c) 60 to 89 days, (d) 90 to 119 days and (e) more than 119 days. Except to the extent, if any, reserved for on the Balance Sheet, all Receivables reflected on the Balance Sheet arose from, and the Receivables existing as of the Closing will have arisen from, the sale of services (including the subleasing and/or licensing of space) to Persons not affiliated with the Company and in the ordinary course of business consistent with past practice.

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SECTION 3.10 Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions. Since the Balance Sheet Date, other than as contemplated by this Agreement or any Ancillary Agreement, the Business has been conducted in the ordinary course and consistent in all material respects with past practice. As amplification and not limitation of the foregoing, since the Balance Sheet Date, the Company has not, except as set forth on Section 3.10 of the Disclosure Schedule:

(a) permitted or allowed any of the Assets to be subjected to any Encumbrance, other than Permitted Encumbrances and Encumbrances that will be released at or prior to the Closing;

(b) written down or written up (or failed to write down or write up in accordance with GAAP consistent with past practice) the value of any inventories or Receivables or revalued any of the Assets other than in the ordinary course of business consistent with past practice and in accordance with GAAP;

(c) made any change in any method of accounting or accounting practice or policy, other than such changes required by GAAP;

(d) amended, terminated, cancelled or settled any material claims of the Company or expressly waived any other material rights of value;

(e) merged with, entered into a consolidation with or acquired an interest of any Person or acquired a substantial portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquired any material assets other than in the ordinary course of business consistent with past practice;

(f) made any capital expenditure or commitment for any capital expenditure in excess of $100,000 individually other than obligations under or pursuant to any Service Agreement listed on Section 3.10(f) of the Disclosure Schedule;

(g) filed any amended Tax Return or made, revoked or changed any Tax election or method of Tax accounting or settled or compromised any liability with respect to Taxes;

(h) incurred any Indebtedness or any other Liabilities other than in the ordinary course of business or Liabilities to be paid at or prior to Closing;

(i) made any loan to, guaranteed any Indebtedness of or otherwise incurred any Indebtedness on behalf of any Person, other than Indebtedness or other Liabilities to be paid at or prior to Closing;

(j) failed to pay any creditor any amount in excess of $10,000 owed to such creditor when due, other than with respect to amounts or claims of creditors being set-off or contested in good faith listed on Sections 3.10(j) or 3.11 of the Disclosure Schedule;

(k) (i) granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable by the Company to any of its employees or independent contractors, including any increase or change pursuant to any Plan, or (ii) established or increased or promised to increase any benefits under any Plan;

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(l) terminated, discontinued, closed or disposed of any plant, facility or other business operation, or laid off or terminated any employees or implemented any early retirement, separation or program providing early retirement window benefits within the meaning of Section 1.401(a) 4 of the Regulations or announced any such action or program for the future;

(m) permitted to lapse or become abandoned any material Intellectual Property (or any registration or grant thereof or any application relating thereto) to which, or under which, the Company has any right, title, interest or license;

(n) allowed any permit that was issued or relates to the Company to lapse or terminate or failed to renew any insurance policy or permit that is scheduled to terminate or expire within 45 days of the Closing;

(o) failed to maintain its property and equipment in adequate repair and operating condition, ordinary wear and tear excepted;

(p) suffered any casualty loss or damage with respect to any of the Assets which in the aggregate have a replacement cost of more than $10,000, whether or not such loss or damage shall have been covered by insurance;

(q) amended or restated its certificate of formation or limited liability company agreement (or other organizational documents);

(r) (i) abandoned, sold, assigned, or granted any security interest in or to any item of the Company Intellectual Property, the Licensed Intellectual Property or the Company IP Agreements, including failing to perform or cause to be performed all applicable filings, recordings and other acts, and pay or caused to be paid all required fees and taxes, to maintain and protect its interest in such Intellectual Property, or (ii) granted to any third party any license with respect to any Company Intellectual Property or Licensed Intellectual Property, other than licenses of Company Software to the customers of the Company in the ordinary course of its business;

(s) suffered any Material Adverse Change;

(t) sold, transferred or disposed of any properties or assets of the Company other than in the ordinary course of business;

(u) redeemed any membership interests or declared any dividends or distributions (whether in cash, securities or other property), to the holders of membership interests of the Company, other than distributions to the members of the Company to allow them or their members or owners to pay income Taxes on account of their ownership interests in the Company; or

(v) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.10, or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section 3.10.

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SECTION 3.11 Litigation. Section 3.11 of the Disclosure Schedule sets forth all Actions and Claims by or against the Company (or by or against any Seller or any Affiliate thereof and relating to the Company or this Agreement and the transactions contemplated hereby), or affecting any of the Assets or the Business pending before any Governmental Authority (or, to the Knowledge of the Sellers, threatened to be brought by or before any Governmental Authority), and to the extent Known by the Sellers, the parties, nature of the proceeding, date commenced, amount of charges or other relief sought and, if applicable, paid or granted, with respect to all such Actions and Claims. None of the matters set forth in Section 3.11 of the Disclosure Schedule has or has caused a Material Adverse Change or could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby. None of the Sellers or the Company, or any of their respective assets or properties, including the Assets, is subject to any Governmental Order (nor, to the Knowledge of the Sellers, are there any such Governmental Orders threatened to be imposed by any Governmental Authority) which has or has caused a Material Adverse Change or could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

SECTION 3.12 Compliance with Laws.

(a) Except as set forth on Section 3.12 of the Disclosure Schedule, the Company conducts and has conducted the Business in accordance with all Laws (other than (except as set forth in Section 3.12(b)) Environmental Laws) and Governmental Orders applicable to the Company or the Assets, and the Company is not in material violation of any such Law (other than (except as set forth in Section 3.12(b)) Environmental Laws) or Governmental Order. Except as set forth on Section 3.12 of the Disclosure Schedule, neither the Company nor any Seller has received any written citation, stop-work order or similar notice alleging that the Company is not in compliance with the Building Code from any Governmental Authority. Except (other than as set forth in Section 3.12(b)) with respect to Environmental Laws, to the Knowledge of the Sellers, there exists no condition within the Leased Real Property that constitutes a material violation of any applicable Law.

(b) Except as set forth in Section 3.12 of the Disclosure Schedule, the Company is, and has been, in compliance in all material respects with all Environmental Laws and Environmental Permits applicable to the Company or the Assets and has obtained all material governmental approvals required under Environmental Laws to be obtained by the Company for the use of the Leased Real Property for the purposes for which it is currently being used.

SECTION 3.13 Material Contracts.

(a) Section 3.13(a) of the Disclosure Schedule contains a true, complete and correct list (by customer name and date) and copy of each contract, agreement and written arrangement to which the Company is a party with its customers (collectively, the “Service Agreements”).

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(b) Section 3.13(b) of the Disclosure Schedule contains a true, complete and correct list and copy of each support agreement and service contract to which the Company is a party with its suppliers, vendors and service providers pursuant to which the Company paid in the aggregate in excess of $10,000 in the calendar year 2005 or pursuant to which the Company will be obligated to pay in excess of $5,000 through June 30, 2006.

(c) Set forth in Section 3.13(c) of the Disclosure Schedule is a true, complete and correct list of:

(i) each contract, agreement and written arrangement to which the Company is a party with any broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing, consulting and advertising contracts and agreements;

(ii) each management contract and contract with independent contractors or consultants to which the Company is a party;

(iii) all contracts and agreements to which the Company is a party with any Governmental Authority other than as contained in Section 3.13(a) of the Disclosure Schedule;

(iv) all contracts and agreements that limit or purport to limit the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time, other than as contained in Section 3.13(a) of the Disclosure Schedule;

(v) all contracts and agreements between or among the Company, on one hand, and a Seller or any Affiliate of a Seller (other than the Company), on the other hand;

(vi) all contracts and agreements providing for benefits under any Plan;

(vii) all options, warrants, convertible securities, preemptive rights, rights of first refusal, or other rights, agreements, arrangements or commitments of any character relating to the Securities or obligating any Seller or the Company to issue or sell, or restricting any Seller or the Company from issuing or selling, any Securities, or any other interest in the Company;

(viii) all outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Securities or to provide funds to, or make any investment (in the form of a share purchase, loan, capital contribution or otherwise) in, any other Person;

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(ix) all contracts, agreements, understandings, arrangements and commitments, written or oral, to which the Company is a party or is otherwise bound, with any employee, officer, director, consultant or agent of the Company;

(x) all contracts and agreements relating to Indebtedness of the Company;

(xi) all Company IP Agreements; and

(xii) all other contracts and agreements, whether or not made in the ordinary course of business, to which the Company is a party which are material to the Company or the conduct of the Business or under which the Company has any material liability, in each case with “material” to mean binding the Company to pay any amount in excess of, in the aggregate, $10,000.

(d) For purposes of this Agreement, “Material Contracts” means the contracts, agreements and written arrangements of the Company copies of which are contained in Sections 3.13(a) and 3.13(b) of the Disclosure Schedule, and those contracts, agreements and written arrangements listed in Section 3.13(c) of the Disclosure Schedule.

(e) Except as set forth on Section 3.13(e) of the Disclosure Schedule, each Material Contract: (i) is valid and binding on the Company and enforceable against the Company in accordance with its terms, (ii) is in full force and effect, and (iii) upon consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, shall continue in full force and effect without penalty or other adverse consequence. The Company is not in breach of, or default under, any Material Contract in any material respect.

(f) The Company has not received any notice of termination, cancellation, material breach or material default under any Material Contract. To the Knowledge of the Sellers, no other party to any Material Contract is in material breach thereof or material default thereunder.

(g) The Sellers have made available to the Purchaser true and complete copies of all Material Contracts listed in Section 3.13(c) of the Disclosure Schedule.

(h) There is no contract, agreement or other arrangement granting any Person any preferential right to purchase any of the Securities or any of the Assets.

(i) Except as set forth on Section 3.13(i) of the Disclosure Schedule, there are no oral agreements to which the Company is a party or otherwise bound that obligate the Company to pay any amount in excess of, in the aggregate, $1,000 or that restrict the Company’s conduct of its business in any material respect.

(j) Except as may be included in the calculation of Closing Net Working Capital, the Company does not have any obligation to make any payment under any Material Contract as a licensor (or landlord) or service provider thereunder to (or for the direct benefit of) the licensee (or tenant) or service recipient thereunder which is in the nature of a licensee (or tenant) or other inducement, including, without limitation, initial tenant or licensee improvement

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allowances, costs otherwise incurred by the Company to improve any licensee’s premises or space costs, design and refurbishment allowances, legal fees, rent abatement and free rent, and/or loss of income resulting from any free rental or service period.

SECTION 3.14 Intellectual Property.

(a) Section 3.14 of the Disclosure Schedule sets forth a true and complete list of (i) all patents and patent applications, registered trademarks and trademark registration applications, registered copyrights and copyright registration applications, and registered domain names included in the Company Intellectual Property, (ii) all Company IP Agreements, other than commercially available off the shelf Software licensed to the Company pursuant to shrink wrap or click wrap licenses, and (iii) other Company Intellectual Property material to the Business.

(b) The operation of the Business as currently conducted, the use of the Company Intellectual Property and Licensed Intellectual Property in connection therewith and the Company’s operation of its web site in connection with the Business, the content thereof and any advertisements contained therein, do not conflict with, infringe, misappropriate or otherwise violate the Intellectual Property or other proprietary rights, including rights of privacy, publicity and endorsement, of any third party, and no Actions or Claims are pending or, to the Knowledge of the Sellers, threatened against any Seller or the Company alleging any of the foregoing.

(c) The Company (i) owns all rights, title and interest in and to the Company Intellectual Property, free and clear of all Encumbrances, and (ii) has a valid right to use, pursuant to a Company IP Agreement, all Licensed Intellectual Property in the ordinary course of the Business as presently conducted. Except as set forth in Section 3.14 of the Disclosure Schedule, the Company is not obligated or under any duty or liability whatsoever to make any payments by way of royalties, fees or otherwise to any third party with respect to the use of any of the Company Intellectual Property or the Licensed Intellectual Property.

(d) Neither any Company Intellectual Property, nor to the Knowledge of the Sellers, any Licensed Intellectual Property, is subject to any outstanding decree, order, injunction, judgment or ruling that either restricts the use of such Intellectual Property or impairs the validity or enforceability of such Intellectual Property.

(e) The Company Intellectual Property and the Licensed Intellectual Property include all of the Intellectual Property used in the ordinary day-to-day conduct of the Business, and there are no other items of Intellectual Property that are material to the ordinary day-to-day conduct of the Business. The Company Intellectual Property and, to the Knowledge of the Sellers, the Licensed Intellectual Property are subsisting, valid and enforceable, and have not been adjudged invalid or unenforceable in whole or part.

(f) No Actions or Claims are pending or, to the Knowledge of the Sellers, threatened, against any Seller or the Company (i) based upon or challenging or seeking to deny or restrict the use by the Company of any of the Company Intellectual Property or Licensed Intellectual Property, (ii) alleging that any services provided by, or processes used by the Company, infringe or misappropriate any Intellectual Property right of any third party, or (iii) alleging that the Licensed Intellectual Property is being licensed or sublicensed in conflict with the terms of any license or other agreement.

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(g) To the Knowledge of the Sellers, no Person is engaging in any activity that infringes the Company Intellectual Property or Licensed Intellectual Property. The Company has not granted any license or other right to any third party with respect to the Company Intellectual Property or Licensed Intellectual Property. The consummation of the transactions contemplated by this Agreement and the Ancillary Agreements will not result in the termination or impairment of or Encumbrance on any of the Company Intellectual Property.

(h) No rights in the Company Software have been transferred to any third party except to the customers of the Company to whom the Company has licensed such Company Software in the ordinary course of business. To the Knowledge of the Sellers, the Client Central Software is free of all viruses, worms, trojan horses and other material known contaminants. No bug, error, or other problem in respect of the Client Central Software has materially disrupted operation of the Client Central Software or had an adverse impact on the operation of other software programs or operating systems used by the Company. As of the Closing, the Company has the right to use all software development tools, library functions, compilers, and other third party software that are required to operate or modify the Client Central Software.

(i) The Company has entered into written non-disclosure arrangements with third parties who have been accorded access to Trade Secrets and other confidential Intellectual Property used in connection with the Business. To the Knowledge of the Sellers, (i) there has been no misappropriation of any material Trade Secrets of the Company by any Person; (ii) no employee, independent contractor or agent of the Company has misappropriated any trade secrets of any other person in the course of performance as an employee, independent contractor or agent of the Company; and (iii) no employee, independent contractor or agent of the Company is in default or breach of any term of any employment agreement, nondisclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of Intellectual Property.

(j) No Actions or Claims are pending or, to the Knowledge of the Sellers, threatened, against any Seller or the Company alleging that the Company’s collection or use of any personally identifiable information (“Customer Information”) the Company has obtained from visitors to the Company’s Internet website or otherwise violates the Company’s privacy policy or any applicable Laws; the Company has collected, maintained and used Customer Information in compliance, in all material respects, with all applicable Laws, and to the Knowledge of the Sellers, no Person has gained unauthorized access to any Customer Information held by the Company.

SECTION 3.15 Real Property. There exists no Owned Real Property. There exists no Leased Real Property other than pursuant to the SNS Master Lease. The SNS Master Lease is in full force and effect, and neither the Company (as the tenant under the SNS Master Lease) nor SNE (as the landlord under the SNS Master Lease) is in default under the SNS Master Lease, and, to the Knowledge of the Sellers, there exist no facts or circumstances that, with the passage of time or the giving of notice, or both, would constitute a default or breach by the

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Company or SNE under the SNS Master Lease. There are no contractual or legal restrictions that preclude or restrict the ability of the Company to use the Leased Real Property for the purposes for which it is currently being used. Except (other than as set forth in Section 3.12(b)) with respect to Environmental Laws, the Company has obtained all governmental approvals required for the Company to use the Leased Real Property for the purposes which it is currently being used. The capacity of the utility services that have been provided to the Leased Real Property are adequate for the use of the Leased Real Property for the purposes for which it is currently being used. Except as set forth in Section 3.13(a) of the Disclosure Schedule, the Company has not leased, subleased, licensed or otherwise granted any Person any rights to occupy or use any portion of the Leased Real Property. The license fees set forth in each of the Service Agreements are the actual license fees being paid thereunder and there exists no separate agreements or understandings with respect to any of the same.

SECTION 3.16 Tangible Personal Property. Section 3.16 of the Disclosure Schedule lists each item of Tangible Personal Property owned by the Company with a book value in excess of $10,000. Except as set forth in Section 3.16 of the Disclosure Schedule, the Company is not a party to any leases or subleases for Tangible Personal Property with aggregate annual lease payments in excess of $10,000.

SECTION 3.17 Assets.

(a) Except as set forth in Section 3.17 of the Disclosure Schedule, the Company owns, leases or has the legal right to use all the properties and assets, including the Leased Real Property and the Tangible Personal Property, used in the conduct of the Business as of the date of this Agreement, and, with respect to contract rights, is a party to and enjoys the right to the benefits of all contracts, agreements and other arrangements used by the Company in or relating to the conduct of the Business as of the date of this Agreement, all of which properties, assets and rights constitute Assets. The Company has good and marketable title to, or, in the case of leased or subleased Assets, valid and subsisting leasehold interests in, all the Assets, free and clear of all Encumbrances, except Permitted Encumbrances. The Assets constitute all the properties, assets and rights as are necessary in the conduct of the Business as conducted on the date of this Agreement.

(b) The Assets are in adequate operating condition and repair, ordinary wear and tear excepted, and are suitable for the purposes for which they are used.

SECTION 3.18 Customers. Listed on Section 3.18 of the Disclosure Schedule are the names of each of the customers of the Business for the six (6) month period ended June 30, 2006, and the amount for which each such customer was invoiced through such period. None of the Sellers nor the Company has received any written notice that any of the ten (10) largest customers by revenue of the Company for the six (6) month period ended June 30, 2006 has ceased, or will cease, to use the products, equipment, goods or services of the Company, or has substantially reduced, or will substantially reduce, the use of such products, equipment, goods or services at any time.

SECTION 3.19 Suppliers. Listed in Section 3.19 of the Disclosure Schedule are the names and addresses of all of the suppliers of services, supplies, merchandise

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and other goods for the Business or to the Company in an aggregate amount in excess of $5,000 for the six (6) month period ended June 30, 2006. None of the Sellers nor the Company has received any written notice that any of the ten (10) largest suppliers of services, supplies, merchandise or other goods to the Company for the six (6) month period ended June 30, 2006 will not provide services nor sell supplies, merchandise and other goods to the Company at any time after the Closing on terms and conditions substantially similar to those used in its current sales to the Business, subject only to general and customary price increases.

SECTION 3.20 Employee Benefit Matters.

(a) Plans and Material Documents. Section 3.20(a) of the Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all bonus, stock option, stock purchase, restricted stock or other equity-based awards, incentive, deferred compensation, vacation, disability, death benefit, hospitalization, medical fringe benefit, excess benefit, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, change of control, severance or other contracts or agreements, whether formal or informal, whether in writing or not, whether legally enforceable or not, to which the Company is a party, with respect to which the Company has any obligation, contingent or otherwise (including, but not limited to, any contingent liability under Section 4069 of ERISA), or which are maintained, contributed to or sponsored by the Company for the benefit of any current or former employee, officer, independent contractor or director of the Company (collectively, the “Plans”). The Sellers have furnished to the Purchaser a complete and accurate copy of each Plan and each document material to the operation of each Plan (or, in connection with any unwritten Plans, a detailed description thereof) and, as applicable, a complete and accurate copy of (i) each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the most recently filed IRS Form 5500, (iv) the most recently received IRS determination letter for each such Plan, and (v) the most recently prepared actuarial report and financial statement in connection with each such Plan. The Sellers have delivered or made available to the Purchaser accurate and complete copies of all currently effective employee manuals and handbooks, disclosure materials, policy statements and documents used by in the administration of personnel policies and other documents relating to the employment of (or benefits available to) current and former employees of the Company. The Company has no express or implied commitment, whether legally enforceable or not, to (i) create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual, or (iii) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

(b) Absence of Certain Types of Plans. No Plan is subject to Section 412 of the Code or Title IV of ERISA and the Company has not incurred and does not expect to incur any liability with respect to any current or former employee benefit plan (as defined in Section 3(3) of ERISA) subject to Section 412 of the Code or Title IV of ERISA or with respect to any similar plan, program, or arrangement subject to the laws of a foreign nation. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, either alone or in combination with another event (whether contingent or

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otherwise) will (A) entitle any current or former employee, consultant or director of the Company to any increased or modified benefit or payment; (B) increase the amount of compensation due to any such employee, consultant or director; (C) accelerate the vesting, payment or funding of any compensation, equity-based benefit, incentive or other benefit; (D) result in any “parachute payment” under Section 280G of the Code (whether or not such payment is considered to be reasonable compensation for services rendered); (E) cause any compensation to fail to be deductible under any provision of the Code; (F) result in the imposition of any excise tax on the Company or any current or former employee or other service provider under any provision of the Code; or (G) result in any release of any obligation of any current or former employee to the Company. None of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company. Each Plan may be amended or terminated at any time without material liability to the Company, except for claims incurred but not paid prior to any such amendment or termination, and customary fees associated with such amendment or termination.

(c) Compliance with Applicable Law. Except as could not reasonably be expected to result in material liability to the Company, (i) each Plan is now and always has been operated in accordance with both its terms and with the requirements of all applicable Law, including ERISA and the Code, and all persons who participate in the operation of such Plans and all Plan “fiduciaries” (within the meaning of Section 3(21) of ERISA) have always acted in accordance with all applicable Plans as well as the provisions of all applicable Law, including ERISA and the Code, and the Company has not received any claims to the contrary and has no Knowledge of any facts or circumstances that could be reasonably be expected to form the basis for any such claims; (ii) the Company has performed all obligations required to be performed by it under, is not in default under or in violation of, and to the Knowledge of the Sellers, there exists no default or violation by any party to, any Plan; (iii) no legal action, suit or claim is pending or, to the Knowledge of the Sellers, threatened against any Plan or Plan fiduciary or the Company with respect to any Plan (other than routine claims for benefits in the ordinary course) and no fact or event exists that could reasonably be expected to give rise to any such action, suit or claim; (iv) neither any Plan nor the Company (but solely with respect to any Plan) is under audit or investigation or is the subject of an audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other Governmental Authority, nor is any such audit or investigation pending or, to the Knowledge of the Sellers, threatened; and (v) no event has occurred and, to the Knowledge of the Sellers, there exists no condition or set of conditions in connection with the Plans that could give rise to liability to the Company under ERISA, the Code, or applicable law.

(d) Qualification of Certain Plans. Each Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has received a favorable determination letter or opinion letter from the IRS to the effect that, with respect to the form of such plan, it is so qualified, and no fact or event has occurred since the date of such determination letter or opinion letter that could reasonably be expected to adversely affect the qualified status of any such Plan or the exempt status of any such trust or result in a filing under Rev. Proc. 2003-44 or any predecessor or successor thereto. Each trust maintained or contributed to by the Company that is intended to be qualified as a voluntary employees’ beneficiary association and that is intended to be exempt from federal income taxation under Section 501(c)(9) of the Code has received a favorable determination letter from the IRS that it is so qualified and so exempt, and no fact or event has occurred since the date of such determination by the IRS to adversely affect such qualified or exempt status.

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(e) Absence of Certain Liabilities and Events. The Company has no (and has not had any) ERISA Affiliates. The Company has not incurred any liability pursuant to Title I or IV of ERISA, or any liability pursuant to the penalty, excise tax, or joint and several liability provisions of the those sections of the Code related to employee benefit plans, or any foreign law or regulation relating to employee benefit plans. No fact or event exists that presents a risk to the Company (or after the Closing, the Purchaser or any of its Affiliates) of incurring any such liability. Without limiting the foregoing, except as could not reasonably be expected to result in material liability (A) there has been no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan, and (B) no complete or partial termination has occurred within the five years preceding the date hereof with respect to any Plan. No asset of the Company is the subject of any lien arising under ERISA or Section 412 of the Code. The Company has not, since October 3, 2004, (x) granted to any person an interest in a “nonqualified deferred compensation plan (as defined in section 409A(d)(1) of the Code) which interest has been or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be subject to the tax imposed by section 409A(a)(1)(B) or (b)(4) of the Code, or (y) modified the terms of any nonqualified deferred compensation plan in a manner that could cause an interest previously granted under such plan to become subject to the tax imposed by section 409A(a)(1)(B) or (b)(4) of the Code. All plans that are “nonqualified deferred compensation plans” (within the meaning of Section 409A of the Code) are listed on Section 3.20(e) of the Disclosure Schedule.

(f) Plan Contributions and Funding. There are no liabilities, whether contingent or otherwise, of the Company relating to workers’ compensation benefits that are not fully insured against by a bona fide third-party insurance carrier. With respect to each Plan and with respect to each workers’ compensation arrangement, that is funded wholly or partially through an insurance policy or public or private fund, (A) all contributions, premiums and expenses required to have been paid to date under such insurance policy or fund have been paid, all contributions, premiums and expenses required to be paid under the insurance policy or fund through the Closing will have been paid on or before the Closing and (C) to the extent any such contributions, premiums or expenses are not yet due, the liability therefor has been fully accrued on the Company’s financial statements. There will be no liability of the Company under any such insurance policy or fund or ancillary agreement with respect to such insurance policy or fund in the nature of a retroactive rate adjustment, loss sharing arrangement, audit adjustment or other actual or contingent liability arising wholly or partially out of events occurring on or prior to the Closing. All aforementioned contributions and premiums have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and there are no facts or circumstances that exist that reasonably could be anticipated to result such a challenge or disallowance. With respect to each Plan and with respect to each worker’s compensation arrangement, regardless of how funded, the Company may terminate all insurance policies or third party administrator relationships on no more than 60 days’ advance notice without liability, except for premiums due under any such policy through the date of termination.

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SECTION 3.21 Labor Matters. (a) The Company is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company, and to the Knowledge of the Sellers currently there are no organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit which could affect the Company; (b) there are no controversies, strikes, slowdowns or work stoppages pending or, to the Knowledge of the Sellers, threatened between the Company and any of its employees, and the Company has not experienced any such controversy, strike, slowdown or work stoppage within the past three years; (c) the Company has not breached or otherwise failed to comply with the provisions of any collective bargaining or union contract, and there are no grievances outstanding against the Company under any such agreement or contract which could cause a material liability to the Company; (d) there are no unfair labor practice complaints pending or, to the Knowledge of the Sellers, threatened against the Company before the National Labor Relations Board or any other Governmental Authority; (e) the Company is currently in material compliance with all applicable Laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and has withheld and paid to the appropriate Governmental Authority or is holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing; (f) the Company has paid in full to all their respective employees or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees; (g) there is no claim with respect to payment of wages, salary or overtime pay pending against the Company before any Governmental Authority or, to the Knowledge of the Sellers, threatened; (h) the Company is not a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices; (i) there is no charge or proceeding with respect to a violation of any occupational safety or health standard pending against the Company or, to the Knowledge of the Sellers, threatened; (j) no employment related claims or charges, including (A) federal or state or other claims based on sex, sexual or other harassment, age, disability, race or other discrimination or retaliation or common law claims, including claims of wrongful termination, by any current or former employee of the Company, and (B) charges of discrimination in employment or employment practices, for any reason, are pending against the Company before the United States Equal Employment Opportunity Commission, or any other Governmental Authority, nor, to the Knowledge of the Sellers, are any such claims or charges threatened; (k) the employment of the employees of the Company is terminable at will and no employee is entitled to severance pay or other benefits (including acceleration of equity or incentive awards) following termination or resignation; (l) the Company is not a party to any agreement for the provision of labor from any outside agency; (m) the Company properly classifies, and has properly classified, each current and former service provider as an employee or non-employee for payroll withholding obligations and benefit plan participation, and with respect to each such current and former employee, the Company has properly classified and treated such individual as either exempt or not exempt from federal and state overtime requirements; and Section 3.21(n) of the Disclosure Schedule lists each former employee of the Company (along with his or her date of termination and prior job site location) who, on or within the 90 days preceding the Closing, experienced employment action that would count toward determining whether advance notification of termination is required under the Worker Adjustment Retraining and Notification Act or any similar state law.

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SECTION 3.22 Employees. Section 3.22 of the Disclosure Schedule lists the name, current annual salary rates, bonuses, deferred or contingent compensation, pension, accrued vacation, “golden parachute” and other benefits paid or payable (in cash or otherwise) in the current fiscal year and the most recently completed fiscal year, of each current employee, officer, director or consultant of the Company. There are no contracts, agreements, understandings, arrangements and commitments, written or oral, to which the Company is a party or is otherwise bound, with any employee, officer, director or consultant of the Company or with any Affiliate or employee of any Affiliate of the Company.

SECTION 3.23 Certain Interests.

(a) Except as set forth on Section 3.23 of the Disclosure Schedule, no Seller nor any member, stockholder, officer, manager or director of any Seller or the Company, and no relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any Seller or any such member, stockholder, officer, manager or director:

(i) has any direct or indirect financial interest in any competitor, supplier or customer of the Company or the Business; provided, however, that the ownership of securities representing no more than 4.9% of the outstanding voting power of any competitor, supplier or customer, and which are also listed on any national securities exchange or traded on any national securities market, shall not be deemed to be a “financial interest” so long as the Person owning such securities has no other connection or relationship with such competitor, supplier or customer;

(ii) owns, directly or indirectly, in whole or in part, or has any other interest in any material tangible or intangible property which the Company uses in the conduct of the Business or otherwise; or

(iii) has outstanding any Indebtedness to the Company.

(b) None of the Sellers nor the Company has any Liability or any other obligation of any nature whatsoever to any officer, member, manager, director or equityholder of the Company or to any relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any such officer, member, manager, director or equityholder.

SECTION 3.24 Taxes.

(a) Filing of Tax Returns and Payment of Taxes. Except as set forth in Section 3.24 of the Disclosure Schedule, the Company has duly and timely filed with the appropriate taxing authorities all Tax Returns required to be filed taking into account all relevant extensions. All such Tax Returns filed are complete and accurate in all material respects. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return other than the Company’s 2005 income Tax Returns. No written claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

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(b) Audits, Investigations, Disputes or Claims. No deficiencies for Taxes have been claimed, proposed or assessed by any Tax authority against the Company. There are no pending or, to the Knowledge of the Sellers, threatened audits, investigations, disputes or claims or other actions for or relating to any Liability for Taxes with respect to the Company, and there are no matters under discussion with any Governmental Authorities, or to the Knowledge of the Sellers, with respect to Taxes that are likely to result in an additional Liability for Taxes with respect to the Company. There has not been any examination report or statement of deficiency assessed against or agreed to by the Company. The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. The Company is not contesting any Taxes assed by any Tax authority against the Company.

(c) Taxes of Other Persons. The Company has no Liability for the Taxes of any Person (other than Taxes of the Company) (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.

(d) Tax Sharing Agreements. There are no Tax-sharing agreements or similar arrangements with respect to or involving the Company, the assets of, or the business conducted by, the Company, and after the Closing Date, none of the Company, the Securities, the assets of, or the business conducted by, the Company, shall be bound by any such Tax-sharing agreements or similar arrangements or have any Liability thereunder for amounts due in respect of periods prior to the Closing Date.

(e) No Withholding. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, equity holder or other third party.

(f) Liens. Except as set forth in Section 3.24 of the Disclosure Schedule, there are no material Encumbrances for Taxes (other than for Taxes not yet due and payable) on any of the assets of the Company.

(g) Partnership Tax Treatment. At all times since its formation, the Company has been classified as a partnership or disregarded entity for United States federal Tax purposes.

(h) The Company has registered, by way of complete and accurate Maricopa County Self Reporting Business Personal Property Registrations filed with the Maricopa County Tax Assessor, all of the Company’s Tangible Personal Property with the Maricopa County Tax Assessor.

SECTION 3.25 Insurance. The Company maintains insurance coverage in such types and amounts and covering such risks as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of the Company.

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SECTION 3.26 Certain Business Practices. None of the Sellers or the Company or any of their respective directors, managers, officers, agents, representatives or employees (in their capacity as directors, managers, officers, agents, representatives or employees) has: (a) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures to government officials or others or established or maintained any unlawful or unrecorded funds in violation of Section 104 of the Foreign Corrupt Practices Act of 1977 (15 U.S.C. §79dd-2), as amended, or any other applicable foreign, federal or state law; or (b) accepted or received any unlawful contributions, payments, expenditures or gifts.

SECTION 3.27 Brokers. Except for Signal Hill Capital Group LLC, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Ancillary Agreements based upon arrangements made by or on behalf of the Sellers or the Company. The Sellers are solely responsible for the fees and expenses of Signal Hill Capital Group LLC and Sellers and the Company shall agree to indemnify Purchaser against same and against any cost or expense (including, but not limited to, attorneys’ fees) incurred by Purchaser in resisting any claim for any such brokerage commission.

SECTION 3.28 Suite 310/320 Construction. Except as set forth in Section 3.28 of the Disclosure Schedule, the construction and installation of the improvements, alterations, fixtures, upgrades, utility services and equipment in the portions of the Leased Property commonly known as Suite 310 and Suite 320 was completed prior to the Closing in accordance, in all material respects, with the plans dated March 1, 2006 prepared by Peter Lendrum Registered Architect and approved by the City of Phoenix on March 29, 2006 pursuant to DPTE’s Annual Facility Permit, construction Permit Number 06021216.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

As an inducement to the Sellers to enter into this Agreement, each Purchaser, jointly and severally, hereby represents and warrants to the Sellers as follows:

SECTION 4.01 Organization and Authority of the Purchaser.

(a) The Purchaser is a Delaware limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.

(b) The execution and delivery by the Purchaser of this Agreement and the Ancillary Agreements to which it is a party, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of

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the Purchaser. This Agreement has been, and upon their execution the Ancillary Agreements to which the Purchaser is a party shall have been, duly executed and delivered by the Purchaser, and (assuming due authorization, execution and delivery by the Sellers) this Agreement constitutes, and upon their execution the Ancillary Agreements to which the Purchaser is a party shall constitute, legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, except to the extent that (i) enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or similar law as is now or hereinafter in effect relating to creditors’ rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court or other authority or person before which any proceeding therefor may be brought.

SECTION 4.02 No Conflict. Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.03, except as may result from any facts or circumstances relating solely to any Seller, the execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements to which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of formation or limited liability company agreement of the Purchaser, (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser or (c) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Purchaser is a party, which would adversely affect the ability of the Purchaser to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement or the Ancillary Agreements.

SECTION 4.03 Governmental Consents and Approvals.

(a) The execution, delivery and performance by the Purchaser of this Agreement and each Ancillary Agreement to which the Purchaser is a party do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to any third party or Governmental Authority, except as described in Schedule 4.03 hereto.

(b) The Purchaser’s acquisition of the Securities is not reportable pursuant to the HSR Act. Purchaser acknowledges that the Sellers are (i) relying on the foregoing representation in its determination that no pre-merger notification or other report or filing is required to be made in connection with the transactions contemplated by this Agreement and (ii) not in a position to confirm the underlying facts with respect thereto.

SECTION 4.04 Securities Laws. The Purchaser is acquiring the Securities solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof. The Purchaser confirms that the securities were not offered to it by any means of general solicitation or general advertising. The Purchaser understands that the Securities have not been registered under the securities Laws of any state, under the Securities

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Act of 1933, as amended, or under the securities Laws of any other country and are offered in reliance on exemptions therefrom, that the Securities have not been approved or disapproved by the Securities and Exchange Commission, by any other federal or state agency or by any other equivalent foreign agency. The Purchaser understands that there are restrictions on the transferability of the Securities pursuant to applicable federal and state securities Laws.

SECTION 4.05 Litigation. No Action by or against the Purchaser is pending or, to the knowledge of the Purchaser, threatened, which could affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

SECTION 4.06 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser.

SECTION 4.07 Third Party Contacts. Within the six months preceding the date hereof, to the Knowledge of the Purchaser, neither the Purchaser nor any Affiliate thereof has knowingly and intentionally solicited the Company’s or SNE’s customers to move, redirect, abandon or defer any contract or other business they are conducting with, or considering conducting with, the Company or SNE at the Leased Real Property.

SECTION 4.08 Restrictions on Conduct of the Business. Immediately following the Closing, neither the Company nor the Business shall be subject to or bound by, as a result of any past or present affirmative action by the Purchaser or any of its Affiliates, any restriction or any Governmental Order limiting the Company’s ability to compete or solicit business (in any geographic area, prior to December 31, 2006, with respect to any line of business, without regard to whether the Company currently conducts business in a particular geographic area or currently engages in a particular line of business), which Governmental Order or restriction the Company or the Business is not subject to or bound by immediately prior to the Closing.

SECTION 4.09 Solvency. The Purchaser does not intend to incur Indebtedness beyond its ability to pay such Indebtedness as it matures (taking into account the timing and amounts of cash to be payable or in respect of its Indebtedness). The Purchaser has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.

SECTION 4.10 Tax Status of Purchasers. As of the date hereof, Digital VB (or, if Digital VB is a Disregarded Entity, its owner) and Digital Services (or, if Digital Services is a Disregarded Entity, its owner) are, and through the end of the Closing Date will be, treated as separate entities from one another for federal income tax purposes.

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ARTICLE V

ADDITIONAL AGREEMENTS

SECTION 5.01 Access to Information.

(a) In order to facilitate the resolution of any claims made against or incurred by any Seller prior to the Closing or for any other reasonable purpose, for a period of seven years after the Closing, the Purchaser shall (i) retain the books and records relating to the Business and the Company relating to periods prior to the Closing and (ii) upon reasonable notice, afford the officers, employees, agents and representatives of the Sellers reasonable access (including the right to make, at the Sellers’ expense, photocopies), during normal business hours, to such books and records.

(b) In order to facilitate the resolution of any claims made by or against or incurred by the Purchaser or the Company after the Closing or for any other reasonable purpose, for a period of seven years following the Closing, each Seller shall (i) retain the books and records of such Seller which relate to the Business and the Company and their operations for periods prior to the Closing and which shall not otherwise have been delivered to the Purchaser or the Company and (ii) upon reasonable notice, afford the officers, employees, agents and representatives of the Purchaser or the Company reasonable access (including the right to make photocopies, at the expense of the Purchaser or the Company), during normal business hours, to such books and records.

SECTION 5.02 Confidentiality. Each Seller agrees to, and shall cause its agents, representatives, Affiliates, employees, officers, managers and directors to: (i) treat and hold as confidential (and not disclose or provide access to any Person to or otherwise use) all information relating to Trade Secrets, processes, patent applications, product development, price, customer and supplier lists, pricing and marketing plans, policies and strategies, details of client and consultant contracts, operations methods, product development techniques, business acquisition plans, new personnel acquisition plans and all other confidential or proprietary information with respect to the Business or the Company, (ii) in the event that any Seller or any such agent, representative, Affiliate, employee, officer, manager or director becomes legally compelled to disclose any such information, if practicable, provide the Purchaser with prompt written notice of such requirement so that the Purchaser or the Company may seek a protective order or other remedy or waive compliance with this Section 5.02, (iii) in the event that such protective order or other remedy is not obtained, or the Purchaser waives compliance with this Section 5.02, furnish only that portion of such confidential information which is legally required to be provided and exercise its reasonable efforts to obtain assurances that confidential treatment will be accorded such information, and (iv) promptly furnish (prior to, at, or as soon as practicable following, the Closing) to the Company or the Purchaser any and all copies (in whatever form or medium) of all such confidential information then in the possession of any Seller or any of its agents, representatives, Affiliates, employees, officers, managers and directors; provided, however, that this sentence shall not apply to any information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by any Seller, its agents, representatives, Affiliates, employees, officers, managers or directors. Each Seller agrees and acknowledges that remedies at law for any breach of its obligations under

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this Section 5.02 are inadequate and that in addition thereto the Purchaser shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach.

SECTION 5.03 Use of Intellectual Property. Each Seller acknowledges and agrees that from and after the Closing, (i) the names listed in Schedule 5.03 hereto and all similar or related names, marks and logos (all of such names, marks and logos being the “Company Marks”) shall be owned by the Company, (ii) no Seller nor any of its Affiliates shall have any rights in the Company Marks or shall use any of the Company Marks and (iii) no Seller nor any of its Affiliates will contest the ownership or validity of any rights of the Purchaser or the Company in or to the Company Marks.

SECTION 5.04 Further Action. Each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated by this Agreement.

SECTION 5.05 Employee Matters. Nothing expressed or implied in this Agreement shall be interpreted to confer upon any current or former employees of the Company any rights or remedies, including, without limitation, any right to employment or continued employment for any specified period, of any nature or kind whatsoever or any rights to any particular compensation or benefits whatsoever (including, without limitation, any form of notice or severance pay). Other than the Purchaser Indemnified Parties, the Seller Indemnified Parties and the Seller Representative, the right to enforce any of the terms of this Agreement shall inure only to the parties hereto and shall in no way extend to any third parties who might benefit from the terms of this Agreement in any way, including, without limitation, current or former employees of the Company.

SECTION 5.06 Non-competition; Non-solicitation; Non-Disparagement.

(a) Non-competition. During the period beginning on the date hereof and ending on December 31, 2006 (the “Non-compete Period”), each Seller shall not directly or indirectly engage in any business that competes with the Business. Notwithstanding the foregoing, nothing contained in this Section 5.06(a) shall prohibit any Seller or any of their respective Affiliates from (i) owning less than five percent (5%) of any class of security listed on a national securities exchange or traded in the over-the-counter market or (ii) during the Non-compete Period, subject to this Section 5.06(a) and Sections 5.06(b) and 5.06(c), seeking, investigating, acquiring, financing and/or developing any property in any geographic area, including the Business’ market, for the purposes of providing, upon the termination of the Non-compete Period, co-location or data center space for lease or license to third parties in any geographic area, including the Business’ market. Purchaser hereby acknowledges that Sellers and/or their Affiliates intend, during the Non-compete Period, subject to this Section 5.06(a) and Sections 5.06(b) and 5.06(c), to seek, investigate, acquire, finance and/or develop property for the purposes of providing co-location or data center space for lease or license to third parties, including in the Business’ market, after the termination of the Non-compete Period.

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(b) Non-solicitation of Customers. Without limiting the generality of the provisions of Section 5.06(a) above, during the period beginning on the date hereof and ending on the first anniversary of the Closing Date (the “Non-solicit Period”), each Seller shall not directly or indirectly solicit any Person that is or was a Customer of the Business during the period between June 30, 2005 and the Closing Date, or from any successor in interest to any such Person, in any case for the purpose of securing business or contracts related to the services provided by the Business.

(c) Non-solicitation of Employees. During the Non-solicit Period, each Seller shall not directly or indirectly solicit for employment or hire any person that is or was an employee (or co-employee) of or consultant to the Business during the period between June 30, 2005 and the Closing Date; provided, however, that this Section 5.06(c) shall not prohibit (i) any general advertisement or general solicitation that is not targeted at such persons or (ii) soliciting the employment of, or the hiring of, any such person who has been terminated by the Company after the date hereof.

(d) Non-Disparagement. During the Non-solicit Period, each Seller shall not, directly or indirectly, publicly disparage in any material respect the Company, Purchaser, Digital or any of their respective Affiliates (actually known by the applicable Seller to be such an Affiliate).

(e) In no event shall any action taken in good faith by a Management Member at Purchaser’s request pursuant to Section 5.08 or otherwise be a breach of Sections 5.06 (a), (b) or (c).

(f) Purchaser hereby acknowledges and agrees, on its own behalf and on behalf of its Affiliates, including the Company after the Closing, that any opportunity or rights with respect to acquiring, financing, developing, managing and/or operating any property for the purposes of providing co-location or data center space for lease or license to third parties identified or acquired by any Seller (whether in its capacity as a member, manager, officer or employee of the Company or otherwise) or any Affiliate of any Seller prior to the Closing are the sole and exclusive property and/or rights of Sellers and/or their Affiliates, that Sellers shall have no obligation (fiduciary or otherwise) to the Company or Purchaser with respect to any such opportunity or right, and that neither the Company nor Purchaser shall have any interest in or claim to any such opportunity or right.

SECTION 5.07 Cooperating Regarding Assignment of Fiber Optics Communication System License and Consent to Assignment of Chilled Water Agreement. Each Seller covenants and agrees, (a) at no cost to Purchaser, to employ all commercially reasonable efforts to (i) cause the Fiber Optics Communication System to be transferred and assigned to Purchaser as promptly following the Closing as is practicable and to provide such assistance with respect to such transfer and assignment of such agreement as the Purchaser reasonably requests and (ii) cause Northwind Phoenix, LLC to consent, by executing the Assignment of Chilled Water Agreement, to the assignment by SNE of all its right, title and interest in, under and with respect to the Chilled Water Agreement; provided that Sellers shall not be obligated to compensate Northwind Phoenix, LLC for such consent, and (b) not to take any action that would reasonably be expected to prevent, delay or impede the assignment to Purchaser of the Fiber Optics Communication System.

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SECTION 5.08 Transition Services.

(a) During the sixty (60) day period after the Closing Date, each Management Member shall provide to Purchaser such advisory services with respect to matters pertaining to the Business and the Assets as shall be reasonably requested from time to time of such Management Member by Purchaser in good faith.

(b) During the one hundred twenty (120) day period after the Closing Date, William D. Slessman shall (A) provide to Purchaser such advisory services with respect to matters pertaining to the Client Central Software as shall be reasonably requested from time to time by Purchaser in good faith, (B) make himself available by telephone to answer any questions that Purchaser shall have with respect to the Client Central Software.

(c) All Support Services and Software Support Services shall be provided during the Company’s normal business hours at no cost to Purchaser (other than reimbursement of expenses to the extent provided in accordance with this Section 5.08) for up to forty (40) hours in any calendar week by all Management Members in the aggregate. In the event that Purchaser requests that the Management Members collectively perform Support Services and/or Software Support Services that actually and reasonably require the Management Members, in the aggregate, to devote in excess of forty (40) hours in any calendar week to the performance of such Support Services and/or Software Support Services, the Management Members may agree to devote time in excess of forty (40) hours in a calendar week toward the performance of such requested Support Services and/or Software Support Services (such agreement not to be unreasonably withheld), in which event, Purchaser shall pay to the Seller Representative on behalf of the Management Members a fee of $250 per hour (plus reimbursement of expenses to the extent provided in accordance with this Section 5.08) for each additional hour in excess of forty (40) hours in any calendar week that is actually and reasonably required to perform the requested Support Services and/or Software Support Services. Notwithstanding anything to the contrary in this Agreement, no time spent on any action taken by the Management Members under any provision of this Agreement (including, without limitation, under Section 5.07), other than in response to a request by Purchaser for Support Services or Software Support Services, as applicable, under this Section 5.08, shall be counted in the calculation of whether forty (40) hours in any calendar week has been provided.

(d) The Management Members shall have no obligation to expend any funds in connection with the performance of their obligations under this Section 5.08, and Purchaser shall reimburse each Management Member for his reasonable out-of-pocket expenses which are incurred in connection with the performance by such Management Member of his obligations under this Section 5.08; provided, however, that the Management Members shall be responsible for the payment of (and Purchaser shall have no obligation to reimburse any Management Member for) any and all expenses incurred by the Management Members in connection with the performance of their obligations under this Section 5.08 for or relating to (i) telephonic and/or other electronic communications and (ii) travel to or from the Real Property and/or lodging or per diem expenses in the Phoenix, Arizona area. Any reimbursement to be made by Purchaser

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pursuant to this Section 5.08 shall be made following submission to Purchaser by a Management Member of reasonable documentation of the out-of-pocket expenses incurred by such Management Member in connection with such Management Member’s performance of his obligations under this Section 5.08.

(e) No Management Member, nor any other Seller, makes any warranties, express or implied, with respect to any services provided pursuant to this Section 5.08. Notwithstanding anything to the contrary contained in this Agreement, in no event shall any Management Member or any other Seller be liable to Purchaser or to any other Person for any Losses incurred by reason of or arising out of the (i) performance by the Management Members of Support Services and/or Software Support Services under this Section 5.08 or (ii) the non-performance of the Management Members of their obligations under this Section 5.08 to the extent that such non-performance does not constitute willful misconduct.

ARTICLE VI

TAX MATTERS

SECTION 6.01 Books & Records; Cooperation. To the extent not already filed as of the Closing Date, after the Closing, Sellers shall prepare, or cause to be prepared, at Sellers’ expense, all income Tax Returns of the Company for the taxable years ending on December 31, 2005 and on the Closing Date. The Sellers shall not make an election under Section 754 of the Code with respect to the acquisition of the Securities by Purchasers on the income Tax Return of the Company for the taxable year ending on the Closing Date without the prior written consent of Purchasers, which consent may be withheld in Purchasers’ sole and absolute discretion. The Purchaser may cause the Company to make a Section 754 election on the Company’s income Tax Return beginning on the date after the Closing Date in a manner consistent with the parties’ agreements under this Agreement, including Section 6.03 hereof. The Seller Representative shall provide copies of such Tax Returns to Purchaser no later than twenty (20) days before the due dates of such Tax Returns for Purchaser’s review and comment. The Purchaser shall cause the Company to file any such income Tax Returns of the Company prepared by Sellers within five (5) days of receipt of final copies of such Tax Returns from Sellers. The Purchaser and the Sellers agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance relating to the Securities or the Company, including, without limitation, access to books and records, as is reasonably necessary for the filing of all Tax Returns by Sellers, the Purchaser or the Company, the making of any election relating to Taxes, the preparation for any audit by any taxing authority, the prosecution or defense of any claim, suit or proceeding relating to any Taxes and performing Tax diligence. The Purchaser and the Sellers shall retain all books and records with respect to Taxes pertaining to the Securities and the Company, for a period of at least four (4) years following the Closing Date. At the end of such period, each party shall provide the other with at least ten (10) days prior written notice before transferring, destroying or discarding any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records. The Purchaser and the Sellers shall cooperate fully with the other in the conduct of any audit, litigation or other proceeding relating to Taxes involving the Securities and the Company. The Purchaser and the Sellers further agree, upon request, to use their commercially reasonable efforts to obtain any certificate or other document

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from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

SECTION 6.02 Allocation of Taxes. (a) Subject to Section 6.06 regarding Transfer Taxes, Sellers shall be responsible for and shall promptly pay when due all Taxes levied with respect to the Company attributable to the Pre-Closing Tax Period. The Purchaser shall be responsible for and shall promptly pay when due all Taxes levied with respect to the Company attributable to the Post-Closing Tax Period. All Taxes levied with respect to the Company for the Straddle Period shall be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax Period, as follows:

(i) in the case of any Taxes other than Taxes based upon or related to income or receipts, the portion allocable to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period;

(ii) in the case of any Tax based upon or related to income or receipts, including payroll Taxes, the portion allocable to the Pre-Closing Tax Period shall be deemed equal to the amount which would be payable if the relevant Straddle Period ended on the Closing Date; and

(iii) all transactions not in the ordinary course of business occurring on the Closing Date and after the purchase of the Securities at the Closing as a result of any act or omission of the Purchaser or any of its Affiliates shall be considered to have occurred during the Post-Closing Tax Period and shall be reported on the Tax Returns of the Purchaser (or its Affiliates).

(b) Upon receipt of any bill for such Taxes relating to the Securities or the Company, the Purchaser and the Sellers shall present a statement to the other setting forth the amount of reimbursement to which each is entitled under this Section 6.02 together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within ten (10) days after delivery of such statement. In the event that the Purchaser or the Sellers shall make any payment for which it is entitled to reimbursement under this Section 6.02, the applicable party shall make such reimbursement promptly but in no event later than ten (10) days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. Notwithstanding the foregoing, (1) no Purchaser Indemnified Party shall be liable for (i) any Taxes of Sellers or the Company levied with respect to the Securities or the Company attributable to Pre-Closing Tax Periods, or (ii) any other Taxes of Sellers or their Affiliates for any periods, and (2) the Sellers shall not be liable for (i) any Taxes of the Company attributable to Post-Closing Tax Periods, or (ii) any other Taxes of the Purchaser or its affiliates for any periods.

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SECTION 6.03 Covenants Regarding Certain Filings

(a) The Company has distributed to the Sellers all of its accounts receivable including, but not limited to, those Receivables identified on Schedule 6.03, in accordance with the terms of the resolutions referenced in Section 2.04(p). Each Seller and each Purchaser acknowledges and agrees that the Company will not be required to file, and none of the Sellers or Purchasers will cause the Company to file, an IRS Form 8308 in connection with the sale and purchase of the Securities pursuant to this Agreement, unless either Purchaser or the Company receives a written request from the IRS to file IRS Form 8308 or the Sellers determine in their sole and absolute discretion that Form 8308 is required to be filed. Each Seller and each Purchaser agrees that none of the Sellers, the Purchasers or the Company will be required to file or will file an IRS Form 8594 with respect to the purchase of the Securities pursuant to this Agreement unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code if the issue is initiated by the IRS.

(b) Each Purchaser hereby agrees that, without the prior written consent of the Seller Representative, which consent may be given or withheld in the Seller Representative’s sole discretion, neither Purchaser shall file an election to treat (or take any action resulting in treating) Digital VB, Digital Services, Inc., a Maryland corporation, or the Company as a disregarded entity, as defined in Treasury Regulation Section 301.7701-3, or a qualified REIT subsidiary, as defined in Section 856(i) of the Code (each such entity, a “Disregarded Entity”), effective on or as of the Closing Date.

SECTION 6.04 Notices. The Sellers shall promptly notify the Purchaser in writing upon receipt by Sellers of notice of any pending or threatened federal, state, local or foreign Tax audits or assessments related to the Securities or the Company.

SECTION 6.05 Withholding Certificates. At the Closing, each Seller shall deliver to the Purchaser all necessary forms and certificates complying with applicable law, duly executed and acknowledged, and reasonably satisfactory to the Purchaser, certifying that the transactions contemplated by this Agreement are exempt from withholding under Section 1445 of the Code and from backup withholding under Section 3406 of the Code.

SECTION 6.06 Transfer Taxes. The Sellers shall be liable for all sales, use, transfer, documentary, stamp, registration, conveyance, value added, goods and services or other similar Taxes imposed by any Tax jurisdiction domestic or foreign, and all recording or filing, notary fees and other similar costs incurred in connection with this Agreement (collectively, “Transfer Taxes”).

SECTION 6.07 Tax Indemnification.

(a) By Purchaser. The Purchaser shall indemnify, save and hold the Sellers harmless from and against any and all Losses incurred in connection with, arising out of, resulting from or incident to (i) any breach of the representations and warranties made by Purchaser pursuant to Section 4.10 or any breach of covenant made by the Purchaser pursuant to this Article VI; and (ii) any Taxes of the Company with respect to any Post-Closing Tax Period (allocated in accordance with the principles described in Section 6.02).

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(b) By the Sellers. The Sellers shall indemnify, save and hold the Purchaser Indemnified Parties harmless from and against any and all Losses incurred in connection with, arising out of, resulting from or incident to (i) any breach of the representations and warranties made by the Company and the Sellers pursuant to Section 3.24 (Taxes) or any covenant made by the Sellers pursuant to this Article VI; (ii) any Taxes of the Company with respect to any Pre-Closing Tax Period (allocated in accordance with the principles described in Section 6.02); (iii) any Transfer Taxes payable by Sellers pursuant to Section 6.06; and (iv) the unpaid Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise, for which the Company is liable with respect to any Pre-Closing Tax Period.

(c) The indemnification obligations of Purchaser and the Sellers under this Section 6.07 shall be subject the terms, conditions, limitations and procedures set forth in Sections 8.01, 8.04, 8.05, 8.06 and 8.07 (as if Sections 8.01, 8.04, 8.05, 8.06 and 8.07 were set forth in this Section 6.07).

SECTION 6.08 Characterization of Payments. Any indemnification payments made pursuant to Section 6.07 or Article VIII shall constitute an adjustment of the consideration paid for the Securities for Tax purposes and shall be treated as such by the Purchaser, Sellers and the Company on their Tax Returns to the extent permitted by law.

ARTICLE VII

CONDITIONS TO CLOSING

SECTION 7.01 Conditions to Obligations of the Sellers. The obligations of the Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants. The representations and warranties of the Purchaser contained in this Agreement shall have been true and correct when made and shall be true and correct as of the Closing, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date, in each case, with the same force and effect as if made as of the Closing, other than such representations and warranties as are made as of another date, and the covenants and agreements contained in this Agreement to be complied with by the Purchaser on or before the Closing shall have been complied with in all respects;

(b) Purchaser Closing Deliveries. Purchaser shall have delivered to the Closing Escrow Agent all of the items required to be delivered by Purchaser pursuant to Section 2.05;

(c) No Proceeding or Litigation. No Action shall have been commenced by or before any Governmental Authority against any Seller or the Purchaser, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of the Seller Representative, is likely to render it impossible or unlawful to consummate such transactions; provided, however, that the provisions of this Section 7.01(c) shall not apply if any Seller has directly or indirectly solicited or encouraged any such Action;

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(d) Closing Escrow Agreement. The Closing Escrow Agent shall have duly executed and delivered to the Sellers the Closing Escrow Agreement;

(e) General Escrow Agreement . The General Escrow Agent shall have duly executed and delivered to the Sellers the General Escrow Agreement;

(f) Ancillary Agreement Exhibits. All Persons other than the Purchaser, the Company, the Sellers and the Seller Representative shall have duly executed and delivered to the Sellers all exhibits to each of the Ancillary Agreements to which such Person is a party; and

(g) Closing of Purchase of Real Property. The transactions contemplated under the Real Estate Purchase Agreement shall be in the process of closing simultaneously with the Closing hereunder.

SECTION 7.02 Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants. The representations and warranties of the Sellers contained in this Agreement shall have been true and correct when made and shall be true and correct as of the Closing, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date, in each case, with the same force and effect as if made as of the Closing, other than such representations and warranties as are made as of another date, and the covenants and agreements contained in this Agreement to be complied with by the Sellers on or before the Closing shall have been complied with in all respects;

(b) Seller Closing Deliveries. Sellers shall have delivered to the Closing Escrow Agent all of the items required to be delivered by Sellers pursuant to Section 2.04;

(c) No Proceeding or Litigation. No Action shall have been commenced by or before any Governmental Authority against any Seller or the Purchaser, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of the Purchaser, is likely to render it impossible or unlawful to consummate such transactions; provided, however, that the provisions of this Section 7.02(c) shall not apply if the Purchaser or any Affiliate thereof has directly or indirectly solicited or encouraged any such Action;

(d) No Material Adverse Change. No event or events shall have occurred which, individually or in the aggregate, have caused or would cause a Material Adverse Change;

(e) Closing Escrow Agreement. The Closing Escrow Agent shall have duly executed and delivered to the Purchaser the Closing Escrow Agreement;

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(f) General Escrow Agreement . The General Escrow Agent shall have duly executed and delivered to the Purchaser the General Escrow Agreement;

(g) Ancillary Agreement Exhibits. All Persons other than the Purchaser, the Company, the Sellers and the Seller Representative shall have duly executed and delivered to the Purchaser all exhibits to each of the Ancillary Agreements to which such Person is a party; and

(h) Closing of Purchase of Real Property. The transactions contemplated under the Real Estate Purchase Agreement shall be in the process of closing simultaneously with the Closing hereunder.

ARTICLE VIII

INDEMNIFICATION

SECTION 8.01 Survival of Representations and Warranties.

(a) The representations and warranties of the Sellers contained in this Agreement and the documents described in Sections 2.04(d), (e), (g), (k), (m), (n) and (p) (the “Sellers Additional Agreements”) shall survive until the first anniversary of the Closing Date; provided, however, that (i) the representations and warranties made pursuant to Section 3.04 shall survive indefinitely, and (ii) the representations and warranties made pursuant to Section 3.24 and Section 3.27 shall survive until 60 days after the expiration of the applicable statute of limitations (including extensions). Neither the period of survival nor the liability of any Seller with respect to the Sellers’ representations and warranties shall be reduced by any investigation made at any time by or on behalf of the Purchaser. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties by the Purchaser to the Seller Representative pursuant to and in accordance with the provisions of this Article VIII and Section 9.03, then the relevant representations and warranties shall survive as to such claim, until such claim has been finally resolved.

(b) The representations and warranties of the Purchaser contained in this Agreement and the documents described in Section 2.05(d) and (e) (the “Purchaser Additional Agreements”) shall survive until the first anniversary of the Closing Date; provided, however, that the representations and warranties made pursuant to Section 4.03(b), Section 4.06 and Section 4.10 shall survive until 60 days after the expiration of the applicable statute of limitations (including extensions). Neither the period of survival nor the liability of the Purchaser with respect to the Purchaser’s representations and warranties shall be reduced by any investigation made at any time by or on behalf of the Sellers. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties by the Seller Representative to the Purchaser pursuant to and in accordance with the provisions of this Article VIII and Section 9.03, then the relevant representations and warranties shall survive as to such claim, until such claim has been finally resolved.

SECTION 8.02 Indemnification by the Sellers. The Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Purchaser Indemnified Party”) shall be indemnified and held harmless by each Seller, severally and not jointly based upon its Pro Rata Share, for and against any and all Liabilities, losses, damages,

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claims, costs and expenses, interest, awards, judgments and penalties (including attorneys’ and consultants’ fees and expenses) actually suffered or incurred by them (including any Action brought or otherwise initiated by any of them), specifically excluding punitive, incidental and consequential damages, other than punitive, incidental and consequential damages incurred pursuant to any Third Party Claim (hereinafter a “Loss”, and collectively, “Losses”), arising out of or resulting from:

(a) the breach of any representation or warranty made by any Seller contained in this Agreement or any other Transaction Document, other than indemnification for a breach of any representation or warranty contained in Section 3.24 of this Agreement, the indemnification of which shall be governed solely by Section 6.07;

(b) the breach of any covenant or agreement by any Seller contained in this Agreement or any other Transaction Document, other than indemnification for a breach of any covenant contained in Article VI of this Agreement, the indemnification of which shall be governed solely by Section 6.07; or

(c) any and all Losses suffered or incurred by the Purchaser or the Company by reason of or in connection with any claim or cause of action of any third party to the extent arising out of any liability or obligation of any Seller.

SECTION 8.03 Indemnification by the Purchaser. The Sellers and their Affiliates, officers, directors, employees, agents, successors and assigns (each a “Seller Indemnified Party”) shall be indemnified and held harmless by the Purchaser for and against any and all Losses, arising out of or resulting from:

(a) the breach of any representation or warranty made by the Purchaser contained in this Agreement or any other Transaction Document, other than indemnification for a breach of any representation or warranty contained in Section 4.10 of this Agreement, the indemnification of which shall be governed solely by Section 6.07; or

(b) the breach of any covenant or agreement by the Purchaser contained in this Agreement or any other Transaction Document, other than indemnification for a breach of any covenant contained in Article VI of this Agreement, the indemnification of which shall be governed solely by Section 6.07.

SECTION 8.04 Notice of Loss; Third Party Claims.

(a) An Indemnified Party shall give the Indemnifying Party notice (which in the case of a Purchaser Indemnified Party may be satisfied by the giving of notice to the Seller Representative) of any matter which an Indemnified Party has determined has given or could reasonably be expected to give rise to a right of indemnification under this Agreement or any other Transaction Document, within 30 days of such determination, stating the amount of the Loss, if known, and method of computation thereof, and containing a reasonably detailed description of such matter and a reference to the provisions of this Agreement or any other Transaction Document in respect of which such right of indemnification is claimed or arises.

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(b) If an Indemnified Party shall receive notice of any Action, audit, demand or assessment (each, a “Third Party Claim”) against it which gives or could reasonably be expected to give rise to a claim for Loss under this Article VIII (or under Section 6.07), within 30 days of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim (which in the case of a Purchaser Indemnified Party may be satisfied by the giving of notice to the Seller Representative) together with a brief statement of information then known to the Indemnified Party with respect thereto and a reference to the provisions of this Agreement or any other Transaction Document in respect of which such right of indemnification is claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII (or under Section 6.07) except to the extent that the Indemnifying Party is actually and materially prejudiced by such failure. If the Indemnifying Party or, in the case of the Sellers, the Seller Representative, acknowledges in writing the obligation to indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim, subject to the provisions of Section 8.05, then the Indemnifying Party or, in the case of the Sellers, the Seller Representative, shall be entitled to assume and control the defense of such Third Party Claim at its expense, subject to the provisions of Section 8.05, and through counsel of its choice upon written notice of its intention to do so to the Indemnified Party within 10 days of the receipt of the such notice from the Indemnified Party. If the Indemnifying Party elects to assume such control, the Indemnified Party shall have the right to retain counsel to act on its behalf, but the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents in writing to the retention of such counsel or unless there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of the Indemnified Party (based upon advice of counsel) for the same counsel to represent both the Indemnified Party and the Indemnifying Party. In the event of such conflict, the Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the Indemnified Party determines counsel is required, at the expense of the Indemnifying Party. If the Indemnifying Party, having elected to assume such control, thereafter fails to vigorously defend the Third Party Claim, and such failure continues for ten (10) days after the Indemnifying Party is given written notice of such failure, the Indemnified Party shall be entitled to assume such control; provided, however, that if the Indemnified Party gives a notice of such a failure at any time with respect to any Third Party Claim, it shall not thereafter as a condition to the assumption of control of a Third Party Claim have any obligation to give an Indemnifying Party any other notice of such a failure with respect to such Third Party Claim. In the event that the Indemnifying Party or, in the case of the Sellers, the Seller Representative, exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party or, in the case of the Sellers, the Seller Representative, in such defense and make available to the Indemnifying Party, or, in the case of the Sellers, the Seller Representative, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party, subject to considerations with respect to the maintenance of privilege. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the

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Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party, subject to considerations with respect to the maintenance of privilege. No such Third Party Claim may be settled by the Indemnifying Party or, in the event that any Seller is the Indemnifying Party, the Seller Representative without the prior written consent of the Indemnified Party unless (i) such settlement involves only the payment of money damages for which the Indemnifying Party is fully liable hereunder, (ii) the settlement does not include or constitute any admission of liability on the part of the Indemnified Party, and (iii) such settlement includes a full release of the Indemnified Party with respect to all liability with respect thereto.

SECTION 8.05 Certain Limitations on Remedies.

(a) Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Article VIII), the Sellers shall not be liable to any Purchaser Indemnified Party under Section 6.07 with respect to a breach of a representation or warranty contained in Section 3.24 or Section 8.02(a) unless and until the Losses incurred by all Purchaser Indemnified Parties as a result thereof, together with all Claims, Damages and Expenses (as defined in the Real Estate Purchase Agreement) incurred by the Purchaser Indemnified Parties (as defined in the Real Estate Purchase Agreement) for which SNE is liable under Section 7.4.1(a) of the Real Estate Purchase Agreement, exceed, in the aggregate, $250,000 (the “Basket Amount”); provided, however, that in the event that such Losses together with such Claims, Damages and Expenses, in the aggregate, exceed the Basket Amount, the Sellers shall fully indemnify the Purchaser Indemnified Parties for all Losses in excess of the Basket Amount that are incurred by the Purchaser Indemnified Parties and that are within the indemnification obligations of the Sellers pursuant to Section 6.07 with respect to a breach of a representation or warranty contained in Section 3.24 or Section 8.02(a); provided, further, that Sellers’ obligations for breach of any representation or warranty contained in Section 3.04 and Section 3.28 shall not be subject to the limitation set forth in this Section 8.05(a) and shall not be counted against the Basket Amount.

(b) Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Article VIII), the Purchaser shall not be liable to any Seller Indemnified Party under Section 8.03(a) unless and until the Losses incurred by all Seller Indemnified Parties as a result thereof, together with all Claims, Damages and Expenses incurred by the Seller Indemnified Parties (as defined in the Real Estate Purchase Agreement) for which the Property Purchaser is liable under Section 7.4.2(a) of the Real Estate Purchase Agreement, exceed, in the aggregate, the Basket Amount; provided, however, that in the event that such Losses together with such Claims, Damages and Expenses, in the aggregate, exceed the Basket Amount, the Purchaser shall fully indemnify the Seller Indemnified Parties for all Losses in excess of the Basket Amount that are incurred by the Seller Indemnified Parties and that are within the indemnification obligations of the Purchaser pursuant to Section 8.03(a); provided, further, that Purchaser’s obligations for breach of any representation or warranty contained in Section 4.03(b) shall not be subject to the limitations set forth in this Section 8.05(b) and shall not be counted against the Basket Amount.

(c) Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Article VIII), the Sellers shall not be liable to any Purchaser

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Indemnified Party under Section 6.07 or Section 8.02 (other than for any claim for a breach of a representation or warranty under Section 3.28), nor shall any such claim or series of related claims be counted toward the Basket Amount, unless the Losses incurred by the applicable Purchaser Indemnified Parties as a result of any such claim or series of related claims exceed $10,000; provided, however, that the limitations on the liability of Sellers contained in this Section 8.05(c) shall apply only with respect to the first fifteen (15) claims of which (i) the Purchaser Indemnified Parties have given the Seller Representative written notice or the Purchaser Indemnified Parties (as defined in the Real Estate Purchase Agreement) have given written notice to SNE and (ii) for which the Sellers would be liable to the Purchaser Indemnified Parties under Section 6.07 or Section 8.02, or SNE would be liable to the Purchaser Indemnified Parties (as defined in the Real Estate Purchase Agreement) under Section 7.4.1 of the Real Estate Purchase Agreement, as applicable, but for this Section 8.05(c) (or Section 7.4.3.3.1 of the Real Estate Purchase Agreement), and from and after the date on which the fifteenth (15th) such claim shall have occurred, this Section 8.05(c) shall have no further force or effect.

(d) Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Article VIII), the Purchaser shall not be liable to any Seller Indemnified Party under Section 6.07 or Section 8.03, nor shall any such claim or series of related claims be counted toward the Basket Amount, unless the Losses incurred by the applicable Seller Indemnified Parties as a result thereof exceed $10,000; provided, however, that the limitations on the liability of Sellers contained in this Section 8.05(d) shall apply only with respect to the first fifteen (15) claims of which (i) the Seller Indemnified Parties have given the Purchaser written notice or the Seller Indemnified Parties (as defined in the Real Estate Purchase Agreement) have given written notice to Property Purchaser and (ii) for which the Purchaser would be liable to the Seller Indemnified Parties under Section 6.07 or Section 8.03, or Property Purchaser would be liable to the Seller Indemnified Parties (as defined in the Real Estate Purchase Agreement) under Section 7.4.2 of the Real Estate Purchase Agreement, as applicable, but for this Section 8.05(d) (or Section 7.4.3.3.2 of the Real Estate Purchase Agreement), and from and after the date on which the fifteenth (15th) such claim shall have occurred, this Section 8.05(d) shall have no further force or effect.

(e) Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Documents, the Purchaser shall not be liable to any Seller Indemnified Party under the Transaction Documents to the extent that the aggregate amount of (i) Losses incurred by the Seller Indemnified Parties pursuant to the Transaction Documents or in connection with the transactions contemplated hereby or thereby or as a result thereof and (ii) Claims, Damages and Expenses incurred by the Seller Indemnified Parties (as defined in the Real Estate Purchase Agreement) pursuant to the Transaction Documents or in connection with the transactions contemplated thereby or as a result thereof, exceed, in the aggregate, $7,000,000; provided, however, that neither claims arising out of fraud nor Purchaser’s obligations for breach of any representation or warranty contained in Sections 4.03(b) and 4.10 or breach of any covenant contained in Section 6.03 shall be subject to the limitations set forth in this Section 8.05(e). For the avoidance of doubt, the parties hereto agree that, other than with respect to claims arising out of fraud or Purchaser’s obligations for breach of any representation or warranty contained in Sections 4.03(b) and 4.10 or breach of any covenant contained in Section 6.03, the liability of the Purchaser under this Agreement and the Transaction Documents together with the liability of the Property Purchaser under the Real Estate Purchase Agreement and the Transaction Documents, shall not in any event, exceed $7,000,000, in the aggregate.

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With respect to any indemnity claim that any Seller Indemnified Party has or may have under Section 8.03, such Seller Indemnified Party must give written notice to Purchaser of any such claims on or before the Escrow Fund Distribution Date (as defined in the General Escrow Agreement), and with respect to any indemnity claim that any Seller Indemnified Party has or may have under Section 6.07, such Seller Indemnified Party must give written notice to Purchaser of any such claims on or before the date that is sixty (60) days after the expiration of the applicable statute of limitations (including extentions). In the event any Seller Indemnified Party fails to provide such notice within the required time period, such Seller Indemnified Party shall have no right to bring any such claim against Purchaser under this Agreement. Notwithstanding the foregoing, this paragraph of this Section 8.05(e) shall not apply to claims for fraud or claims arising out of Purchaser’s obligations for breach of any representation or warranty contained in Section 4.03(b) or Section 4.06.

SECTION 8.06 Exclusive Remedy.

(a) Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Documents (other than, to the extent provided therein, the Real Property Purchase Agreement), other than as set forth in Section 9.15 and this Section 8.06, recovery against the Escrow Amount pursuant to this Article VIII or Section 6.07 and the General Escrow Agreement constitutes the Purchaser Indemnified Parties’ sole and exclusive recourse and remedy for any and all Losses or other claims relating to or arising from this Agreement, any other Transaction Document (other than, to the extent provided therein, the Real Property Purchase Agreement), or in connection with the transactions contemplated hereby or thereby; provided, however, that the Sellers’ obligations for a breach of any representation or warranty contained in Section 3.27 shall not be subject to the foregoing limitations set forth in this Section 8.06(a); provided, further, however, that the Sellers shall not in any event be liable to any Purchaser Indemnified Party under the Transaction Documents to the extent that the aggregate amount of (i) Losses incurred by the Seller Indemnified Parties pursuant to the Transaction Documents or in connection with the transactions contemplated hereby, thereby or as a result thereof and (ii) Claims, Damages and Expenses incurred by the Purchaser Indemnified Parties (as defined in the Real Estate Purchase Agreement) pursuant to the Transaction Documents or in connection with the transactions contemplated thereby or as a result thereof, exceed, in the aggregate, $7,000,000; provided, finally, however, that notwithstanding the foregoing (but subject to the following sentence), none of the Sellers’ obligations for breach of any representation or warranty contained in Section 3.04 or Section 3.24, Sellers’ breach of any covenant contained in Section 6.03, or claims arising out of fraud shall be subject to any of the limitations set forth in this Section 8.06(a). With respect to any indemnity claim that any Purchaser Indemnified Party has or may have under Section 6.07, such Purchaser Indemnified Party must give written notice to Sellers of any such claims on or before the date that is sixty (60) days after the expiration of the applicable statute of limitations (including extensions). In the event any Purchaser Indemnified Party fails to provide such notice within the required time period, such Purchaser Indemnified Party shall have no right to bring any such claim against any Seller under this Agreement.

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(b) Other than as set forth in Section 9.15 and the Real Estate Purchase Agreement, the indemnification provisions and procedures contained in this Article VIII and Section 6.07 shall constitute the sole and exclusive recourse and remedy of the Purchaser Indemnified Parties and the Seller Indemnified Parties with respect to any Losses resulting from, arising out of or in connection with any matters subject to indemnification under this Article VIII and Section 6.07 with respect to this Agreement or any other Transaction Document; provided, however, that claims arising out of fraud shall not be subject to the limitations set forth in this Section 8.06(b).

SECTION 8.07 Other Limitations. Any liability for indemnification hereunder shall be determined without duplication of recovery (i) by reason of the state of facts giving rise to such liability constituting a breach of more than one representation or warranty or (ii) with respect to any Liability to the extent that the dollar value thereof is included in the calculation of the Closing Net Working Capital Amount. Each Loss shall be reduced by the amount of any insurance proceeds for such Loss actually received by the Indemnified Party with respect to the matters causing such Loss. The Indemnified Parties shall use their respective commercially reasonable efforts to mitigate the amount of any Losses, where practicable and feasible, so long as the applicable Indemnifying Parties reimburse all such Indemnified Parties for all good faith out-of-pocket expenses incurred with respect to such efforts promptly upon written request therefor accompanied by documentation thereof.

ARTICLE IX

GENERAL PROVISIONS

SECTION 9.01 Seller Representative.

(a) Each Seller, by executing this Agreement, hereby irrevocably appoints Fund Management Services, LLC, a Delaware limited liability company as its agent and attorney-in-fact for purposes of this Agreement and the Transaction Documents (the “Seller Representative”), and consents to and agrees to be irrevocably bound by the taking by the Seller Representative of any and all actions and the making of any decisions required or permitted to be taken by the Seller Representative under this Agreement and each Transaction Document (including, without limitation, the exercise of the power to agree to, negotiate, enter into settlements and compromises of and demand arbitration, and comply with orders of courts and awards of arbitrators with respect to any indemnity claims, and resolve any claim made pursuant to this Agreement or any Transaction Document, and take all actions necessary in the judgment of the Seller Representative for the accomplishment of the foregoing). Fund Management Services, LLC, a Delaware limited liability company, hereby accepts its appointment as the Seller Representative for purposes of this Agreement and the Transaction Documents. The appointment, rights and powers of the Seller Representative hereunder are irrevocable and coupled with an interest, are in consideration of the mutual covenants made in this Agreement and the Transaction Documents, and may not be terminated by the act of any Seller, operation of law or the occurrence of any other event. The Purchaser and the Purchaser Representative (as defined in the General Escrow Agreement) and the General Escrow Agent shall be entitled to deal exclusively with the Seller Representative on all matters relating to this Agreement and the Transaction Documents, and shall be entitled to rely conclusively (without further evidence of

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any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller by the Seller Representative, and on any other action taken or purported to be taken on behalf of any Seller by the Seller Representative, as fully binding upon such Seller. Each Seller agrees that any funds due to such Seller and paid to the Seller Representative or to any other Person at the written direction of the Seller Representative shall be in full satisfaction of the Purchaser’s liability therefor. The Sellers hereby authorize the Seller Representative to withhold a portion of the payments to be made to the Sellers at the Closing or from time to time thereafter under this Agreement, the General Escrow Agreement or otherwise in such amount as the Seller Representative shall reasonably determine, which amount shall satisfy any anticipated fees, costs and expenses incurred by the Seller Representative in connection with the transactions contemplated by the Transaction Documents or by the Seller Representative in performing its obligations under this Agreement and the General Escrow Agreement, provided, however, that such holdback shall be placed by the Seller Representative into a separate bank account, shall not be commingled with any other funds of any other party and any interest earned on such funds shall be added to the amount of such holdback and, once distributed, shall be allocated among the Sellers as if such interest were included in the original amount received (the “Seller Holdback”).

(b) The Seller Representative shall be entitled to resign at any time upon not less than twenty (20) days prior written notice delivered to each of the Sellers, Purchaser and the General Escrow Agent. If the Seller Representative shall die or resign from such position, or otherwise be unable to fulfill his responsibilities as agent of the Sellers as determined by the written election of the Sellers holding a majority-in-interest of the Securities as of immediately prior to the Closing, then the Sellers holding a majority-in-interest of the Securities as of immediately prior to the Closing shall, within ten days after such removal, appoint a successor representative and promptly give Purchaser and Escrow Agent written notice thereof. Upon receipt of such notice by Purchaser, any such successor shall become the “Seller Representative” for purposes of this Agreement and the Transaction Documents and this Section 9.01. If for any reason there is no Seller Representative at any time and Purchaser has received written notice of such occurrence, all references herein to the Seller Representative shall be deemed to refer to the Sellers holding a majority-in-interest of the Securities as of immediately prior to the Closing.

(c) The Sellers agree that the Seller Representative shall not be liable to the Sellers for any act done or omitted hereunder as Seller Representative (except in the case of fraud or intentional misconduct on the part of Seller Representative). The Sellers agree that the Seller Representative shall not be required to expend or risk any personal funds or otherwise incur any financial liability in the performance of the duties of the Seller Representative hereunder. Each of the Sellers, severally but not jointly, based on its Pro Rata Shares agrees to indemnify each Seller Representative and hold each Seller Representative harmless against any Losses arising out of or in connection with the acceptance or administration of such Seller Representative’s duties hereunder, other than due to the fraud or willful misconduct of such Seller Representative. In furtherance of the foregoing, the Seller Representative shall have no liability whatsoever to the Sellers for any loss arising from any cause related to any act, failure to act or neglect of any agent or correspondent selected by the Seller Representative, including any such agent or correspondent selected for the remittance of funds. The Seller Representative shall have no liability whatsoever to the Sellers for the investment of any funds held by or for the Seller Representative, including, without limitation, pursuant to the Seller Holdback. The Sellers agree that this Section 9.01(c) is an essential portion of the agreement of the Seller Representative to accept its appointment as the Seller Representative.

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(d) The Seller Representative shall be entitled to rely upon any order, judgment, certificate, demand, notice, instrument or other writing delivered to it hereunder without being required to investigate the validity, accuracy or content thereof nor shall the Seller Representative be responsible for the validity or sufficiency of this Agreement or any Transaction Document. In all questions arising under this Agreement or any Transaction Document, the Seller Representative may rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Seller Representative based on such advice, the Seller Representative shall not be liable to any Seller. The Seller Representative shall be entitled to be reimbursed from the Seller Holdback with respect to any third party out-of-pocket fees, costs or expenses incurred by the Seller Representative in taking any of the actions contemplated hereby; provided, that in the event that the Seller Holdback does not contain sufficient funds to satisfy such costs and expenses, each of the Sellers agree to promptly reimburse the Seller Representative for such Seller’s Pro Rata Share of such costs and expenses.

SECTION 9.02 Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

SECTION 9.03 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given and shall be deemed to have been delivered and received (i) when actually delivered in person, (ii) one (1) day after being deposited with an internationally recognized overnight courier service, charges prepaid and properly addressed, or (iii) the next Business Day when sent by facsimile if properly addressed and a confirmation of transmission is received by the sender (on the condition that a confirming copy of any notice sent by facsimile is sent by any other manner permitted under this Section 9.03 within one Business Day after such notice is sent by facsimile) to the respective parties hereto in the case of any Seller at the address set forth below such Seller’s name on Schedule 1.01(d) (with delivery of copies as set forth therein), or, in the case of the Purchaser, the following address (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.03):

If to the Purchaser:

Digital Phoenix Van Buren, LLC

Digital Services, Phoenix, LLC

c/o Digital Realty Trust

560 Mission Street, Suite 2900

San Francisco, CA 94105

Telecopy: (415) 736-6521

Attention: General Counsel and CEO

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with a copy to:

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street, Twenty-Fifth Floor

Los Angeles, CA 90071-2228

Telecopy: (213) 627-0705

Attention: Patrick A. Ramsey, Esq.

SECTION 9.04 Public Announcements. No party hereto shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the Seller Representative, in the case of the Purchaser, or the Purchaser, in the case of any Seller, unless otherwise required by Law or applicable stock exchange regulation, provided that the parties hereto shall cooperate as to the timing and contents of any press release, public announcement or communication so required by Law or applicable stock exchange regulation prior to the dissemination thereof.

SECTION 9.05 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

SECTION 9.06 Entire Agreement. This Agreement and the Ancillary Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between any Seller and the Purchaser with respect to the subject matter hereof and thereof, including, without limitation, that certain letter of intent dated as of February 28, 2006, between Digital and the Company and SNE.

SECTION 9.07 Assignment. This Agreement may not be assigned by operation of Law or otherwise without the express written consent of the Seller Representative and the Purchaser (which consent may be granted or withheld in the sole discretion of the Seller Representative or the Purchaser); provided, however, that the Purchaser may assign (including by merger) this Agreement or any of its rights and obligations hereunder to one or more Affiliates of the Purchaser without the consent of any Seller or the Seller Representative; provided, however, that in no event may the Purchaser assign without the prior express written consent of the Seller Representative, which consent may be withheld in the sole discretion of the Seller Representative, its obligation to make any payments required pursuant to Schedule 2.02, unless such assignment occurs through the merger of the Company with and into Digital VB with Digital VB as the surviving entity, in which event such consent shall not be required.

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SECTION 9.08 Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by the Seller Representative and the Purchaser or (b) by a waiver in accordance with Section 9.09.

SECTION 9.09 Waiver. The Seller Representative on behalf of the Sellers, on the one hand, or the Purchaser, on the other, may (a) extend the time for the performance of any of the obligations or other acts of the other, (b) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered by the other pursuant hereto or (c) waive compliance with any of the agreements of the other or conditions to such other’s obligations contained herein. Any such extension or waiver shall be valid and enforceable (i) against the Sellers, only if set forth in an instrument in writing signed by the Seller Representative on behalf of the Sellers, and (ii) against Purchaser, only if set forth in an instrument in writing signed by the Purchaser. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights.

SECTION 9.10 No Third Party Beneficiaries. Other than the Seller Representative, each Seller Indemnified Party and each Purchaser Indemnified Party, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any employee or former employee of any Seller or the Company, any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

SECTION 9.11 Governing Law; Exclusive Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. Except as otherwise provided in Section 2.02, all Actions arising out of or relating to this Agreement shall be heard and determined exclusively in a chancery court sitting in the State of Delaware; provided, however, that if such Delaware state court does not have jurisdiction over such Action or does not have the power or authority to provide the relief sought, such Action shall be heard and determined in the federal district court sitting in the State of Delaware having jurisdiction over such Action or if such federal district court does not have jurisdiction over such Action, then such Action shall be heard and determined in any state court sitting in the State of Delaware. Consistent with, and subject to, the preceding sentence, the parties hereto hereby (a) submit to the exclusive jurisdiction of any federal or state court sitting in Dover, Delaware for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above named courts.

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SECTION 9.12 Waiver of Jury Trial. To the fullest extent permitted by Law, each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement. Each of the parties hereto hereby (a) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement and the transactions contemplated by this Agreement, as applicable, by, among other things, the mutual waivers and certifications in this Section 9.12.

SECTION 9.13 Counterparts. This Agreement and any amendments hereto may be executed and delivered in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when counterparts have been signed by each party hereto and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature to this Agreement or any amendment hereto is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof. At the request of any party each other party shall promptly re-execute an original form of this Agreement or any amendment hereto and deliver the same to the other party. No party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a contract and each party hereto forever waives any such defense.

SECTION 9.14 Attorneys’ Fees. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

SECTION 9.15 Remedies Cumulative; Specific Performance. The rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in Sections 5.02 and 5.06 of this Agreement for the benefit of any other party to this Agreement, such other party shall be entitled (in addition to any other remedy that may be available to it) to (a) a decree or order of specific performance or mandamus from a court of competent jurisdiction as contemplated in Section 9.11 to enforce the observance and performance of such covenant, obligation or other provision, and (b) an injunction from a court of competent jurisdiction as contemplated in Section 9.11 restraining such breach or threatened breach.

SECTION 9.16 Cooperation with Purchaser’s Auditors and SEC Filing Requirements. Upon the request of the Purchaser, post-Closing, the Sellers shall provide to the

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Purchaser (at the Purchaser’s expense) copies of, or shall provide the Purchaser reasonable access to, such factual information as may be reasonably and timely requested by the Purchaser, and in the possession or control of the Sellers or the Sellers’ Affiliates or accountants to enable the Purchaser (and/or its Affiliates) to file its or their Current Report on Form 8-K, including all amendments thereto, if, as and when such filing may be required by the SEC. At the Purchaser’s sole cost and expense, post-Closing, the Sellers shall allow Purchaser’s independent public accounting firm (the “Auditor”) to conduct an audit of the income statements of the Company for its most recently completed two fiscal years, and shall cooperate with the Auditor in the conduct of such audit. In addition, post-Closing (but not more than ten (10) business days after the Purchaser’s request therefor), the Sellers agree to provide to the Auditor a letter of representation (at no cost to the Sellers) substantially in the same form as Exhibit F (the “Representation Letter”) and, if requested by the Auditor, historical financial statements for the Company including income and balance sheet data for the Company. Without limiting the foregoing, post-Closing (i) the Purchaser or the Auditor may audit the operating statements of the Company, at the Purchaser’s expense; and the Sellers shall provide such documentation as the Purchaser or the Auditor may reasonably request in order to complete such audit, (ii) the Sellers shall furnish to the Purchaser such financial and other information as may be reasonably required by the Purchaser to make any required filings with the SEC or other governmental authority; provided, however, that the foregoing obligations of the Sellers shall be limited to providing such information or documentation as may be in the possession of, or reasonably obtainable by, the Sellers or the Sellers’ Affiliates or accountants, at no cost to the Sellers, and in the format that the Sellers or the Sellers’ Affiliates or accountants have maintained such information; and (iii) the Representation Letter will not expand, extend, supplement or increase any of the representations or warranties set forth in this Agreement or any Sellers Additional Agreement or Ancillary Agreement in any manner or to expose the Sellers to any risk of liability to the Purchaser, any of the Purchaser’s Affiliates or any other third parties, other than the Auditor as expressly set forth in the Representation Letter. Notwithstanding anything to the contrary, the provisions of this Section shall survive Closing for a period of two years. All matters under this Section 9.16 which are at the Purchaser’s expense or at no cost to the Sellers, which shall include reasonable internal costs and expenses, shall be paid by the Purchaser to the Sellers on demand.

SECTION 9.17 Acknowledgement by Purchaser. THE REPRESENTATIONS AND WARRANTIES BY THE SELLERS SET FORTH IN THIS AGREEMENT, INCLUDING THE SCHEDULES HERETO, AND THE ANCILLARY AGREEMENTS AND IN THE REAL ESTATE PURCHASE AGREEMENT AND REAL ESTATE TRANSACTION DOCUMENTS (AS DEFINED IN THE REAL ESTATE PURCHASE AGREEMENT), CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE SELLERS TO PURCHASER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND PURCHASER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ENVIRONMENTAL CONDITIONS, ASSETS OR LIABILITIES OR PROSPECTS OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE SELLERS. PURCHASER ACKNOWLEDGES THAT IT DID NOT RELY ON ANY REPRESENTATION OR WARRANTY NOT CONTAINED IN THIS AGREEMENT, ANY ANCILLARY

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AGREEMENT, THE REAL ESTATE PURCHASE AGREEMENT OR THE REAL ESTATE TRANSACTION DOCUMENTS WHEN MAKING ITS DECISION TO ENTER INTO THIS AGREEMENT AND WILL NOT RELY ON ANY SUCH REPRESENTATION OR WARRANTY IN DECIDING TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 9.18 Limited Liability of Purchaser. Notwithstanding any provision of this Agreement to the contrary, the liabilities and obligations of Purchaser hereunder and under all Ancillary Agreements shall be the liabilities of Purchaser only, and shall not be the liabilities or obligations of Digital, the member and manager of Purchaser, Digital Realty Trust, Inc., a Maryland corporation (“General Partner”) (the general partner of Digital), any Affiliate, or any present or future officer, director, employee, trustee, member, shareholder, partner, beneficiary, internal investment contractor, manager, investment manager or agent of Purchaser, or Digital or General Partner. Any recourse by Sellers for any breach or default of Purchaser under this Agreement or any Ancillary Agreement or with respect to any liability or obligation related thereto shall be solely against Purchaser and the assets of Purchaser and there shall be no recourse on account of any such breach or default (or with respect to any such liability or obligation) against any Affiliate of Purchaser, or Digital or General Partner or any present or future officer, director, employee, trustee, member, shareholder, partner, beneficiary, internal investment contractor, manager, investment manager or agent of any of the same. This provision shall survive the Closing.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed as of the date first written above.

SELLERS
STERLING TELECOM HOLDINGS, LLC a Delaware limited liability company
BY:	/s/ Steven Taslitz
NAME:	Steven Taslitz
TITLE:	Managing Member
/s/ George D. Slessman
GEORGE D. SLESSMAN
/s/ William D. Slessman
WILLIAM D. SLESSMAN
/s/ Anthony L. Wanger
ANTHONY L. WANGER

[Signature Page to Securities Purchase Agreement]

PURCHASER
DIGITAL PHOENIX VAN BUREN, LLC a Delaware limited liability company
By:	DIGITAL REALTY TRUST, L.P.,
	a Maryland limited partnership, its member and manager
	By:	DIGITAL REALTY TRUST, INC., a
		Maryland corporation, its general partner
		BY:	/s/ Michael Foust
		NAME:	Michael Foust
		TITLE:	CEO
DIGITAL SERVICES PHOENIX, LLC, a Delaware limited liability company
By:	DIGITAL SERVICES, INC., a
	Maryland corporation, its member and manager
	BY:	/s/ Michael Foust
	NAME:	Michael Foust
	TITLE:	CEO

[Signature Page to Securities Purchase Agreement]

SELLER REPRESENTATIVE
FUND MANAGEMENT SERVICES, LLC, a Delaware limited liability company, as Seller Representative, solely in its capacity as such and not in any other capacity
BY:	/s/ Steven Taslitz
NAME:	Steven Taslitz
TITLE:	Managing Director

[Signature Page to Securities Purchase Agreement]

EX-12.1

Exhibit 12.1

Digital Realty Trust, Inc.

Statement of Computation of Ratios (1)

	The Company (2)				The Company		The Company and the Predecessor (2)			The Predecessor (2)
	Six Months Ended June 30,				Year ended December 31,											Period from February 28, 2001 (inception) through December 31, 2001
	2006		2005		2005		2004			2003			2002
Income (loss) from continuing operations before minority interests	$	13,844	$	12,713	$	25,344	$	(4,327	)	$	16,738		$	129		$	(2,758	)
Interest expense		22,869		16,708		37,724		23,101			10,022			5,249			—
Interest within rental expense		135		50		147		113			66			—			—
Minority interests in consolidated joint ventures		—		—		—		(6	)		(149	)		(190	)		—
Earnings available to cover fixed charges	$	36,848	$	29,471	$	63,215	$	18,881		$	26,677		$	5,188		$	(2,758	)
Fixed charges:
Interest expense	$	22,869	$	16,708	$	37,724	$	23,101		$	10,022		$	5,249		$	—
Interest within rental expense		135		50		147		113			66			—			—
Capitalized interest		1,820		—		—		—			—			—			—
		24,824		16,758		37,871		23,214			10,088			5,249			—
Preferred stock dividends		6,890		3,470		10,014		—			—			—			—
Fixed charges and preferred stock dividends	$	31,714	$	20,228	$	47,885	$	23,214		$	10,088		$	—		$	—
Ratio of earnings to fixed charges		1.48		1.76		1.67		—	(3)		2.64			—	(4)		—
Ratio of earnings to fixed charges and preferred stock dividends		1.16		1.46		1.32		—			2.64			—	(4)		—

(1) All numbers presented in this exhibit exclude 7979 East Tufts Avenue, a property held for sale at June 30, 2006 and which we sold on July 12, 2006.

(2) The Predecessor is not a legal entity; rather it is a combination of certain of the real estate subsidiaries of Global Innovation Partners, LLC, a Delaware limited liability company (GI Partners) contributed to the Company in connection with the IPO in November 2004, along with an allocation of certain assets, liabilities, revenues and expenses of GI Partners related to the real estate owned by such subsidiaries.

(3) For the year ended December 31, 2004, earnings were insufficient to cover fixed charges by $4,333.

(4) For the year ended December 31, 2002, earnings were insufficient to cover fixed charges by $61.

EX-31.1

Exhibit 31.1

Certification Of Principal Executive Officer

Pursuant To Section 302 Of The Sarbanes–Oxley Act Of 2002

I, Michael F. Foust, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, Inc.;

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(s) 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(s) 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: August 4, 2006
By:	/s/    MICHAEL F. FOUST
	Michael F. Foust Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification Of Principal Financial Officer

Pursuant To Section 302 Of The Sarbanes–Oxley Act Of 2002

I, A. William Stein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, Inc.;

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(s) 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(s) 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: August 4, 2006
By:	/s/    A. WILLIAM STEIN
	A. William Stein Chief Financial Officer and Chief Investment Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 4, 2006
	/s/    MICHAEL F. FOUST
	Michael F. Foust Chief Executive Officer

Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 4, 2006
	/s/    A. WILLIAM STEIN
	A. William Stein Chief Financial Officer

Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.