As filed with the Securities and Exchange Commission on June 7, 2011

Registration Statement No. 333-165554

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 8

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

The Telx Group, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

4899

13-4129783

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer
Identification Number)

1 State Street, 21st Floor

New York, NY 10004

(212) 480-3300

(Address, including zip code, and telephone number, including area code, of Registrants’ principal executive offices)

Eric Shepcaro

Chief Executive Officer

The Telx Group, Inc.

1 State Street, 21st Floor

New York, NY 10004

(212) 480-3300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael L. Zuppone, Esquire

Paul, Hastings, Janofsky & Walker, LLP

75 East 55^th Street

New York, New York 10022

(212) 318-6000

Facsimile: (212) 319-4090

William P. Rogers, Jr., Esquire
Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, New York 10019

(212) 474-1000

Facsimile: (212) 474-3700

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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


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

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 7, 2011

LOGO

Shares

Common Stock

This is the initial public offering of shares of common stock of The Telx Group, Inc.

We are selling shares of our common stock and the selling stockholders are selling shares of our common stock. We will not receive any of the proceeds from the shares of common stock sold by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $ and $ per share. We have applied to list our common stock on The Nasdaq Global Market under the symbol “TELX.”

See the section entitled “Risk Factors” beginning on page 10 to read about factors you should consider before buying shares of our common stock.


	Per Share	Total
Initial public offering price
Underwriting discounts and commissions
Proceeds, before expenses, to the company
Proceeds, before expenses, to the selling stockholders

The underwriters have an option to purchase a maximum of additional shares of our common stock from us and/or the selling stockholders at the initial public offering price less the underwriting discounts and commissions.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares against payment in New York, New York on , 2011.


Goldman, Sachs & Co.				Deutsche Bank Securities


	RBC Capital Markets

Oppenheimer & Co.	Piper Jaffray	SunTrust Robinson Humphrey

The date of this prospectus is , 2011.

LOGO

TABLE OF CONTENTS


	Page
Prospectus Summary		1
Risk Factors		10
Forward-Looking Statements		27
Use of Proceeds		29
Dividend Policy		30
Capitalization		31
Dilution		33
Selected Consolidated Financial Data		35
Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
Business		68
Management		84
Executive Compensation		92
Certain Relationships and Related Party Transactions		110
Principal and Selling Stockholders		114
Description of Capital Stock		116
Description of Indebtedness		120
Shares Eligible for Future Sale		123
Material U.S. Federal Tax Considerations		125
Underwriting		130
Legal Matters		134
Experts		134
Where You Can Find More Information		134
Index to Consolidated Financial Statements		F-1

Through and including , 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Market data and industry statistics and forecasts used throughout this prospectus are based on independent industry publications, reports by market research firms and other published independent sources. Tier1 Research, Cisco, Gartner, The Insight Research Corporation, Vertical Systems Group and the U.S. Census are the primary sources for third-party market data and industry statistics and forecasts. Some data and other information are also based on our good faith estimates, which are derived from our review of internal surveys and independent sources. Although we believe these sources are credible, we have not independently verified the data or information obtained from these sources.

The Gartner reports described herein (the “Gartner Reports”) represent data, research opinion or viewpoints published, as part of a syndicated subscription service by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Reports are subject to change without notice.

PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read the entire prospectus, including the section entitled “Risk Factors” and our financial statements and related notes, before you decide whether to invest in our common stock. If you invest in our common stock, you are assuming a high degree of risk. See the section entitled “Risk Factors.” References to “we,” “our,” “our company,” “us,” “the company,” “Telx” or “The Telx Group, Inc.” refer to The Telx Group, Inc. and its consolidated subsidiaries. References to “GI Partners Funds” refer to GI Partners Fund II, L.P. and GI Partners Side Fund II, L.P., collectively and references to “GI Partners” refer to the entities that control or manage the GI Partners Funds. Unless otherwise indicated, industry data are derived from publicly available sources, which we have not independently verified.

Business Overview

Telx is a leading provider of network neutral, global interconnection and colocation solutions in the United States. Our interconnection and colocation offerings enable customers to seamlessly connect to hundreds of diverse communications networks and other enterprises. Additionally, we provide a secure and reliable environment to house customers’ mission-critical equipment and time sensitive data. We believe that our 15 facilities, located in nine tier-1 markets, are some of the most strategically positioned datacenters in the United States. These facilities are located at the primary intersections of multiple, major international and domestic fiber routes where we believe Internet and private network traffic is most concentrated and interconnection demand is highest. We believe that our average of 37 physical interconnections per customer as of March 31, 2011 gives us greater physical interconnection density than our competitors. Over the last three years, we have grown our revenues from $50.8 million in 2007 to $130.2 million in 2010, representing a compound annual growth rate of 37%, and our net losses have decreased from $36.4 million to $0.3 million over the same period. For the three months ended March 31, 2011, we had revenues of $37.8 million and a net loss of $4.8 million.

As a network neutral provider, we are an unbiased intermediary that provides the necessary interconnection products and related services that facilitate the exchange of communications network traffic between our customers. Customers within a Telx facility are able to connect to any other customer within the facility, including up to 300 service providers, depending on the facility. These interconnections effectively allow a customer to replace their existing and more expensive network alternatives. Through these interconnections, our facilities host diverse and densely populated ecosystems of communications service providers, enterprises, online media, video and content providers, and other entities. We view an ecosystem as a set of related businesses and organizations that use our facilities to exchange information with each other. For example, a financial ecosystem can consist of financial exchanges, financial clients and information exchanges that exchange large volumes of real-time financial market data. Our customers benefit from greater choice of networks, reduced network costs, improved capital budget efficiency, improved performance and access to revenue opportunities with accelerated time to market.

With 914 customers and 34,083 total physical interconnections within our facilities as of March 31, 2011, our interconnection-centric model targets customers that value the interconnection density in our secure and reliable environments. The table below is a representative list of those customers:

Communications

Service Providers

Enterprises/Institutions

Online Media, Video and
Content Providers

Government / Cloud / SaaS /
Other

AT&T

Clearwire

Cogent

Equinix

Level 3 Communications

Qwest

Reliance Globalcom

Sprint

Tata Telecom

Telecom Italia

Verizon

ACTIV Financial Systems

Emory University

Hewlett Packard

International Securities Exchange (ISE)

University of Florida

CBS

Justin TV

JahJah

Viacom

Yahoo!

iland Internet Solutions

NASA (via Arcata
Associates)

DediPower Managed
Hosting

SoftLayer Technologies

We evaluate market leadership based on publicly available information for physical interconnections per customer and our experience in the industry. Based on this framework, we believe that our average of 37 physical interconnections per customer as of March 31, 2011 makes us a leading network neutral, global interconnection and colocation solutions provider in the United States. We believe that the interconnection density within our facilities can create a network effect that increases the value proposition of our products and related services. Because each additional customer added to a facility can connect to all of the other customers already in that facility, with the addition of each new customer, the potential number of interconnections in our facilities increases. We believe that this enhances our ability to both retain existing customers and attract new customers. Our 15 interconnection and colocation facilities are located in the New York Metropolitan area, the San Francisco Bay area, Los Angeles, Dallas, Chicago, Atlanta, Phoenix, Charlotte and Miami.

The global Internet datacenter market is estimated to grow at a compound annual growth rate of approximately 19% from $13.2 billion in 2010 to $22.4 billion in 2013 according to Tier1 Research’s Multi-Tenant Datacenter Global Markets Overview—2011 report. Increasing demand for our network neutral interconnection and colocation products and related services is being driven by powerful trends, including favorable datacenter supply and demand dynamics, continued growth in Internet traffic, increasing enterprise adoption of datacenter outsourcing and network based applications, continued adoption of Ethernet technologies, continued growth of Internet video, emerging computing technologies such as cloud computing, increasing demand for proximity hosting and low latency (or low time delay) networking, and increasing datacenter power and cooling requirements.

Our business is characterized by significant monthly recurring revenue, low churn (or loss of revenue), and a predictable cost structure. We generate revenue by charging our customers a recurring monthly fee for our interconnection and colocation products and related services, a one-time fee for the installation of related colocation and interconnection products, and an hourly or a subscription fee for technical support services. The combination of our recurring revenues, representing approximately 96% of our total revenue for the three months ended March 31, 2011, and our low churn provides us significant visibility into our revenue generating capabilities for the coming years. We believe our high interconnection density demonstrates an interconnection-centric business model that differentiates us from our competition. It improves our ability to maximize revenues and profitability relative to other predominately colocation-centric providers that do not have a similar level of interconnection density within a comparable physical footprint. Additionally, our interconnection-centric model improves our profitability and capital efficiency because we can add a significant number of interconnections between existing customers within our facilities without leasing additional space or incurring significant additional costs.

Our revenue growth since 2007 is primarily the result of organic growth, consisting of increasing amounts of our products and related services provided to existing and new customers. From December 31, 2007 to December 31, 2010, we grew our customer base from 495 to 884 customers representing a 21% compound annual growth rate and our total physical interconnections increased from 19,692 to 32,882 representing a 19% compound annual growth rate. Over the same period, to meet our customers’ increasing demand for our products and related services, we expanded our facility footprint from 370,543 gross square feet to 604,368 gross square feet representing a compound annual growth rate of 18%. At March 31, 2011, our customer base had increased to 914, total physical interconnections had increased to 34,083 and our facility footprint had increased to 626,105 square feet. The growth in our facility footprint was accomplished through the addition of three new facilities and the expansion of our existing space within our other facilities. We believe that our existing customer base, products and services will continue to grow, which will enhance the ecosystems within our facilities and in turn support our ability to attract new customers.

Our Competitive Strengths

Customers typically use our products and related services because we provide them with a level of interconnection access, quality of service, reliability and flexibility that is difficult to replicate independently or with another interconnection and colocation provider. We believe that our key competitive strengths, which are described below, position us well to take advantage of the favorable trends in our industry.

Industry Leader in Physical Interconnections. As of March 31, 2011, we facilitated a total of 34,083 physical interconnections between our customers, which represent an average of 37 physical interconnections per customer. This allows our customers to achieve the seamless exchange of information across hundreds of communications service providers, enterprises, online media, video and content providers, government agencies, cloud computing providers and Software as a Service (SaaS) providers. We believe that our average of 37 physical interconnections per customer as of March 31, 2011, represents greater physical interconnection density than our peers in the United States.

High Barriers to Entry. We believe our interconnection-centric model has high barriers to entry primarily resulting from the difficulty in replicating the ecosystems that exist within our facilities and the resulting network effect that exists among our customers. Significant time and resources are required to develop these ecosystems. In addition, we believe that the buildings in which we operate are already the primary landing points and crossroads for global fiber networks and the ability to replicate this network proximity would be difficult and cost prohibitive. While significant barriers to entry exist, we believe that our experience, relationships with a critical mass of communities of interest and leading communications service providers, reputable brand, associated track record and proven business model enable us to pursue expansion opportunities more effectively than potential competitors.

Exclusive Operator of Interconnection Areas within 10 Digital Realty Trust Wholesale Datacenter Buildings. Our relationship with Digital Realty Trust, Inc., or Digital Realty Trust, one of the leading datacenter real estate investment trusts, generally provides us with the exclusive ability to operate the interconnection areas in 10 tier-1 wholesale datacenter buildings across the United States.

Engineering and Operational Excellence. Our facilities provide the structural integrity and redundant power and cooling infrastructure required for a secure, reliable and effective networking and computing environment. Since 2003, we have provided our customers with over 99.999% uptime on our overall power and cooling systems. Based on our industry experience and customer feedback, we believe that we also offer best-in-class installation and technical support services that enhance networking opportunities and maximum exposure to the global communications marketplace.

Our Strategy

Our goal is to expand our leadership position in network neutral, global interconnection and colocation products and related services. Our strategy for accomplishing this goal includes the key elements described below.

Continue to Acquire Profitable New Customers. We recognize the ability of additional customers to enhance the value proposition of our interconnection ecosystems. We will continue to target and develop relationships with customers that will benefit most from their inclusion in a Telx ecosystem and that will increase the value proposition to our other customers due to their expected demand for interconnection. We intend to continue to price our products and services at a level that reflects both the market demand for our products and related services, as well as our short and long term profitability goals and return on invested capital expectations.

Further Penetrate Attractive Industry Sectors. A substantial portion of our revenue is derived from communications service providers that require the high level of interconnections we offer. Revenue from other industry sectors, however, has grown from an annualized rate of 15% of our revenues for the year ended December 31, 2007 to an annualized rate of 28% for both the year ended December 31, 2010 and the three months ended March 31, 2011. The enterprise, online media, video and content provider, government, cloud computing provider and SaaS provider industry sectors have grown significantly within the ecosystems that exist within our facilities and provide attractive opportunities for further ecosystems development and growth. We also believe other industry sectors, such as healthcare, will provide additional long-term opportunities for ecosystems development and growth. We intend to continue to focus our efforts to further penetrate these sectors.

Increase Network Densities. As our network densities increase, our customer value proposition increases. As an interconnection-centric company, we aim to continuously increase the number of interconnections we facilitate. We will continue to focus our sales, marketing, technology and facilities efforts accordingly.

Selective Product and Services Expansion. We intend to continually develop our interconnection and colocation offerings and introduce new products and related services to meet our customers’ needs. Product and services launched during 2010 included our Ethernet Exchange product that allows service providers and enterprises to seamlessly interconnect their Ethernet networks. As of March 31, 2011, 19 service provider customers have ordered the service.

Selective Expansion in Existing and New Markets. As we grow our business, we aim to grow efficiently by increasing our gross square footage to satisfy the demand for our products and related services in existing facilities and by selectively identifying domestic and international opportunities for expansion into new markets. We only begin new expansions once we have identified customers and we have the capital to fully fund

the build out. Our expansions are done in phases in order to manage the timing and scale of our capital expenditure obligations, reduce risk and improve our return on capital.

Pursue Selective Acquisitions. We believe our industry has favorable consolidation characteristics and we expect this trend to continue in the foreseeable future. Given the limited availability of interconnection and colocation facilities within tier-1 markets, acquisitions of existing businesses may provide a cost-effective method of increasing network densities, expanding our customer base and broadening our geographic footprint. We intend to pursue attractive opportunities as they arise.

Summary Risk Factors

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties summarized below, the risks described under “Risk Factors,” the other information contained in this prospectus and our consolidated financial statements and the related notes before you decide whether to invest in our common stock.

•

We have incurred substantial losses in the past and may continue to incur losses in the future.

•

Our operating results have fluctuated historically and could continue to fluctuate in the future, which could affect our ability to maintain our current market position or expand.

•

In the past, significant deficiencies and material weaknesses in our internal control over financial reporting have been identified. If new material weaknesses arise or if we fail to maintain proper and effective internal controls going forward, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect our business, operating results and financial condition.

•

Our ability to maximize the utilization of our facilities is limited by the availability and cost of sufficient electrical power and cooling capacity, which may result in our inability to accept new customers at our facilities. This could lead to a decline in our revenue growth and may cause us to incur additional costs to increase the power supply, increase cooling capacity or acquire space at an additional facility.

•

We are dependent upon third-party suppliers for power and certain other services, and we are vulnerable to service failures of our third-party suppliers and to price increases by such suppliers.

•

We are continuing to invest in our expansion efforts, but we may not experience sufficient customer demand in the future to realize expected returns on these investments.

•

Changes in technology could adversely affect our business.

•

Our success largely depends upon retaining the services of our management team.

•

The forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, or at all.

Recent Developments

Term Loan are guaranteed by all of our current subsidiaries, and certain of our subsidiaries that we may acquire or create in the future, and is secured by substantially all of our and such subsidiary guarantors’ assets on a pari passu basis as the existing term loans and revolving loans. Pursuant to the First Amendment and Incremental Agreement, (i) the non-default interest rates for the Incremental Term Loan will be determined, at our election, by reference to either LIBOR plus 5.00% or a prime-based rate plus 4.00%, (ii) the non-default interest rates for the existing term loans were decreased from their previous levels and will, going forward, be determined, at our election, by reference to either LIBOR plus 5.00% or a prime-based rate plus 4.00%, and (iii) the floor for LIBOR loans that are Incremental Term Loans or existing term loans was decreased to 1.50% and the floor for prime rate loans that are Incremental Term Loans or existing term loans was decreased to 2.50%. The interest rates and floors for revolving loans did not change. The margins are subject to increase in certain circumstances as set forth in the credit agreement. In addition, as part of the First Amendment and Incremental Agreement, the interest coverage ratio, senior secured leverage ratio and consolidated capital expenditures covenants were revised. We intend to use the proceeds of the Incremental Term Loan for expansions, and to pay the fees and expenses of the transaction. We intend to use the remaining proceeds from the borrowings to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes. We did not draw upon the revolving facility at the closing of the First Amendment and Incremental Agreement or through March 31, 2011, but when or if we do so, such proceeds will be used to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes.

Corporate Information

We were incorporated on August 3, 2000 as a Delaware corporation. We currently conduct certain operations through our wholly owned subsidiaries. We are headquartered in New York, New York. Our principal executive offices are located at 1 State Street, 21st Floor, New York, New York 10004 and our telephone number at this location is (212) 480-3300. Our website address is www.telx.com. Information included or referred to on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by reference into this prospectus.

The Offering

Common stock offered by us

Common stock offered by the selling stockholders

Common stock to be outstanding after this offering

Option to purchase additional shares

Use of proceeds

We intend to use the net proceeds of this offering for capital expenditures, working capital and general corporate purposes. We may also use a portion of the net proceeds to finance growth through the acquisition of, or investment into, businesses, products, services or technologies complementary to our current business. We will not receive any of the proceeds from the sale of shares by the selling stockholders. See the section entitled “Use of Proceeds.”

Proposed Nasdaq Global Market symbol

TELX

The number of shares of our common stock to be outstanding immediately after this offering is based on the number of shares outstanding as of , 2011, after giving effect to the conversion of all of our outstanding shares of preferred stock into shares of common stock; and excludes:

•

128,803 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2011, having a weighted average exercise price of $52.31 per share;

•

146,920 shares of common stock reserved for issuance under our equity incentive plan as of March 31, 2011; and

•

52,684 shares of common stock issuable upon the vesting of outstanding restricted stock units as of March 31, 2011.

Assumptions Used in This Prospectus

Except as otherwise indicated, all information contained in this prospectus assumes:

•

an offering price of $ per share of common stock, which is the mid-point of the range set forth on the cover of this prospectus;

•

the underwriters do not exercise their option to purchase up to an additional shares of our common stock from us and/or the selling stockholders;

•

the conversion of all outstanding shares of our preferred stock into an aggregate of shares of common stock immediately prior to the closing of this offering;

•

a for stock split of our outstanding capital stock that was effected on , 2011;

•

the filing of our amended and restated certificate of incorporation upon the completion of this offering; and

•

our issuance of shares of common stock in this offering.

Summary Consolidated Financial Data

The following summary consolidated financial data for the fiscal years ended December 31, 2010, 2009 and 2008 are derived from our audited financial statements, which are included elsewhere in this prospectus. Summary consolidated financial data for the three months ended March 31, 2011 and 2010 are derived from our unaudited financial statements. The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read this data together with our audited financial statements and related notes included elsewhere in this prospectus and the information under the sections entitled “Risk Factors,” “Selected Consolidated Financial Data,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


	Three Months Ended March 31,						Years Ended December 31,
	2011			2010			2010			2009			2008
	(unaudited)
	(in thousands, except share and per share data)
Statement of Operations Data:^(1)(2)(3)(4)
Revenues	$	37,755		$	29,651		$	130,197		$	98,335		$	70,038
Operating expenses		36,189			25,779			116,224			99,937			93,332

Operating income (loss)		1,566			3,872			13,973			(1,602	)		(23,294	)
Interest income		15			62			218			374			396
Interest expense		(6,148	)		(1,990	)		(13,432	)		(7,221	)		(7,380	)
Other income (expense)		—			—			13			(12	)		(330	)

Income (loss) from operations before income taxes		(4,567	)		1,944			772			(8,461	)		(30,608	)
Income tax benefit (expense)		(259	)		(231	)		(1,056	)		(1,458	)		(772	)

Net income (loss)	$	(4,826	)	$	1,713		$	(284	)	$	(9,919	)	$	(31,380	)
Less: preferred dividends		(7,076	)		(6,411	)		(26,991	)		(24,452	)		(21,743	)

Net loss available for common stockholders	$	(11,902	)	$	(4,698	)	$	(27,275	)	$	(34,371	)	$	(53,123	)

Net loss per common share	$	(4,620	)	$	(6,654	)	$	(38,633	)	$	(63,066	)	$	(290,290	)

Weighted average common shares outstanding		2,576			706			706			545			183


(1) Includes stock-based compensation expense of:	$	1,110		$	407		$	1,744		$	1,179		$	919
(2) Includes depreciation and amortization expense of:	$	3,800		$	2,643		$	12,163		$	21,686		$	32,256
(3) Includes non-cash rent of:	$	4,930		$	2,025		$	13,290		$	7,953		$	6,720
(4) Includes non-cash compensation expense for executive loan forgiveness of:	$	—		$	414		$	414		$	—		$	—

Adjusted EBITDA Reconciliation

We use a non-GAAP financial metric that we call Adjusted EBITDA to track, analyze and understand our financial performance, which we define as operating income from continuing operations, plus depreciation and amortization, stock-based compensation expense and other non-cash items such as deferred rent (income)/expense. We believe that Adjusted EBITDA is a helpful metric for the following reasons:

•

As a measurement of operating performance, it assists management in comparing our operating results for various periods, since it removes the impact of items not directly resulting from operations;

•

For planning purposes, we use it to help prepare our internal operating budgets;

•

It allows us to establish targets for certain management compensation that relate to the results of our operations, avoiding the impact of items not directly resulting from operations; and

•

It allows us to effectively evaluate our capacity to incur and service debt, fund capital expenditures and expand our business.

The following is a reconciliation of our net income (loss) for the three months ended March 31, 2011 and 2010, and for the years ended December 31, 2010, 2009 and 2008 to Adjusted EBITDA.


	Three Months Ended March 31,					Year Ended December 31,
	2011			2010		2010			2009			2008
	(unaudited)
	(in thousands)
Net income (loss)	$	(4,826	)	$	1,713	$	(284	)	$	(9,919	)	$	(31,380	)
Interest expense, net		6,133			1,928		13,214			6,847			6,984
Other income (expense)		—			—		(13	)		12			330
Income tax expense (benefit)		259			231		1,056			1,458			772
Non-cash rent expense ⁽¹⁾		4,930			2,025		13,290			7,953			6,720
Depreciation and amortization expense		3,800			2,643		12,163			21,686			32,256
Non-cash compensation expense ⁽²⁾		1,110			821		2,158			1,179			919

Adjusted EBITDA	$	11,406		$	9,361	$	41,584		$	29,216		$	16,601

(1)

Non-cash rent expense includes deferred rent expense and non-cash rent expense related to a stock option granted to a landlord. Deferred rent expense represents the non-cash component of rent expense required by GAAP to reflect the total escalating rent payments under our long-term leases as a straight-line expense each period over the estimated term of the lease.

(2)	Non-cash compensation expense includes the non-cash component of compensation expense related to our equity incentive plans and in the first quarter of 2010, the non-cash compensation related to executive loan forgiveness of $414.

Our Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. In addition, Adjusted EBITDA: (a) does not represent net income or cash flows from operating activities as defined by U.S. generally accepted accounting principles, or GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or other financial information as determined under GAAP.

We prepare Adjusted EBITDA by adjusting net loss to eliminate the impact of a number of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate each adjustment and the reasons we consider them appropriate. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to net loss. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

RISK FACTORS

An investment in our common stock involves a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors, as well as the financial and other information contained in this prospectus, including our consolidated financial statements and related notes. Any of the following risks as well as other risks and uncertainties discussed in this prospectus could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our stock to decline, which could cause you to lose all or part of your investment. Additional risks and uncertainties of which we are unaware, or that are currently deemed immaterial by us, also may become important factors that affect us.

Risks Related to Our Business and Industry

We have incurred substantial losses in the past and may continue to incur losses in the future.

For the years ended December 31, 2010, 2009 and 2008, we incurred net losses of approximately $0.3 million, $9.9 million and $31.4 million, respectively. For the three months ended March 31, 2011 and 2010, we had a net loss of $4.8 million and net income of $1.7 million, respectively. As of March 31, 2011, we had an accumulated deficit of $89.5 million. Going forward, there can be no guarantee that we will achieve and sustain profitability. Our ability to sustain or increase profitability is dependent upon a number of risks and uncertainties discussed below, many of which are beyond our control. Given the competitive and evolving nature of the industry in which we operate, we may not be able to achieve and sustain profitability on a quarterly or annual basis.

Our operating results have fluctuated historically and could continue to fluctuate in the future, which could affect our ability to maintain our current market position or expand.

Our operating results have fluctuated in the past and may continue to fluctuate in the future as a result of a variety of factors, many of which are beyond our control, including the following:

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

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demand for interconnection and colocation products and services in general or at our facilities in particular;

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competition from other suppliers of the products and services we offer;

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timing and magnitude of operating expenses, capital expenditures and expenses related to sales and marketing, including expenses incurred as a result of expansions and acquisitions, if any;

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cost and availability of power and cooling capacity;

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cost and availability of additional space inventory either through lease or acquisition in our target markets;

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our acquisition of additional facilities;

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mix of our current products and services;

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financial condition and credit risk of our customers; and

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our access to capital and ability to fund capital expenditure projects.

Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition. Although we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future operating results. A relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation and amortization expenses, and interest expense. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. Comparisons to prior periods should not be relied upon as indications of our future performance.

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2008, our independent registered public accounting firm did not identify any material weaknesses but did identify two significant deficiencies in our internal controls relating to an inadequate system of internal controls during 2008 in certain processes and several deficiencies related to information technology, or IT, processes, controls and documentation. A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. In connection with the audit of our consolidated statements as of and for the year ended December 31, 2007, our independent registered public accounting firm identified a deficiency that constituted a material weakness in our internal control over financial reporting for the year ended and as of December 31, 2007. This material weakness related to an inadequate system of internal controls during the first half of 2007 (as we documented a comprehensive set of accounting policies and procedures in the second half of the year) and several control deficiencies related to IT processes, controls and documentation. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the audit of our consolidated financial statements as of December 31, 2006 and for the periods from January 1 to October 3, 2006 and October 4 to December 31, 2006, our independent registered public accounting firm identified two control deficiencies that represented material weaknesses in our internal control over financial reporting for such periods. These material weaknesses related to insufficient technical resources in accounting, financial reporting and income taxes and an inadequate system of internal controls including a lack of a comprehensive set of accounting policies and procedures and several deficiencies related to IT processes, controls and documentation. Because of these material weaknesses, there is heightened risk that a material misstatement of our financial statements as of and for the periods ended December 31, 2007 and December 31, 2006 was not prevented or detected.

We have taken steps to remediate the material weaknesses and significant deficiencies which were identified in connection with the audits for 2006, 2007 and 2008. However, there are no assurances that the measures we have taken to remediate these internal control weaknesses were completely effective or that similar weaknesses will not recur. Additionally, as part of our ongoing efforts to improve our financial accounting organization and processes, from 2007 to the present we have hired several senior accounting personnel.

No material weaknesses were identified for the year ended December 31, 2009, and, accordingly, we believe that our remediation efforts for the 2006, 2007 and 2008 material weaknesses and significant deficiencies were successful. No material weaknesses were identified for the year ended December 31, 2010 but our independent registered public accounting firm did identify two significant deficiencies in our internal controls relating to inadequate review in financial reporting. We have taken steps to remediate these significant deficiencies by hiring more support resources, including a third-party independent accounting firm to support our financial reporting review process. However, there are no assurances that the measures we have taken to remediate these significant deficiencies were completely effective or that similar issues will not recur. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify.

While these significant deficiencies did not constitute a material weakness, we did not perform an assessment of our internal controls over financial reporting nor did our auditors perform an audit over our internal controls over financial reporting; we therefore cannot assure you that these or other similar issues will not arise in future periods. We anticipate that we will next evaluate our internal control over financial reporting

in connection with management’s preparation of our financial statements for the year ended December 31, 2011. Although an evaluation of internal controls will only be performed at year end, we will review internal controls in connection with our quarterly reporting.

The availability of an adequate supply of electrical power and cooling capacity, and the infrastructure to deliver that power and cooling, is critical to our ability to provide our products and services. Even though physical space may be available in a facility, the demand for electrical power may exceed our designed capacity. We may be unable to meet the increasing power and cooling needs of our customers if our customer mix does not match our expectations or our customers further increase their use of high density electrical power equipment. In addition, the amount of sellable space within our facilities is reduced to the extent that we house generators and batteries to provide back-up power. Further, certain of the leases for our facilities also contain provisions that limit the supply of electrical power and cooling capacity to such facilities, as a result of which our ability to reach full utilization may be constrained in these facilities. If the availability of power and cooling capacity limits our ability to fully utilize the space within our facilities, we may be unable to accept new customers at our facilities and our revenue growth will decline. We also may incur additional costs to increase the power supply and/or cooling capacity or acquire space at an additional facility, which could increase our losses, or reduce our ability to become profitable.

We are dependent upon third-party suppliers for power and certain other services, and we are vulnerable to service failures of our third-party suppliers and to price increases by such suppliers.

We rely on third parties to provide power, and we cannot ensure that these third parties will deliver such power in adequate quantities or on a consistent basis. If the amount of power available to us is inadequate to support our customer requirements or delivery of power does not occur in a timely manner, we may be unable to provide our services to our customers and our operating results and cash flow may be materially and adversely affected. In addition, our facilities are susceptible to power shortages and planned or unplanned power outages caused by these shortages such as those that occurred in California in 2001, in New York City and the Northeast in 2003 and in Miami in 2005. We attempt to limit exposure to power shortages by using backup generators and batteries. Power outages, which may last beyond our backup and alternative power arrangements, would harm our customers and our business. Although we have maintained power availability in excess of the Tier 4 fault tolerant standards resulting in aggregate availability in excess of 99.999% across our facilities since 2003, a limited number of our customers have experienced temporary losses of power, for which we generally provided credits against future invoices. We could incur similar or other financial obligations or be subject to lawsuits by our customers in connection with a loss of power. In addition, any loss of services or equipment damage could reduce the confidence of our customers in our products and services and could consequently impair our ability to attract and retain customers, which would adversely affect both our ability to generate revenues and our operating results.

We are dependent upon third-party suppliers for the resale of Internet access and other services, and we have no control over the quality and reliability of the services provided by these suppliers. In the past, some of these providers have experienced significant system failures. Users of our products and services may in the future experience difficulties due to service failures unrelated to our systems, products and services. If for any reason these suppliers fail to provide certain services to us, our business, financial condition and results of operations could be adversely affected.

While most of our facilities operate in regulated energy markets, power costs increase from time to time. We generally have the option to pass along increases in the cost of power to our customers, but we may choose not to do so for a variety of operating reasons. To the extent that we do not pass these costs along, or that

we delay in passing them along, we will pay higher energy prices, increasing our operating costs and depressing our margins. In addition, even if we do pass these power costs along, we will effectively increase the price for our products and services, which could reduce overall demand for our products and services.

The high utilization of our facilities may limit our ability to grow in certain key markets, and we may be unable to expand our existing facilities or locate and secure suitable sites for additional facilities.

Our facilities have reached high rates of utilization in many of our key markets. Our ability to meet the growing needs of our existing customers and to attract new customers in these key markets depends on our ability to add additional capacity by incrementally expanding our existing facilities or by locating and securing additional facilities in these markets that meet specific infrastructure requirements such as access to multiple communications service providers, a significant supply of electrical power and sufficient cooling capacity, high ceilings and the ability to sustain heavy floor loading. In many markets, the supply of facilities with these characteristics is limited and subject to high demand. If we are unable to expand our facilities in a timely and cost-effective manner, or to locate facilities with characteristics similar to our current facilities, our revenue growth will decline, and we may not achieve profitability.

We are continuing to invest in our expansion efforts, but we may not experience sufficient customer demand in the future to realize expected returns on these investments.

We expect to acquire or lease additional properties, and potentially may construct new facilities. If successful, we will be required to commit substantial operational and financial resources to these facilities, generally up to 12 months in advance of securing customer contracts, and we may not experience sufficient customer demand in those markets in which we choose to expand to support these facilities once they are built. In addition, unanticipated technological changes could affect customer requirements, and we may not have built such requirements into our new facilities. Any of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments and could have a material adverse effect on our operating results.

Moreover, there can be no assurance that we will be able to successfully integrate these new facilities. Specific challenges we have encountered in such prior acquisitions include the following:

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occasional unexpected additional capital expenditures to improve the condition of the acquired equipment so as to achieve the desired level of quality of service;

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the need to create and maintain uniform policies, procedures and controls; and

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the necessary internal corporate skill-sets to properly manage our expanded customer base.

Acquiring or leasing additional properties (including the construction of new facilities) may expose us to the challenges set forth above and other risks such as:

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the diversion of senior management’s attention from daily operations to the negotiation of transactions and integration of such properties;

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the inability to achieve projected synergies;

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the possible loss or reduction in value of acquired properties;

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the possible loss of key personnel; and

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the assumption of undisclosed liabilities.

The failure to successfully integrate such new properties could have a material adverse effect on our business, results of operations and financial condition. Successful integration will depend on our ability to manage acquired operations, realize revenue growth from an expanded customer base and eliminate duplicative and excess costs, among other factors.

Our construction of additional facilities could involve significant risks to our business.

Construction involves substantial planning and allocation of company resources. Construction also requires us to carefully select and rely on the experience of one or more general contractors and associated subcontractors during the construction process. Should a general contractor or significant subcontractor experience financial or other problems during the construction process, we could experience significant delays, increased costs to complete the project and other negative impacts to our expected returns.

In the event we decide to construct new facilities separate from our existing facilities, we may provide services to interconnect these two facilities. Should these services not provide the necessary reliability to sustain service, this could result in lower interconnection revenue, lower margins and could have a negative impact on customer retention over time.

If we are unable to manage our growth effectively, our financial results could suffer.

We have increased our number of full-time employees from 103 as of December 31, 2007 to 202 as of December 31, 2010, and have increased our revenue from $50.8 million in 2007 to $130.2 million in 2010. Further, we intend to continue to expand our overall business, customer base, headcount, and operations, domestically and possibly internationally. Creating a global organization and managing a geographically dispersed workforce will require substantial management effort and significant additional investment in our operating and financial system capabilities and controls. If our information systems are unable to support the demands placed on them by our rapid growth, we may be forced to implement new systems which would be disruptive to our business. We may be unable to manage our expenses effectively in the future due to the expenses associated with these expansions, which may negatively impact our gross margins or operating expenses. If we fail to improve our operational systems or to expand our customer service capabilities to keep pace with the growth of our business, we could experience customer dissatisfaction, cost inefficiencies, and lost revenue opportunities, which may materially and adversely affect our operating results.

We lease all but one of our facilities, and the termination or non-renewal of leases poses significant risk to our ongoing operations.

We only own one of our facilities (Atlanta), and operate the rest of them pursuant to commercial leasing arrangements. The initial terms of such leases expire over a period ranging from 2022 to 2050. We would incur significant costs if we were forced to vacate one of our facilities due to the high costs of relocating the equipment in our facilities and installing the necessary infrastructure in a new facility. In addition, if we were forced to vacate a facility, we could lose customers that chose our products and services based on our location. Our landlords could attempt to evict us for reasons beyond our control. Further, we may be unable to maintain good working relationships with our landlords, which would adversely affect our customer service and could result in the loss of current customers.

In addition, our business would be harmed by our inability to renew leases at favorable terms. Most of our leases provide two ten-year renewal options with rents set at then-prevailing market rates. We expect that the then-prevailing market rates will be higher than present rates. To maintain the operating profitability associated with our present cost structure, we must increase revenues within existing facilities to offset the anticipated increase in lease payments at the end of the original and renewal terms. Failure to increase revenue sufficiently to offset these projected higher costs would adversely impact our operating income.

The majority of our leases are with a single landlord, Digital Realty Trust, which makes us more vulnerable than if our leases were diversified. In addition, a significant portion of our revenue is generated by interconnection products and services we provide to customers located in Digital Realty Trust facilities, which we may lose if contractual arrangements we have with Digital Realty Trust are terminated or our rights under such contracts are impaired.

Ten of our 14 leased facilities are leased to us by a single landlord, Digital Realty Trust, representing approximately 36% of our total facility space as of March 31, 2011. The initial terms of these Digital Realty

Trust leases expire in 2026, and we have options to extend them through 2046. The terms of all these leases with Digital Realty Trust are generally similar. In addition, in September 2010, we entered into a colocation agreement with Digital Realty Trust for approximately 40,000 rentable square feet of datacenter space at 111 8th Avenue, New York, New York. The base term of this agreement expires in June 2024. In the event that we are unable to come to agreement with Digital Realty Trust regarding the renewal of these leases, or come to a disagreement regarding our rights and obligations under these agreements, a significant portion of our available inventory may be impaired or lost.

Subject to certain exceptions, we have the general right to exclusively operate the interconnection areas at ten Digital Realty Trust facilities. Although we lease space from Digital Realty Trust (which we then license to our customers) in such facilities, due to our exclusivity arrangement with Digital Realty Trust, a significant number of companies that lease space from Digital Realty Trust directly make their interconnections in our interconnection areas. The revenue generated by the interconnections in such interconnection areas represents a significant portion of our overall revenue. If we were to lose the right to operate these interconnection areas in the future, we may also lose the revenue associated with the interconnections in such interconnection areas, and our business could suffer as a result.

If our contracts with our customers are not renewed or are terminated, our business could be substantially harmed.

Our customer contracts typically have terms of one to three years. Our customers may not elect to renew these contracts. Furthermore, our customer contracts are terminable for cause if we breach a material provision of the contract, including the failure to provide power or connectivity for extended periods of time, or if we violate applicable laws or regulations. We may face increased competition and pricing pressure as our customer contracts become subject to renewal. Our customers may negotiate renewal of their contracts at lower rates, for fewer products and services or for shorter terms. In addition, if we lose one customer, others may elect not to renew their contracts to the extent that such other customers depend substantially on interconnection with the lost customer. If we are unable to successfully renew our customer contracts on their current terms, or if our customer contracts are terminated, our business could suffer.

Any failure of our physical infrastructure or our products and services, or failure to meet performance standards under our service level agreements, could result in our customers terminating their relationship with us and could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation and have a material adverse effect on our financial results.

Our business depends on providing customers with highly reliable products and services. The products and services we provide are subject to failure resulting from numerous factors, including:

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human error;

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power loss;

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improper building maintenance by the landlords of the buildings in which our facilities are located;

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physical or electronic security breaches;

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fire, earthquake, hurricane, flood and other natural disasters;

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water damage;

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the effect of war, terrorism and any related conflicts or similar events worldwide; and

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sabotage and vandalism.

Problems at one or more of our facilities, whether or not within our control, could result in service interruptions or equipment damage. We have service level agreements with substantially all of our customers in which we provide various guarantees regarding our levels of service. We may have difficulty meeting these levels of service if we experience service interruptions. Service interruptions or equipment damage in our

facilities could result in credits for service interruptions to these customers. We have at times in the past given credits to our customers against future invoices as a result of service interruptions due to equipment failures. We cannot assure you that our customers will accept these credits as compensation in the future. In addition, our inability to meet our service level commitments may damage our reputation and could consequently limit our ability to retain existing customers and attract new customers, which would adversely affect our ability to generate revenues and negatively impact our operating results. Also, service interruptions and equipment failures could result in lost profits or other indirect or consequential damages to our customers and may expose us to additional legal liability and impair our brand image. We depend on our landlords and other third-party providers to properly maintain the buildings in which our facilities are located. Improper maintenance by such landlords and third parties increase the risk of service interruptions and equipment damage.

Additionally, certain of our facilities, including those in New York, California, Florida and Texas, are located in areas particularly susceptible to terrorist activity and natural disasters such as earthquakes, hurricanes and tornadoes. The occurrence of any terrorist activity or natural disaster could shut down one or more of our facilities and result in a material adverse effect upon our results of operations. Moreover, we may not have adequate property or liability insurance to cover catastrophic events.

We may not be able to compete successfully against current and future competitors. If we fail to differentiate our facilities and products and services from those of our competitors, we may not be able to compete successfully and our business and results of operations may be adversely affected.

We compete with network neutral interconnection and colocation service providers and other service providers, including U.S.-based communications service providers, Internet service providers, managed service providers, ethernet exchange service providers and web hosting companies. Many of our competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than us, and some have a greater presence in our markets and in other markets across the United States and around the world. Because of their greater financial resources, some of our competitors have the ability to adopt aggressive pricing policies. As a result, we may suffer from pricing pressure that would adversely affect our ability to generate revenues and adversely affect our operating results. In addition, most of these competitors currently offer interconnection and colocation products and services in the same markets and buildings where we have facilities, and other competitors may start doing so in the future. Some of these competitors may also provide our current and potential customers with additional benefits and may do so in a manner that is more attractive to our potential customers than our products and services. These competitors may be able to provide bundled interconnection and colocation products and services at prices lower than our cost structure allows. If, as a result of such efficiencies, these competitors are able to adopt aggressive pricing policies for interconnection and colocation products and services, our ability to generate revenues would be materially and adversely affected.

In addition, our competitors may operate more successfully or form alliances to acquire significant market share. Once businesses locate their networking and computing equipment in competitors’ facilities, it may be extremely difficult to convince them to relocate to our facilities. Furthermore, a business that has already invested substantial resources in such arrangements may be reluctant or slow to replace or limit its existing services by becoming our customer. Finally, we may also experience competition from our landlords. Rather than leasing available space in our buildings to us or other large single tenants, they may decide to convert the space instead to smaller units designed for multi-tenant interconnection and colocation use. Landlords may enjoy a cost advantage in providing products and services similar to those provided by us, and this could also reduce the amount of space available to us for expansion in the future.

We depend upon a limited number of communications service providers in certain of our facilities, and the loss of one or more of these providers in those facilities could adversely affect our business.

Because we do not own or operate our own network, we depend upon communications service providers to interconnect and/or colocate as customers in our facilities and contribute to the network density that attracts our

other customers. In some of our smaller markets, we have agreements with only a limited number of communications service providers. In these smaller market facilities, we expect that we will continue to rely upon a limited number of communications service provider customers to maintain network density within those facilities. Our agreements with these customers are generally for one to three year terms (if not renewed). A loss of one or more of these providers could have a material and adverse effect on the operations of one or more of our smaller facilities.

We may make acquisitions of complementary businesses, customers, products or service lines or technologies, and such acquisitions may pose integration and other risks that could harm our business.

We may acquire complementary businesses, product or service lines and technologies in the future as we did in March 2007 when we acquired certain assets owned by NYC Connect, LLC. There can be no assurance that we will be able to successfully integrate any such acquisitions. To finance these acquisitions, we may incur additional debt and issue additional shares of our stock, which will dilute existing stockholders’ ownership interests in us, and such debt may adversely affect our business and operations.

Specific challenges we have encountered in our acquisition of certain assets owned by NYC Connect, LLC include the following:

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occasional unexpected additional capital expenditures to improve the condition of the acquired equipment so as to achieve the desired level of quality of service;

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creating and maintaining uniform policies, procedures and controls; and

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building the necessary internal corporate skill-sets to properly manage our expanded customer base.

Future acquisitions may expose us to the challenges set forth above and other risks such as:

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Certain financial risks, including, but not limited to (i) the payment of a purchase price that exceeds the future value that we may realize from the acquired operations and businesses; (ii) an increase in our expenses and working capital requirements, which could reduce our return on invested capital; (iii) potential known and unknown liabilities of the acquired businesses; (iv) costs associated with integrating acquired businesses, operations, or technologies; (v) the incurrence of additional debt; and (vi) possible adverse tax and accounting effects.

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Operating risks, including, but not limited to (i) the diversion of management’s attention to the assimilation of the businesses, operations, or technologies to be acquired; (ii) the risk that the acquired businesses, operations, or technologies will fail to maintain the quality of services that we have historically provided; (iii) the need to implement financial and other systems; (iv) the need to maintain customer, supplier or other favorable business relationships of acquired operations and restructure or terminate unfavorable relationships; and (v) the potential for deficiencies in internal controls of the acquired operations.

The failure to successfully integrate acquired businesses, customers, products, service lines or technologies could have a material adverse effect on our business, results of operations and financial condition. Successful integration will depend on our ability to manage acquired operations, realize revenue growth from an expanded customer base and eliminate duplicative and excess costs, among other factors.

Our products and services have a sales cycle that may have a material adverse effect on our business, financial condition and results of operations. The sales cycle may lengthen due to the current macroeconomic environment.

A customer’s decision to license cabinet or cage space in one of our facilities and to purchase interconnection products typically involves a significant commitment of our time and resources. Many customers are reluctant to commit to purchasing our interconnection and colocation products and services until they are

confident that our facility has adequate available communications service provider connections and network density. As a result, we may experience a longer than average sales cycle for our products and services. Furthermore, we may expend significant time and resources in pursuing a particular sale or customer that does not generate revenue. Delays due to the length of our sales cycle or costs incurred that do not result in sales may have a material adverse effect on our business, financial condition and results of operations.

Our success largely depends upon retaining the services of our management team.

We are highly dependent on our management team. We expect that our continued success and future growth will largely depend upon the efforts and abilities of members of our management team. The loss of services of any key executive, including Eric Shepcaro, our Chief Executive Officer, Christopher W. Downie, our President, Chief Financial Officer and Treasurer, William Kolman, our Executive Vice President, Sales, Michael Terlizzi, our Executive Vice President, Engineering and Construction, and Clayton Mynard, our Senior Vice President, General Counsel and Secretary, for any reason could have a material adverse effect upon us. Our success also depends upon our ability to identify, develop and retain qualified employees. The loss of some of our management and other employees could have a material adverse effect on our operations. We do not maintain key man insurance on any members of our management team.

Government regulation of dark fiber is largely unsettled, and depending on its evolution, may adversely affect our business. In addition, we may add new products or services that may be subject to regulation.

The telecommunications industry is currently undergoing a transformation as it moves from a traditional dedicated circuit network architecture to a design where all forms of traffic—voice, video, and information—are transmitted as digital bits over IP-based networks. With the advent of these digital data transmissions and the growth of the Internet, data networks are becoming the networks over which all communications services can be offered. Determining the appropriate regulatory framework for these data networks is one of the most significant challenges facing federal and state telecommunication policy makers. As a result of this fundamental shift in the telecommunications industry’s underlying technology, various laws and governmental regulations at the federal, state and local level in the U.S. and in Canada, governing IP-based services, related communications services and information technologies remain largely unsettled.

Although we do not offer telecommunications services on a common carrier basis, there is a risk that we will become subject to regulation. For example, the Federal Communications Commission, or the FCC, has not yet made a final determination of its intent or ability to regulate the provision and sale of so-called “dark fiber,” which we use to connect certain of our facilities, such as our facilities in New York and New Jersey, and offer to our customers for use as part of the larger Telx product and service offerings. The FCC presently considers dark fiber to be a “network element” and not a “telecommunications service” regulated by the FCC. We currently do not believe that we are subject to regulation due to our use of dark fiber in the interconnection between certain of our facilities, although we cannot be certain that the FCC would adopt this position. Additionally, the FCC may change its position in the future. Further, we intend to continue to expand our offerings of products and services. Certain of our new products, or components thereof, such as our new Ethernet Exchange product, may be subject to regulation by the FCC. Although we currently do not anticipate that any regulation will be material to our business, we cannot assure you that this will be the case in the future.

Due to changing technology and applications of that technology, it is uncertain whether and how existing laws or regulations or new laws or regulations will be applied by the FCC and other regulatory bodies in the future to other currently unregulated products and services we offer, or to new products or services that we may offer in the future. Future regulatory, judicial and legislative changes may have a material adverse effect on our ability to deliver products and services within various jurisdictions.

We may not be able to continue to add new customers and increase sales to our existing customers, which could adversely affect our operating results.

Our growth is dependent on our ability to continue to attract new customers while retaining and expanding our products and services to existing customers. Growth in the demand for our products and services may be inhibited and we may be unable to sustain growth in our customer base, for a number of reasons, such as:

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our inability to market our products and services in a cost-effective manner to new customers;

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the inability of our customers to differentiate our products and services from those of our competitors or our inability to effectively communicate such distinctions;

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our inability to successfully communicate to businesses the benefits of our products and services;

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our inability to expand our sales to existing customers;

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our inability to penetrate international markets;

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our inability to strengthen awareness to our brand; and

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reliability, quality or compatibility problems with our products and services.

A substantial amount of our past revenue growth was derived from purchases of additional interconnection and colocation products and services by existing customers. Our costs associated with increasing revenue from existing customers are generally lower than costs associated with generating revenue from new customers. Therefore, a reduction in the rate of revenue increase from our existing customers, even if offset by an increase in revenue from new customers, could reduce our operating margins.

In addition, investment in datacenter companies, in particular in REITs and wholesale providers of datacenter space, has generally increased. As a result, additional facilities are under construction by such wholesale providers in certain markets. As the additional capacity is brought on line, customer demand for our facilities may be impacted.

Any failure by us to continue attracting new customers or grow our revenue from existing customers could have a material adverse effect on our operating results.

Our brand is not as well known as that of some of our competitors. Failure to develop and maintain brand recognition could harm our ability to compete effectively.

Many of our competitors are large companies that promote their brands with significantly larger budgets than we have for brand promotion. If we fail to develop and maintain brand recognition through sales and marketing efforts and a reputation for high quality service, we may be unable to attract new customers and risk losing existing customers to competitors with better known brands.

We have significant debt obligations which include restrictive covenants that limit our flexibility to manage our business; failure to comply with these covenants could trigger an acceleration of our outstanding indebtedness.

As of March 31, 2011, outstanding indebtedness under our senior secured credit facility totaled approximately $200 million. Our senior secured credit facility requires that we maintain specific financial ratios and comply with covenants, including various financial covenants, which contain numerous restrictions on our ability to incur additional debt, pay dividends or make other restricted payments, sell assets, enter into affiliate transactions and take other actions. Furthermore, our existing financial arrangements are, and future financing arrangements are likely to be, secured by all of our assets. If we are unable to meet the terms of the financial covenants or if we breach any of these covenants, a default could result under one or more of these agreements. A default, if not waived by our lenders, could result in the acceleration of outstanding indebtedness and cause our debt to become immediately due and payable.

If we are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, we will have to refinance such obligations, or otherwise we will not be able to repay our debt. If new financing is made available, its terms may not be favorable to us and our business may be adversely affected.

We could incur substantial costs as a result of violations of or liabilities under environmental laws.

We are subject to various environmental and health and safety laws and regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and wastes. Certain of these laws and regulations impose liability, without regard to fault or the lawfulness of the disposal activity, for the entire cost of the investigation and cleanup of contaminated sites on current and former owners and operators of real property and persons who have disposed of or released hazardous substances at any location. Our facilities contain tanks for the storage of diesel fuel and significant quantities of lead acid batteries to provide back-up power. Any leak or spill of hazardous materials could result in interruptions to our operations and expenditures that could have a material adverse effect on our business, financial condition and results of operations. Moreover, hazardous substances or regulated materials of which we are not aware may be present at facilities we operate and lease. To the extent any such contaminants are discovered at our facilities, we may be responsible under applicable laws, regulations or leases for any required removal or cleanup at substantial cost. In addition, non-compliance with or liabilities under existing environmental or health and safety laws and regulations, or the adoption of more stringent requirements in the future, could result in fines, penalties, third-party claims and other costs that could be material.

We may require additional capital and may not be able to secure additional financing on favorable terms to meet our future capital needs, which could adversely affect our financial position and result in stockholder dilution.

We may need to raise additional funds through equity or debt financings in the future in order to meet our operating and capital needs. We may not be able to secure additional debt or equity financing on favorable terms, or at all, at the time when we need such funding. If we are unable to raise additional funds, we may not be able to pursue our growth strategy and our business could suffer. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock. In addition, any debt financing that we may obtain in the future could have restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

Terrorist activity throughout the world could adversely impact our business, particularly in regards to our operations located in New York City.

The continued threat of terrorist activity may increase our costs due to the need to provide enhanced security, which would have a material adverse effect on our business and results of operations. These circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our facilities. We may not have adequate property and liability insurance to cover catastrophic events or attacks brought on by terrorist activity. In addition, we depend heavily on the physical infrastructure, particularly as it relates to power, that exists in the markets in which we operate. Any damage to such infrastructure in these markets, and particularly in New York City, a market where we operate that is likely to be more prone to terrorist activity as a principal financial and technology center of the United States, may materially and adversely affect our business.

We may expand internationally and operate in foreign markets, which would expose us to risks associated with international sales and operations.

We may expand our customer base internationally and operate in foreign markets. In the past, we have not had operations in foreign jurisdictions. Managing a global organization is difficult, time consuming, and expensive. Our inexperience in operating our business globally increases the risk that any potential future international expansion efforts that we may undertake will not be successful. In addition, conducting international operations subjects us to new risks that we have not generally faced. These risks include:

•

localization of our products and services, including translation into foreign languages and adaptation for local practices and regulatory requirements;

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lack of familiarity with and unexpected changes in foreign regulatory requirements;

•

longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

•

difficulties in managing and staffing international operations;

•

fluctuations in currency exchange rates;

•

potentially adverse tax consequences, including the complexities of transfer pricing, foreign value added tax systems, and restrictions on the repatriation of earnings;

•

dependence on certain third parties, including channel partners with whom we do not have extensive experience;

•

the burdens of complying with a wide variety of foreign laws and legal standards;

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increased financial accounting and reporting burdens and complexities;

•

political, social, and economic instability abroad, terrorist attacks and security concerns in general; and

•

reduced or varied protection for intellectual property rights in some countries.

Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

We may be vulnerable to security breaches which could disrupt our operations and have a material adverse effect on our financial performance and operating results.

A party who is able to compromise the security of our facilities could misappropriate either our proprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results.

Industry consolidation may have a negative impact on our business.

The telecommunications industry is currently undergoing consolidation. As our customers consolidate, there may be fewer communications service providers available in our facilities and, with less network density in our facilities, our network neutral interconnection and colocation products and services may become less attractive to our customers. Further, our customers may require fewer interconnection and colocation products and services as they combine businesses. In addition, consolidation of our competitors may provide them with greater efficiencies of scale than we are able to manage, placing us at a competitive disadvantage. For example, two of our significant competitors and customers, Equinix, Inc. and Switch & Data Facilities Company, Inc., merged in 2010. In addition, Verizon Communications Inc. acquired Terremark Worldwide, Inc., Time Warner Cable Inc. recently entered into an agreement to acquire Navisite, Inc., and CenturyLink, Inc. recently entered into an agreement to acquire SAVVIS, Inc. Given the competitive and evolving nature of this industry, further consolidation of our customers and competitors may present a risk to our network neutral business model and have a material adverse effect on our revenues and results of operations.

Changes in technology could adversely affect our business.

The markets for the products and services we offer are characterized by rapidly changing technology, evolving industry standards, frequent new service introductions, shifting distribution channels and changing

customer demands. We may not be able to adequately adapt our products and services or acquire new products and services that can compete successfully. We risk losing customers to our competitors if we are unable to adapt to this rapidly evolving marketplace. Furthermore, advances in technology, such as ethernet exchange products, may limit the need for, or displace the revenue that we receive from, other, more profitable, products, such as physical interconnections or may shift business away from us to our competitors.

In addition, our large communications service provider customers that may be colocated at our facilities and our competitors’ facilities may, for reasons that are beyond our control, decide to upgrade the equipment in our competitors’ facilities but not at our facilities. This could lead to the phasing out of our facilities as a marketplace for communications services, making our products and services less desirable for our customers. Such an occurrence would adversely affect our financial condition, our ability to retain existing customers and our ability to attract new customers.

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Forecasts relating to the expected growth in the global interconnection and colocation market, datacenter supply and demand, consumer and business Internet traffic, the Ethernet market, Internet video applications, the cloud computing market and the proximity hosting and low latency networking market may prove to be inaccurate. Even if these markets were to experience the forecasted growth, we may not grow our businesses at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts included in this prospectus should not be taken as indicative of our future growth.

Risks Related to the Offering and Share Ownership

Our costs will increase significantly as a result of operating as a public company, and our management will be required to devote substantial time to complying with public company regulations.

We have never operated as a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, and The NASDAQ Stock Market have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to comply with these rules and regulations. Moreover, these rules and regulations relating to public companies will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these new rules and regulations to make it more difficult and more expensive for us to obtain and maintain director and officer liability insurance. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit function, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to satisfy SEC rules and the ongoing requirements of Section 404. If our finance and accounting organization is unable for any

reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer and we could experience internal control weaknesses. Any consequences resulting from inaccuracies or delays in our reported financial statements could have an adverse effect on the trading price of our common stock as well as an adverse effect on our business, operating results and financial condition.

Failure to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price.

As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our financial statements and harm our operating results. In addition, we will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our auditors have issued an attestation report on effectiveness of our internal controls. As described above, in connection with prior audits of our consolidated financial statements for certain prior periods, our independent registered public accounting firm identified several significant deficiencies and material weaknesses. In the future, we may discover additional deficiencies, which we may not be able to remediate in time to meet our deadline for compliance with Section 404. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent auditors may not issue a favorable assessment. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations. If either we are unable to conclude that we have effective internal control over financial reporting or our independent auditors are unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

There is no existing market for our common stock, and you cannot be certain that an active trading market or a specific share price will be established.

Prior to this offering, there has been no public market for shares of our common stock. We have applied to list our common stock on The Nasdaq Global Market. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on The Nasdaq Global Market or otherwise or how liquid that market might become. The initial public offering price for the shares of our common stock will be determined by negotiations between us and the underwriters, and may not be indicative of the price that will prevail in the trading market following this offering. The market price for our common stock may decline below the initial public offering price, and our stock price is likely to be volatile.

If our stock price fluctuates after this offering, you could lose a significant part of your investment.

The market price of our stock may be influenced by many factors, some of which are beyond our control, including those described above under “Risks Related to Our Business and Industry” and the following:

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the failure of securities analysts to publish research about us after this offering or to make changes in their financial estimates;

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announcements by us or our competitors of significant contracts, productions, acquisitions or capital commitments;

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variations in quarterly operating results;

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general economic conditions;

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terrorist acts;

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future sales of our common stock; and

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investor perception of us and the telecommunications industry.

As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial offering price. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. If there are substantial sales of our common stock, the price of our common stock could decline.

The price of our common stock could decline if there are substantial sales of our common stock in the public stock market after this offering. After this offering, we will have shares of common stock outstanding. This includes shares being sold in this offering, all of which may be resold in the public market immediately following this offering. The remaining shares, or approximately % of our outstanding shares after this offering, including owned by the GI Partners Funds, are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold in the near future as set forth below:


Number of shares and percentage of total outstanding*		Date available for sale into public market
shares, or %		Immediately after this offering.

shares, or %		Generally, 180 days after the date of this prospectus due to lock-up agreements between certain of the holders of these shares and the underwriters or to contractual arrangements between the other holders of these shares and us, subject to a potential extension under certain circumstances.

shares, or %		At various dates more than 180 days after the date of this prospectus.

*	Number of shares does not include shares issuable pursuant to the exercise of options and shares issuable upon the vesting of outstanding restricted stock units.

After this offering and the expiration of the lock-up period, the holders of an aggregate of shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register the issuance of all shares of common stock that we have issued and may issue under our equity incentive plan. Once we register the issuance of these shares, subject to lock-up restrictions, they can be freely sold in the public market upon issuance. Furthermore, Goldman, Sachs & Co. and Deutsche Bank Securities Inc. may, at their discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements with the underwriters. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $ in net tangible book value per share from the price you paid. In addition, following this offering, purchasers in the offering will have

contributed % of the total consideration paid by our stockholders to purchase shares of common stock in exchange for acquiring approximately % of our total outstanding shares of common stock as of , 2011, after giving effect to this offering. The vesting of outstanding restricted stock units and exercise of outstanding options will result in further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section entitled “Dilution.”

The issuance of additional stock in connection with acquisitions, our stock incentive plans or otherwise will dilute all other stockholdings.

After this offering, we will have an aggregate of shares of common stock authorized but unissued and not reserved for issuance under our equity incentive plans or otherwise. We may issue all of these shares without any action or approval by our stockholders. We intend to continue to actively pursue strategic acquisitions. We may pay for such acquisitions, partly or in full, through the issuance of additional equity. Any issuance of shares in connection with our acquisitions, the exercise of stock options or otherwise would dilute the percentage ownership held by the investors who purchase our shares in this offering.

Your ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock and will continue to have substantial control over us after the offering.

Upon completion of this offering, the GI Partners Funds will beneficially own approximately % of our common stock. As a result, these stockholders will be able to exert significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets, and may have interests that are different from yours and may vote in a way with which you disagree and which may be adverse to your interests. In addition, this concentration of ownership may have the effect of preventing, discouraging or deferring a change of control, which could depress the market price of our common stock. For information regarding ownership of our outstanding stock by the GI Partners Funds, see the section entitled “Principal and Selling Stockholders.”

Our authorized but unissued common stock and preferred stock may prevent a change in our control.

Upon the consummation of this offering, our amended and restated certificate of incorporation will authorize us to issue additional authorized but unissued shares of our common stock or preferred stock. In addition, our board of directors may classify or reclassify any unissued shares of our preferred stock and may set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board may establish a series of preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management may not apply our net proceeds from this offering in ways that increase the value of your investment. We expect to use the net proceeds from this offering primarily for capital expenditures, for working capital and for other general corporate purposes. In addition, we may also use a portion of the remaining net proceeds to acquire or invest in businesses, products, services or technologies complementary to our current business, through mergers, acquisitions, joint ventures or otherwise. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price.

Upon the consummation of this offering, certain provisions of our amended and restated certificate of incorporation and amended and restated by-laws could make it more difficult for a third party to acquire control of us even if such a change in control would increase the value of our common stock and limit the ability of our stockholders to replace or remove our current board of directors.

We will have a number of anti-takeover devices in place that will hinder takeover attempts and could reduce the market value of our common stock or prevent sale at a premium. Our anti-takeover provisions will include:

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a staggered, or classified, board of directors;

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removal of directors, only for cause, by a supermajority of the voting power of stockholders entitled to vote;

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blank-check preferred stock, the preference, rights and other terms of which may be set by the board of directors and could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise benefit our stockholders;

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a provision denying stockholders the ability to act by written consent from and after the date upon which GI Partners ceases to beneficially own at least 50% of the outstanding shares of our common stock;

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a provision denying stockholders the ability to call special meetings;

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Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which restricts certain business combinations with interested stockholders in certain situations will apply from and after the time at which GI Partners and its affiliates cease to beneficially own at least 5% of the outstanding shares of our common stock; and

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advance notice requirements for stockholder proposals and nominations.

After the completion of this offering, we do not expect to declare any dividends in the foreseeable future.

After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. In addition, our existing credit facilities prohibit us from paying cash dividends, and any future financing agreements may prohibit us from paying any type of dividends. Consequently, investors may need to sell all or part of their holdings of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

Risks Related to Tax Matters

Our ability to use net operating loss carryforwards to reduce future tax payments may be limited if we experience a change in ownership, or if taxable income does not reach sufficient levels.

Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

We experienced ownership changes in 2003 and 2006 that triggered the limitations of Section 382 of the Code on our net operating loss carryforwards. We may also experience ownership changes in the future as a result of this initial public offering and subsequent shifts in our stock ownership. As a result, we are limited with respect to net operating loss carryforwards accrued prior to 2006 and may be further limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. Federal income tax purposes.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. Forward-looking statements convey our current expectations or forecasts of future events. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans, use of the net proceeds of this offering, and our objectives for future operations, are forward-looking. You can identify forward-looking statements by terminology such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “can,” “continue,” or “may,” or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes. Forward-looking statements in this prospectus may include statements about:

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our financial outlook and the financial outlook of Internet dependent businesses, including telecommunications carriers, Internet service providers, online content providers and enterprises;

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our ability to remediate any material weaknesses in our internal control over financial reporting and our ability to maintain proper and effective internal controls;

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our ability to compete successfully with our competitors;

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our use of our proceeds from this offering;

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our cash needs;

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implementation of our corporate strategy;

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our financial performance;

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our ability to leverage our network densities;

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our ability to grow in our markets and expand the capacity in our facilities to meet the increasing needs of our existing customers and to serve new customers;

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the availability and cost of sufficient electrical power and cooling capacity in our facilities;

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our ability to pursue and successfully integrate acquisitions;

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our ability to strengthen existing customer relationships and reach new customers;

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our ability to develop relationships with customers in emerging, bandwidth-intensive segments and to develop new sales channels;

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our ability to offer a mix of products and services that will develop and maintain a diverse customer base;

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our ability to design and architect facilities which proactively address the evolving needs of our customers;

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our ability to meet the service levels required by our service level agreements with our customers;

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future regulatory, judicial and legislative changes in our industry;

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the growth in Internet traffic;

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the supply of network neutral interconnection and colocation capacity;

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the adoption of advanced networking technology;

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the adoption and usage of bandwidth-intensive services;

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the growing awareness of business continuity and disaster recovery planning; and

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the effect of industry consolidation on our business.

There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss in this prospectus under the caption “Risk Factors.” You should read these factors and the other cautionary statements made in this prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our 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 we may make. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This prospectus also contains statistical data and estimates, including those relating to market size and growth rates of the markets in which we participate, that we obtained from industry publications and reports generated by Tier1 Research, Cisco, Gartner, The Insight Research Corporation and Vertical Systems Group. These publications include forward-looking statements made by the authors of such reports. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions. Actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness.

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the shares of common stock by us will be approximately $ million, assuming an initial public offering price of $ per share, the mid-point of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, the net proceeds to us will be approximately $ million. We will not receive any of the proceeds from the sale of shares by the selling stockholders. Assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus, a $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use our net proceeds for capital expenditures, working capital and other general corporate purposes. In addition, we may also use a portion of the net proceeds to finance growth through the acquisition of, or investment into, businesses, products, services or technologies complementary to our current business, through mergers, acquisitions, joint ventures or otherwise. However, we have no agreements or commitments for any specific acquisitions at this time. Pursuant to a management agreement, as amended, with the manager of the GI Partners Funds, or GI Manager, GI Manager is entitled to 1.5% transaction closing fee on the gross proceeds in connection with this offering. Assuming that the gross proceeds to us from this offering are $100 million, GI Manager will be entitled to $1.5 million upon the consummation of this offering.

DIVIDEND POLICY

Since our acquisition by the GI Partners Funds in 2006, we have not declared or paid any dividends. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business and do not anticipate paying cash dividends for the foreseeable future. Our existing credit facilities prohibit us from paying cash dividends, and any future financing agreements may prohibit us from paying any type of dividends. For more information about these restrictions, see “Description of Indebtedness.”

CAPITALIZATION

The following table sets forth our consolidated capitalization as of March 31, 2011:

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on an actual basis;

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on a pro forma basis to give effect to the conversion of all outstanding shares of our preferred stock into shares of common stock immediately prior to the closing of this offering; and

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on a pro forma as adjusted basis to give effect to the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, the mid-point of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma as adjusted information set forth in the table below is illustrative only and will adjust based on the actual initial public offering price and other terms of the offering determined at pricing.

This table should be read with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.


	As of March 31, 2011
	(unaudited)
	Actual			Pro Forma	Pro Forma Adjusted
	(in thousands, except share data)
Cash and cash equivalents	$	63,671		$	$

Current capital lease and other financing obligations		1,650
Current portion of debt		2,000
Non-current capital lease and other financing obligations		3,676
Non-current debt		196,875
Stockholders’ equity:
Series A Preferred stock, $0.0001 par value; 2,300,000 shares authorized, 1,930,399 shares issued and outstanding, actual; no shares issued pro forma and pro forma as adjusted		—
Series B Preferred stock, $0.0001 par value; 253,223 shares authorized, 240,354 shares issued and outstanding, actual; no shares issued pro forma and pro forma as adjusted		—
Common stock, $0.0001 par value; 4,500,000 shares authorized, 3,510 shares issued and outstanding, actual; shares issued and outstanding, pro forma; shares issued and outstanding, pro forma as adjusted		—
Additional paid-in capital		207,536
Accumulated deficit		(89,462	)

Total stockholders’ equity		118,074

Total capitalization	$	322,275		$	$

Assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus, a $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital and total stockholders’ equity by $ million, would decrease (increase) long term debt, including current portion, by $ million and would increase (decrease) total capitalization by $ million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The number of shares of our common stock set forth in the table above excludes:

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our issuance of up to shares of common stock that the underwriters have the option to purchase from us;

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128,803 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2011, having a weighted average exercise price of $52.31 per share;

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52,684 shares of common stock issuable upon the vesting of outstanding restricted stock units as of March 31, 2011;

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1,000 shares of common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, having an exercise price of $40.00 per share (excluding warrants issued to a single party that no longer had any economic value); and

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146,920 shares of common stock available for future grant under our equity incentive plan as of March 31, 2011.

DILUTION

If you invest in our common stock your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock immediately after the completion this offering. We calculate net tangible book value per share by dividing our net tangible book value, which equals total assets less goodwill, net other intangible assets and total liabilities, by the number of common shares outstanding, including shares of common stock issued upon the conversion of all outstanding shares of our preferred stock upon the completion of this offering. The pro forma net tangible book value of our common stock as of March 31, 2011 (assuming conversion of our outstanding preferred stock given our enterprise value implied by the assumed initial public offering price per share set forth below) was approximately $ million, or $ per share, based upon shares outstanding. After giving effect to the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, the mid-point of the range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma net tangible book value as of March 31, 2011 would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to investors purchasing shares of our common stock in this offering. The following table illustrates this dilution on a per share basis:


Assumed initial public offering price per share		$
Pro forma net tangible book value per share as of March 31, 2011	$
Increase per pre-offering share in pro forma net tangible book value per share attributable to sale of common stock in this offering	$
Pro forma as adjusted net tangible book value per share after giving effect to this offering		$
Dilution of net tangible book value per share to new investors		$

If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value per share after this offering would be $ per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $ per share.

The following table summarizes on a pro forma as adjusted basis as of March 31, 2011, after giving effect to the completion of this offering, the total cash consideration paid to us and the average price per share paid by existing stockholders for their common stock and by new investors purchasing common stock in this offering at an assumed initial public offering price of $ per share, before deducting estimated underwriting discounts and estimated expenses payable by us.


	Shares Issued				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%	$			%	$
New investors				%				%

Total			100	%	$		100	%

A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, respectively, total consideration paid by new investors and total consideration paid by all stockholders by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding after this offering.

Sales by selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to , or % of the total number of shares of our common stock outstanding after this offering, and will increase the total number of shares held by new investors to , or % of the total number of shares of our common stock outstanding after this offering.

The foregoing discussion and tables are based upon the number of shares issued and outstanding on March 31, 2011, reflects a for stock split of our outstanding capital stock that was effected on , 2011, assumes the conversion of all outstanding shares of our preferred stock as of March 31, 2011 into shares of common stock, assumes no vesting of restricted stock units outstanding as of March 31, 2011 and assumes no exercise of options or warrants outstanding as of March 31, 2011. As of that date, there were:

•

128,803 shares of common stock issuable upon the exercise of options outstanding, having a weighted average exercise price of $52.31 per share;

•

52,684 shares of common stock issuable upon the vesting of outstanding restricted stock units; and

•

1,000 shares of common stock issuable upon the exercise of warrants outstanding, having an exercise price of $40.00 per share (excluding warrants issued to a single party that no longer had any economic value).

For a description of our equity incentive plans, see the section entitled “Management—Equity Incentive Plans.”

If all our outstanding options and warrants (excluding warrants without any economic value) had been exercised, the pro forma net tangible book value as of March 31, 2011 would have been $ million, or $ per share, and the pro forma net tangible book value after this offering would have been $ million, or $ per share, causing dilution to new investors of $ per share.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with the financial statements and the notes to those statements, the sections entitled “Risk Factors,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the consolidated financial statements and related notes thereto included elsewhere in this prospectus. The historical results presented below are not necessarily indicative of the results to be expected for any future period.

Our selected consolidated financial data as of and for the years ended December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements that are included elsewhere in this prospectus. Our selected consolidated financial data as of December 31, 2007 and 2006 and for the three months ended December 31, 2006 have been derived from our audited consolidated financial statements that are not included elsewhere in this prospectus. Our selected consolidated financial data as of and for the nine months ended October 3, 2006 have been derived from our audited consolidated financial statements of our predecessor that are not included in this prospectus. Our selected consolidated financial data as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 have been derived from our unaudited financial statements.


	Three Months Ended March 31,						Successor⁽⁵⁾															Predecessor⁽⁵⁾
	Three Months Ended March 31,						Years Ended December 31,												Three Months Ended December 31, 2006			Nine Months Ended October 3, 2006
	2011			2010			2010			2009			2008			2007⁽⁶⁾			Three Months Ended December 31, 2006			Nine Months Ended October 3, 2006
	(unaudited)						(in thousands, except share and per share data)
Statement of Operations Data:^(1)(2)(3)(4)
Revenues	$	37,755		$	29,651		$	130,197		$	98,335		$	70,038		$	50,762		$	7,963		$	22,248
Operating expenses		36,189			25,779			116,224			99,937			93,332			78,063			15,098			18,569

Operating income (loss)		1,566			3,872			13,973			(1,602	)		(23,294	)		(27,301	)		(7,135	)		3,679
Interest income		15			62			218			374			396			612			104			205
Interest expense		(6,148	)		(1,990	)		(13,432	)		(7,221	)		(7,380	)		(9,769	)		(2,357	)		(11,374	)
Other income (expense)		—			—			13			(12	)		(330	)		(739	)		(1,098	)		(12,974	)

Income (loss) from continuing operations		(4,567	)		1,944			772			(8,461	)		(30,608	)		(37,197	)		(10,486	)		(20,464	)
Noncontrolling interest in net income of consolidated partnership		—			—			—			—			—			—			—			98
Income tax benefit (expense)		(259	)		(231	)		(1,056	)		(1,458	)		(772	)		811			3,819			—

Net income (loss)	$	(4,826	)	$	1,713		$	(284	)	$	(9,919	)	$	(31,380	)	$	(36,386	)	$	(6,667	)	$	(20,366	)
Less: preferred dividends		(7,076	)		(6,411	)		(26,991	)		(24,452	)		(21,743	)		(17,676	)		(3,084	)		—

Net loss available to common stock holders	$	(11,902	)	$	(4,698	)	$	(27,275	)	$	(34,371	)	$	(53,123	)	$	(54,062	)	$	(9,751	)	$	(20,366	)

Net income (loss) per common share:
Basic and diluted	$	(4,620	)	$	(6,654	)	$	(38,633	)	$	(63,066	)	$	(290,290	)	$	(540,620	)	$	(97,510	)	$	(11	)
Weighted average common shares outstanding:
Basic and diluted		2,576			706			706			545			183			100			100			1,898,763
(1) Includes stock-based compensation expense of:	$	1,110		$	407		$	1,744		$	1,179		$	919		$	379		$	1,981		$	1,292
(2) Includes depreciation and amortization expense of:	$	3,800		$	2,643		$	12,163		$	21,686		$	32,256		$	31,560		$	6,656		$	4,190
(3) Includes non-cash rent of:	$	4,930		$	2,025		$	13,290		$	7,953		$	6,720		$	5,373		$	492		$	268
(4) Includes non-cash compensation expense for executive loan forgiveness of:	$	—		$	414		$	414		$	—		$	—		$	—		$	—		$	—



				March 31,			Successor
				March 31,			As of December 31,
				2011			2010			2009			2008			2007			2006
				(unaudited)			(in thousands)

Balance Sheet Data:
Cash and cash equivalents				$	63,671		$	35,536		$	40,655		$	22,638		$	7,705		$	6,830
Total assets					395,132			357,449			303,422			280,302			277,685			242,204
Long-term obligations					252,251			198,570			151,400			125,754			115,737			8,557
Total stockholder's equity (deficit)					118,074			121,495			120,330			129,060			144,283			127,655

	Three Months Ended March 31,						Successor⁽⁵⁾															Predecessor⁽⁵⁾
	Three Months Ended March 31,						Years Ended December 31,												Three Months Ended December 31, 2006			Nine Months Ended October 3, 2006
	2011			2010			2010			2009			2008			2007⁽⁶⁾			Three Months Ended December 31, 2006			Nine Months Ended October 3, 2006
	(unaudited)						(in thousands)

Statement of Cash Flow Data:
Cash flow from:
Operating activities	$	130		$	8,068		$	30,469		$	27,918		$	14,845		$	(4,717	)	$	1,003		$	2,721
Investing activities		(16,022	)		(9,571	)		(40,585	)		(28,982	)		(14,502	)		(55,651	)		(958	)		(2,396	)
Financing activities		44,027			(3,416	)		4,997			19,081			14,590			61,243			5,768			(21	)

(5)	The financial data of the Predecessor is not comparable to the Successor periods due to a new basis of accounting as a result of purchase accounting from the October 2006 acquisition of us by the GI Partners Funds.

(6)	The financial data for 2007 and subsequent periods reflects the operations of the March 2007 acquisition of certain net assets of NYC Connect, LLC, and the operations of the Digital Realty Trust leased facilities from December 2006.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Prospectus Summary—Summary Consolidated Financial Data,” “Selected Consolidated Financial Data” and our consolidated financial statements included elsewhere in this prospectus. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements” included elsewhere in this prospectus.

Overview

As a network neutral provider, we do not own or operate our own network, allowing us to act as an unbiased intermediary in providing the necessary interconnection products and related services that facilitate the exchange of communications network traffic between our customers. Customers within a Telx facility are able to connect to any other customer within the facility, including up to 300 communications service providers, depending on the facility. These interconnections effectively allow a customer to replace their existing and more expensive network alternatives. Through these interconnections, our facilities host diverse and densely populated ecosystems of communications service providers, enterprises, online media, video and content providers, and other entities. We view an ecosystem as a set of related businesses and organizations that use our facilities to exchange information with each other. For example, a financial ecosystem can consist of financial exchanges, financial clients and information exchanges that exchange large volumes of real-time financial market data. Our customers benefit from a wide choice of networks, reduced network costs, improved capital budget efficiency, improved performance and access to revenue opportunities with accelerated time to market.

Our customers rely on our offerings to support their mission-critical communication and information technology (IT) infrastructure needs. Our products and related services enable the exchange of increasing volumes of content and information from across the globe, creating a global connectivity marketplace to support and accelerate our customers’ business growth. With 914 customers and 34,083 total physical interconnections within our facilities as of March 31, 2011, our interconnection-centric model targets customers that value the interconnection density in our secure and reliable environments. We evaluate market leadership based on publicly available information for physical interconnections per customer and our experience in the industry. Based on this framework, we believe that our average of 37 physical interconnections per customer as of March 31, 2011 makes us a leading network neutral, global interconnection and colocation solutions provider in the United States. We believe that the interconnection density within our facilities can create a network effect that increases the value proposition of our products and related services. Because each additional customer added to a facility can connect to all of the other customers already in that facility, with the addition of each new customer, the potential number of interconnections in our facilities increases. We believe that this enhances our ability to

both retain existing customers and attract new customers. Our 15 interconnection and colocation facilities are located in the New York Metropolitan area, the San Francisco Bay area, Los Angeles, Dallas, Chicago, Atlanta, Phoenix, Charlotte and Miami.

We believe that the growth in our revenues and customer base and the decrease in our net losses since 2007, combined with the improvement in public equity market conditions, provide us with the opportunity to access the public equity markets on terms more favorable than those previously available to us. We expect that as a public company, our visibility in the marketplace will increase, thereby enhancing our ability to attract new customers and further grow our business. Additionally, creating a public market for our common stock will facilitate future access to public equity markets and enhance our ability to use our common stock as a means of attracting and retaining key employees and as consideration for potential acquisitions or strategic transactions. As a public company we will seek attractive opportunities to grow our interconnection and colocation market share by growing our relationships with existing and new customers. To support these relationships we may selectively expand our footprint and introduce new related product and service offerings. Consistent with our historical expansion activities, our expansion criteria include several factors such as the demand from existing and new interconnection-centric customers, access to communications service providers, availability of sufficient space and power, amount of incremental investment required and expected return on capital invested. In addition, we intend to continuously develop our interconnection and colocation offerings and introduce new products and related services to meet our customers’ needs across multiple industry sectors including communications service providers, enterprises, online media, video and content providers, government agencies and cloud and SaaS providers. We are committed to our interconnection-centric business model because we believe it provides a differentiated value proposition to both our new and existing customers as compared to other colocation-centric providers. Furthermore, we believe our interconnection-centric model enables us to monetize our physical footprint and deploy our capital more efficiently as we can generate incremental revenue via additional interconnections without material consumption of additional space or power resources.

Material Weaknesses in Internal Control

Our independent registered public accounting firm did not identify any material weaknesses in our internal controls over financial reporting for the years ended December 31, 2010 and 2009 but did identify two significant deficiencies in our internal controls during its audit of our financial statements for the year ended December 31, 2010 relating to inadequate review in financial reporting. A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. While these significant deficiencies did not constitute a material weakness, we did not perform an assessment of our internal controls over financial reporting nor did our auditors perform an audit over our internal controls over financial reporting; we therefore cannot assure you that internal control issues will not arise in future periods. In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2008, our independent registered public accounting firm did not identify any material weaknesses but did identify two significant deficiencies in our internal controls relating to (i) an inadequate system of internal controls during 2008 for the timely reconciliations of bank accounts and physical inventories, and errors in recording fixed asset depreciation expense and installation revenues, and (ii) inadequate controls and procedures around access and security around programs and data, segregation of duties and operations in certain IT systems.

During the audit of our consolidated statements as of and for the year ended December 31, 2007, our independent registered public accounting firm identified a deficiency that constituted a material weakness in our internal control over financial reporting. This material weakness related to an inadequate system of internal controls during the first half of 2007 (as we documented a comprehensive set of accounting policies and procedures and implemented certain controls in the second half of the year) and several control deficiencies related to inadequate controls and procedures around access and security around programs and data, segregation of duties, and operations in certain IT systems. A material weakness is a deficiency, or a combination of

deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. See “Risk Factors—Risks Related to Our Business and Industry.”

We have taken steps to remediate the material weaknesses that existed in 2007 and significant deficiencies that existed in 2008 and 2010. In 2007, we documented, issued and implemented a set of accounting policies and procedures and implemented additional controls to establish an internal control environment and discipline that will continue to ensure the completeness and accuracy of accounting and reporting. We believe this manual includes procedures for all significant policies, business practices, and routine and non-routine procedures performed by each functional area. We plan to periodically review this manual and outlined policies and procedures and update as appropriate for emerging accounting issues. During 2008 and 2009, we also implemented remedial control procedures to address: (i) IT back-up and recovery, (ii) operating systems access, (iii) firewall protections, and (iv) control policies and procedures in certain transaction cycles. We have also implemented additional monitoring activities, as well as evaluated job responsibilities, in order to improve internal controls related to (i) our information security and access to non-financial reporting software applications, (ii) the ability to access and change the management controls, policies and procedures for our customer management and billing systems, and (iii) the initiation, authorization, review and transaction recording for certain transaction cycles and non-routine transaction processing. We plan to conduct further periodic reviews and evaluations of our IT control environment to ensure we prevent any control deficiencies. Additionally, as part of our on-going efforts to improve our financial accounting organization and processes, from 2007 to the present we have hired several senior and supporting accounting personnel, including a controller, assistant controller, director of technical accounting and several accounting clerks. In an effort to remediate the significant deficiencies that were identified in connection with our 2010 audit, we hired more support resources, including a third-party independent accounting firm to support our financial reporting and technical accounting review process. We believe that the corrective actions described above will remediate the internal control weaknesses and deficiencies identified, however, there are no assurances that the measures we have taken to remediate these internal control weaknesses and deficiencies were completely effective or that similar weaknesses will not recur. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify. Because of these prior material weaknesses and significant deficiencies, there is heightened risk that a material misstatement of our financial statements relating to the years ended as of December 31, 2007 and December 31, 2008, respectively, was not prevented or detected. We cannot assure you that these or other similar issues will not arise in future periods.

To date, the audits of our consolidated financial statements by our independent registered public accounting firm have included a consideration of internal control over financial reporting as a basis of designing their audit procedures, but not for the purpose of expressing an opinion on the effectiveness of our internal controls over financial reporting. If such an evaluation had been performed or when we are required to perform such an evaluation, additional material weaknesses and other control deficiencies may have been or may be identified. Ensuring that we have adequate internal financial and accounting controls and procedures in place to help produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies relating to internal controls, which could materially adversely affect our operating results. If we fail to implement and maintain effective internal controls going forward, our ability to produce accurate and timely financial statements could be impaired, which could have a material adverse effect on our business, financial condition, results of operations and stock price.

Key Factors Affecting Our Results of Operations

Our operations and financial results are exposed to certain risks and uncertainties that may impact our financial condition and results of operations. See “Risk Factors” for further discussion of these risks.

Customer demand and industry trends. We have benefited from strong growth in customer demand for our products and related services over the last several years. Our growth in the past has been aided by a limited

supply of interconnection and colocation facilities in the markets we serve. An increase in the supply of interconnection and colocation facilities may result in an increased number of competitive offerings and reduce the overall demand for our products and related services, and therefore cause a decline in our revenues. The growth of customer demand for our products and related services has also been supported by many other factors, including the continuing increases in Internet traffic, enterprise datacenter outsourcing, network-based business application adoption, adoption of Ethernet technologies, growth in Internet video, demand for proximity hosting and low latency interconnection and the emergence of new internet-based computing technologies, such as cloud computing. Our future growth will depend in part on the continued prevalence of these industry trends. If, however, these trends slow or reverse, it would slow or reverse the pace of both our new customer acquisition and revenue growth.

Ability to expand into new facilities and markets. To meet our customers’ increasing demand for our products and related services, we operate 15 facilities consisting of 626,105 total gross square feet as of March 31, 2011. We have expanded our footprint through the addition of three new facilities and the expansion of our existing facilities over the past three years. Our future growth is dependent on our ability to identify new space within existing facilities, new facilities with attractive adjacencies to our primary interconnection and colocation facilities or new markets in which to build our facilities. If we cannot obtain adequate new space to meet the demand for our products and related services, our rate of growth will decline. Additionally, our future profit margins may be materially impacted, either positively or negatively, by the material conditions of the manner in which we expand into this new space. Material conditions that could impact our financial results include construction costs and lease costs, including lease incentives such as rent abatements and construction allowances.

Ability to align expansion with customer demand growth. We build out the infrastructure in our facilities to accommodate anticipated future demand for our products and related services. While we attempt to minimize the amount of excess capacity in our facilities and the associated operating costs, we do consider the necessary lead times for these facility expansions, which require us to build ahead of actual customer demand and revenue growth. When we begin such build-outs, we typically do not have any guarantees regarding the scope or timing of this anticipated growth which exposes us to risks related to excess capacity and the associated negative impact to our profitability. Additionally, long lead times of build-out periods can expose us to periods of increased costs related to expansion before new revenue can be generated from expansion which depress our operating margins. While we make efforts to minimize this impact by negotiating lease incentives, there can be no guarantee that we will be successful and our results may be negatively impacted in future periods.

Energy costs. We have been exposed to the recent increases in energy costs. See “—Quantitative and Qualitative Disclosures about Market Risk.” While most of our datacenters operate in regulated energy markets, power cost increases or decreases are possible. To the extent that there is an increase, we generally have the option to pass along such increase to our customers, but we may choose not to do so for a variety of commercial reasons. To the extent that we do not pass these costs along, or that we delay in passing them along, we will pay higher energy prices without incremental revenue, increasing our operating costs and depressing our margins. In addition, even if we do pass these power costs along, this will effectively increase the price for our products and related services, which could reduce overall demand. Conversely, to the extent that power costs decrease and such decease is not passed along to our customers, our costs will fall and consequently our profit margins will improve. Furthermore, if the cost reduction were to be passed to our customers, this could result in increased demand for our products and related services.

Type of customer and product sold. A significant amount of our new customer growth in 2008, 2009, 2010 and the three months ended March 31, 2011 resulted from further extension of our customer base beyond communications service provider customers. We believe that increasing enterprise adoption of datacenter outsourcing and network based business applications are key factors that make our products and related services attractive to a wide range of enterprises. However, should these factors change, a reduction in customer demand could occur and slow our revenue growth. In addition, a significant amount of our revenue growth and profit margin

expansion is driven by increased utilization of our interconnection products by our existing customers relative to the colocation products they purchase. Whereas our colocation products consume both space and power, our interconnection products consume insignificant amounts of space and power, thereby providing higher operating margins and attractive return opportunities. As revenue from interconnection products increases compared to colocation revenue, our profitability should improve. However, if we sell fewer interconnection products and more colocation products, our profit margins will fall.

Expanding and maintaining our talent base. We rely heavily on knowledgeable and experienced employees to provide a high level of service on a continuous basis in a complex technology-driven environment. This requires us to hire and retain professionals, many of whom may have employment opportunities elsewhere. We may have to adjust salary levels in the future to remain competitive in the market for talent which may increase our cost structure and may depress our margins. As we expand, we will need to identify and attract additional suitably qualified employees to maintain our level of service in both our existing and future footprint.

Public company operating expenses. As a public company, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs in order to comply with the Sarbanes-Oxley Act of 2002 and related rules implemented by the SEC and Nasdaq. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty.

Key Components of Our Results of Operations

Revenues

Our revenues consist of recurring and non-recurring revenues. We generate recurring revenue from our interconnection and colocation products. We generate non-recurring revenue from our installation and technical support services. Installation services are directly related to providing interconnection and colocation products. To review our revenue recognition policies for our recurring and non-recurring revenues, see “—Critical Accounting Policies and Estimates” below.

We use several primary metrics to analyze our revenues and measure our performance as set forth below.


	Three Months Ended March 31, 2011			Year Ended December 31,
	Three Months Ended March 31, 2011			2010			2009			2008
Number of customers		914			884			763			626
Number of physical interconnections		34,083			32,882			28,272			23,867
Cabinet equivalents billed		7,161			7,055			5,781			4,390
Utilization rate		73	%		75	%		67	%		60	%
Percentage of incremental revenue attributable to existing customers		89	%		82	%		70	%		72	%
Average monthly churn as a percentage of monthly recurring revenue		0.4	%		0.7	%		0.6	%		0.8	%

Number of customers. The amounts in the table above represent the number of customers as of the end of each period shown. The number of customers is a measure of our growth in our customer base year over year.

Number of physical interconnections (cross connects). The amounts in the table above represent the total number of connections between our customers as of the end of each period shown. The number of physical

interconnections is a measure of the connectivity density of our ecosystems. By increasing connection densities within our interconnection and colocation facilities, we are able to increase the utility of facilities for information exchange and enhance our value proposition to our customers. We target customers with significant requirements for information and bandwidth exchange with multiple counterparties. Each additional customer added to our facilities adds connectivity options and opportunities for themselves and all other customers in our ecosystems.

Cabinet equivalents billed. The amounts in the table above represent the total cabinet equivalents billed as of the end of each period shown. Cabinet equivalents billed is an indication of how much space in our interconnection and colocation facilities is generating revenue. Our interconnection and colocation facilities have a certain amount of space and power that can be utilized to provide colocation services which includes cabinet and cage products. Each cabinet is estimated at 18 square feet. Our cage product, on the other hand, is sold in square foot increments to customers who typically want a more significant amount of space to store their equipment. Accordingly, cabinet equivalents billed is the sum of the number of cabinets occupied by customers plus the square footage of cage space occupied by customers divided by 18.

Utilization rate. The amounts in the table represent the utilization rate as of the end of each period. The utilization rate represents the percentage of our interconnection and colocation facility sellable space that has been sold to customers. The number fluctuates due to increases in capacity (new interconnection and colocation facility expansion space), new sales, and the loss of customers. The utilization rate is calculated as a percentage, the numerator of which is the total square footage occupied by our customers and the denominator of which is equal to the total sellable square footage of our facilities (which takes into account power and cooling capacity limitations and excluding space occupied by our infrastructure and equipment). Power and cooling capacity are assessed to ensure that distributed power and cooling load requirements are not exceeded by power usage capabilities of the customers.

Percentage of incremental revenues attributable to existing customers. The amounts in the table above represent the percentage of incremental revenues attributable to existing customers for each period. We measure the amount of incremental revenues in a given period that results from new customers to a Telx facility as compared to additional service to a customer with an existing presence in the Telx facility. We view this measure as important to our understanding of our customers’ organic growth requirements once present in a Telx ecosystem.

Average monthly churn as a percentage of monthly recurring revenues. The amounts in the table above represent the average monthly churn for each period. Churn represents lost monthly recurring revenues (MRR) from existing customers during a given period due to either the loss of a customer or a reduction in services provided to existing customers. We define churn as lost recurring revenues during a current month divided by the total recurring revenues from the prior month. Our business is based on a recurring revenue model, therefore lost revenues in a period affect future periods.

Recurring Revenue

Our business is characterized by significant monthly recurring revenue streams and low churn rates. In 2010 and the first three months of 2011, monthly recurring revenue represented 95% and 96% of total revenue, respectively, and we had average monthly churn rates that approximated 0.7% and 0.4%, respectively. We generate recurring revenues from the following products.

Interconnection. Our interconnection products include our cross connect (a physical interconnection), Internet exchange (connectivity facilitated through an Internet switching device), and other interconnection related products. Our cross connect products enable our customers to connect directly to any communications service provider, enterprise or other customer in our facilities. These products are typically provided for a recurring monthly fee per connection. Our Internet exchange products enable our customers to connect directly to our Internet exchange, which provides for public or private peering with other customers on an intermediary switch device. Our customers license connections to our Internet exchange for a recurring monthly fee, based on

needed bandwidth. Our interconnection products are predominantly direct connections via physical interconnections. We also generate recurring revenues from providing customers with Internet access as an additional product offering, which is billed as a recurring monthly fee.

Colocation. We generate recurring revenue from providing colocation space and power as further described below.

Colocation Space. We provide colocation space for a recurring monthly fee for a cabinet or on a per square foot basis for cage space. Customers that license cage space typically use between 50 and 500 square feet in one of our facilities, and often license such space in multiple facilities. In 2010, 90% of our top 20 customers by revenue and 67% of our top 100 customers by revenue utilized our products and related services in multiple facilities. For the three months ended March 31, 2011, 90% of our top 20 customers by revenue and 68% of our top 100 customers by revenue utilized our products and services in multiple facilities. Customers sign a service order, governed by the terms and conditions of a master services agreement, with a typical term of one to three years.

Power. We provide access to A/C or D/C power for a recurring monthly fee under our standard colocation contracts. Our customers pay for power on a per amp basis, typically in 20 to 30 amp increments.

Our inventory of sellable colocation space within each interconnection and colocation facility is limited by the space equipped by our existing power and cooling infrastructure, as well as customer requirements for power and cooling. Power and cooling requirements at each facility continue to grow on a per cabinet or square foot basis as the speed and power of computing equipment continues to increase relative to its physical footprint. We carefully monitor the power and cooling usage in each of our interconnection and colocation facilities and continue to invest in our power and cooling infrastructure to maximize the amount of utilizable space in our interconnection and colocation facilities.

Non-recurring Revenue

We generate non-recurring revenue from the services described below.

Installation Services. We provide installation services to assist our customers in accessing our interconnection and colocation services. We receive one-time installation fees determined by the complexity of the installation. Colocation installation fees are typically billed per cabinet or square foot of cage space installed and per amp of power installed. Colocation installation fees are billed at the time of the installation and are recognized as non-recurring revenue on a straight-line basis over the estimated life of the customer relationship. Interconnection installation fees are typically in the form of port services which are typically sold on one or multi-year terms and recognized over the estimated life of the customer relationship or as cross connect services which are provided on a month-to-month basis and recognized in the period the installation is provided and complete. The earnings process from cross connect installation is culminated in the month the installation is complete.

Technical Support Services. Technical support services are provided by our technicians, who are available 24 hours per day, 365 days per year. These services include system reboots, hardware and software troubleshooting, circuit, loop and fiber troubleshooting, equipment installation and provisioning and infrastructure installations. We generally charge customers for these services for a minimum of one hour and thereafter in 15 minute increments.

The following table presents our revenues and percentage of revenues for the periods presented.


	Three Month Ended March 31,						Year Ended December 31,
	2011			2010			2010			2009			2008
	(unaudited)						($ in Thousands)
Revenue
Colocation	$	21,469	57%	$	17,395	59%	$	75,901	58%	$	58,675	60%	$	44,215	63%
Interconnection		14,621	39%		10,266	34%		47,551	37%		33,304	34%		23,077	33%

Recurring Total		36,090	96%		27,661	93%		123,452	95%		91,979	94%		67,292	96%
Non Recurring		1,665	4%		1,990	7%		6,745	5%		6,356	6%		2,746	4%

Total	$	37,755	100%	$	29,651	100%	$	130,197	100%	$	98,335	100%	$	70,038	100%

Costs and Operating Expenses

Our cost structure includes expenses which are highly predictable, such as rent expense and personnel expenses, and variable costs, such as electricity expenses for which we generally have the ability to pass on cost increases to our customers.

Cost of Revenues. Cost of revenues is comprised primarily of colocation costs for our interconnection and colocation facilities including rent expense and other lease costs, and real estate taxes. It also includes utilities, labor and materials, depreciation and amortization of fixed assets, repairs and maintenance, wholesale network and telecommunication services that support our customers, and security. Labor includes the cost of personnel who perform the installations and technical support services including both external contractors and internal technicians. Internal labor costs also include non-cash stock-based compensation expenses related to internal technicians. The largest components of our cost of revenues, such as rent and compensation expense, are mostly fixed in nature and do not vary significantly from period to period. However, certain components of our cost of revenues, such as utilities, are variable in nature and are directly related to the growth of our revenues. We expect our utilities expenses to increase in the future on a per unit basis due to increases in rates from our utility providers and increased power usage by our customers. Further, we experience seasonality in our utilities expenses based on temperatures and seasonal rate adjustments, which causes the amount of these expenses to fluctuate during the year. In connection with our expansion into new facilities, we typically incur lease, utilities, and labor related expenses prior to being able to accept customers for, and generate revenue from, new interconnection and colocation facilities. As we expand our interconnection and colocation facilities, we expect cost of revenues to increase.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel related expenses for our sales and marketing employees, including wages, benefits, bonuses, commissions, non-cash stock-based compensation, and travel, in addition to the cost of marketing programs such as sales support, trade shows, corporate communications, promotional events, and advertising. Sales and marketing expense also includes bad debt expense and the amortization of customer relationship intangible assets related to the October 2006 acquisition of us by the GI Partners Funds and the March 2007 acquisition of customer relationships from NYC Connect, LLC. Our sales and marketing expenses have increased as we have increased the headcount of our sales staff and increased our marketing and promotional efforts. This increase, however, was partially offset by a reduction of amortization expense related to customer relationship intangible assets as they became fully amortized in the first quarter of 2010.

General and Administrative. General and administrative expenses include personnel related expenses, corporate office rent, legal, accounting, and consulting expenses, insurance, taxes, phone and network expenses for our internal systems, office expenses and depreciation and amortization expenses related to our corporate fixed and intangibles assets. Personnel related expenses include wages, benefits, bonuses, non-cash stock-based compensation, as well as travel expenses for our corporate employees. We expect our general and administrative expenses to increase as we incur additional costs to support our growth, including higher personnel, legal, insurance, and financial reporting expenses. However, we expect general and administrative expenses to decrease as a percentage of revenues over time.

Results of Operations

The following is a more detailed discussion of our financial condition and results of operations for the periods presented. The quarter-to-quarter and year-to-year comparison of financial results is not necessarily indicative of future results.

The following table presents our historical costs and operating expenses as a percentage of revenues for the periods indicated.


	Three Months Ended March 31,						Year Ended December 31,
	2011			2010			2010	2009	2008
Revenues		100	%		100	%	100%	100%	100%
Costs and operating expenses:
Cost of revenues		67	%		58	%	63%	62%	60%
Sales and marketing		12	%		12	%	11%	24%	53%
General and administrative		17	%		17	%	16%	16%	21%
Total costs and operating expenses		96	%		87	%	89%	102%	133%
Income (loss) from operations		4	%		13	%	11%	(2%)	(33%)

Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010

Revenues


	Three Months ended March 31,				$ Change		% Change
	Three Months ended March 31,
	2011		2010
	($ in thousands)
Revenues	$	37,755	$	29,651	$	8,104		27	%

Revenues increased by $8.1 million, or 27%, to $37.8 million for the three months ended March 31, 2011 compared to $29.7 million for the three months ended March 31, 2010. Recurring revenues increased by $8.4 million, or 30%, from the sale of our products and services to new and existing customers. The increase in recurring revenues consisted of $4.1 million of colocation revenues and $4.3 million of interconnection revenues. The increase in revenues reflected an increase in the number of customers as well as higher average revenue per customer, driven in part by (i) facilities expansions, which created additional capacity available for sale, and (ii) increasing interconnection growth between new and existing customers. Existing customers continued to drive revenue growth and comprised 89% of incremental revenues for the three months ended March 31, 2011 compared to 71% for the three months ended March 31, 2010. Cabinet equivalents billed increased 15% to 7,161 at March 31, 2011 compared to 6,209 at March 31, 2010. The number of cross connects was 34,083 at March 31, 2011, which reflects a 16% increase over March 31, 2010 cross connects of 29,324. Non-recurring revenues decreased by $0.3 million primarily related to lower non-recurring installation charges.

Cost of Revenues


	Three Months ended March 31,						$ Change		% Change
	Three Months ended March 31,
	2011			2010
	($ in thousands)
Cost of revenues	$	25,400		$	17,231		$	8,169		47	%
as a percentage of revenue		67	%		58	%

Cost of revenues increased by $8.2 million, or 47%, to $25.4 million for the three months ended March 31, 2011 compared to $17.2 million for the three months ended March 31, 2010. Total rent expense increased $5.1

million primarily due to the expansion of space in several of our facilities. Utilities and other related costs increased $1.0 million due to the addition of new customers, additional usage by our existing customers, and rate increases. Due to the growth of our customer base and the expansion of our facilities, labor and materials increased by $0.4 million. Depreciation and amortization of fixed assets increased $1.5 million due to expansion of our colocation and interconnection facilities and other miscellaneous costs increased by $0.2 million. We anticipate our cost of revenues will increase in absolute dollars as we continue our expansion efforts.

Sales and Marketing


	Three Months ended March 31,						$ Change		% Change
	Three Months ended March 31,
	2011			2010
	($ in thousands)
Sales and marketing	$	4,365		$	3,496		$	869		25	%
as a percentage of revenue		12	%		12	%

Sales and marketing expenses increased by $0.9 million, or 25%, to $4.4 million for the three months ended March 31, 2011 compared to $3.5 million for the three months ended March 31, 2010. The increase was primarily the result of increased personnel related expenses of $1.4 million resulting from an increase in headcount, advertising, commissions and travel expenses partially offset by a decrease in amortization of intangible assets of $ 0.5 million. We expect sales and marketing expenses to increase consistent with revenue growth as we continue to invest in sales distribution and marketing to achieve that growth.

General and Administrative


	Three Months ended March 31,						$ Change		% Change
	Three Months ended March 31,
	2011			2010
	($ in thousands)
General and administrative	$	6,424		$	5,052		$	1,372		27	%
as a percentage of revenue		17	%		17	%

General and administrative expenses increased by $1.4 million, or 27%, to $6.4 million for the three months ended March 31, 2011 compared to $5.0 million for the three months ended March 31, 2010. The increase was attributed to an increase in personnel related expenses of $0.9 million resulting from an increase in headcount as well as an increase in severance costs of $0.2 million. We also had an increase of $0.3 million in other general and administrative expenses. We expect general and administrative expenses to increase as we add corporate support resources for our expansion efforts.

Interest Expense, Net


	Three Months ended March 31,				$ Change		% Change
	Three Months ended March 31,
	2011		2010
	($ in thousands)
Interest expense, net	$	6,133	$	1,928	$	4,205		218	%

Interest expense, net increased by $4.2 million, or 218%, to $6.1 million for the three months ended March 31, 2011 compared to $1.9 million for the three months ended March 31, 2010. The increase was primarily due to an increase in interest expense of $1.4 million related to our $150 million term loan financing in June 2010 and to a lesser extent our additional $50 million incremental financing in March 2011. We also had an increase of $2.8 million for the amortization of fees associated with the debt financing in June 2010, as well as the write-off of financing costs related to the March 2011 financing.

Provision for Income Taxes


	Three Months ended March 31,				$ Change		% Change
	Three Months ended March 31,
	2011		2010
	($ in thousands)
Provision for income taxes	$	259	$	231	$	28		12	%

For the three months ended March 31, 2011, we recorded a tax expense of $0.3 million primarily for deferred tax, which as explained below, arises from tax amortization on our NYC Connect goodwill.

The deferred tax expense of $0.1 million for the three months ended March 31, 2010 was primarily due to amortization of goodwill associated with our acquisition of certain assets and liabilities of NYC Connect, LLC over a 15 year life for tax purposes. This creates a deferred tax liability which is not anticipated to reverse in the foreseeable future and cannot be offset against our deferred tax assets under GAAP.

Net Income (Loss)


	Three Months ended March 31,					$ Change			% Change
	Three Months ended March 31,
	2011			2010
	($ in thousands)
Net income (loss)	$	(4,826	)	$	1,713	$	(6,539	)		(382	)%

Net loss was $4.8 million for the three months ended March 31, 2011 compared to net income of $1.7 million for the three months ended March 31, 2010. The change in net loss of $6.5 million, or 382%, was the result of a $2.3 million decrease in operating income resulting from an increase in revenue of $8.1 million offset by an increase in cost of revenues of $8.2 million, an increase in sales and marketing of $0.9 million and an increase in general and administrative expenses of $1.3 million. Also, there was an increase of $4.2 million of interest expense.

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Revenues


	For the year ended December 31,				$ Change		% Change
	For the year ended December 31,
	2010		2009
	($ in thousands)
Revenues	$	130,197	$	98,335	$	31,862		32	%

Revenues increased by $31.9 million, or 32%, to $130.2 million for 2010 compared to $98.3 million for 2009. Recurring revenues increased by $31.5 million from the sale of our products and services to new and existing customers. The increase in recurring revenues consisted of $17.2 million of colocation revenues and $14.2 million of interconnection revenues. The increase in revenues reflected an increase in the number of customers as well as higher average revenue per customer, driven in part by (i) facilities expansions, which created additional capacity available for sale, and (ii) increasing interconnection growth between new and existing customers. Existing customers continued to drive revenue growth and comprised 82% of incremental revenues in 2010 compared to 70% in 2009. Cabinet equivalents billed increased 22% to 7,055 at December 31, 2010 compared to 5,781 at December 31, 2009. The number of cross connects was 32,882 at December 31, 2010, which reflects a 16% increase over December 31, 2009 cross connects of 28,272. Non-recurring revenues

increased by $0.4 million primarily related to interconnection installations and technical support services as a result of the increase in customer installations and support services for an increased customer base.

Cost of Revenues


	For the year ended December 31,						$ Change		% Change
	For the year ended December 31,
	2010			2009
	($ in thousands)
Cost of revenues	$	81,827		$	60,577		$	21,250		35	%
as a percentage of revenue		63	%		62	%

Cost of revenues increased by $21.3 million, or 35%, to $81.8 million for 2010 compared to $60.6 million for 2009. Total rent expense increased $10.9 million primarily due to the expansion of space in several of our facilities. Utilities and other related costs increased $3.7 million due to the addition of new customers, additional usage by our existing customers, and rate increases. Due to the growth of our customer base and the expansion of our facilities, labor and materials increased by $2.9 million. Depreciation and amortization of fixed assets increased $3.7 million due to expansion of our colocation and interconnection facilities and other miscellaneous costs increased by $0.1 million. We anticipate our cost of revenues will increase in absolute dollars as we continue our expansion efforts.

Sales and Marketing


	For the year ended December 31,						$ Change			% Change
	For the year ended December 31,
	2010			2009
	($ in thousands)
Sales and marketing	$	13,810		$	23,753		$	(9,943	)		(42	)%
as a percentage of revenue		11	%		24	%

Sales and marketing expenses decreased by $9.9 million, or 42%, to $13.8 million for 2010 compared to $23.8 million for 2009. The decrease was attributable to the reduction of amortization expense related to our customer relationship intangible assets of $13.6 million for 2010 compared to 2009. Excluding the amortization of intangible assets, sales and marketing expenses increased $3.6 million for 2010 compared to 2009 and were 10% and 10% of revenue for 2010 and 2009, respectively. This $3.6 million increase was primarily the result of increased personnel related expenses of $2.9 million resulting from an increase in headcount, commissions and travel expenses, an increase of $0.4 million in marketing expenses and an increase of $0.3 million in bad debt expense. We expect sales and marketing expenses to increase consistent with revenue growth as we continue to invest in sales distribution and marketing to achieve that growth.

General and Administrative


	For the year ended December 31,						$ Change		% Change
	For the year ended December 31,
	2010			2009
	($ in thousands)
General and administrative	$	20,587		$	15,607		$	4,980		32	%
as a percentage of revenue		16	%		16	%

General and administrative expenses increased by $5.0 million, or 32%, to $20.6 million for 2010 compared to $15.6 million for 2009. The increase was attributed to an increase in personnel related expenses of $2.2

million resulting from an increase in headcount and travel expenses, an increase in professional fees of $1.7 million related to consulting and recruiting fees and an increase of $1.1 million in other general and administrative expenses. We expect general and administrative expenses to increase as we add corporate support resources for our expansion efforts.

Interest Expense, Net


	For the year ended December 31,				$ Change		% Change
	For the year ended December 31,
	2010		2009
	($ in thousands)
Interest expense, net	$	13,214	$	6,847	$	6,367		93	%

Interest expense, net increased by $6.4 million, or 93%, to $13.2 million for 2010 compared to $6.8 million for 2009. The increase was primarily due to an increase in interest expense of $4.2 million related to our $150 million term loan financing in June 2010 and an increase of $2.0 million for the amortization of fees associated with the debt financing in June 2010, as well as the write-off of the remaining balance of deferred financing costs related to the previous credit facility.

Provision for Income Taxes


	For the year ended December 31,				$ Change			% Change
	For the year ended December 31,
	2010		2009
	($ in thousands)
Provision for income taxes	$	1,056	$	1,458	$	(402	)		(28	)%

For 2010, we recorded deferred and current income tax expense of $0.9 million and $0.2 million, respectively, compared to $1.0 million and $0.5 million, respectively, for 2009. The deferred tax expense for 2010 of $0.9 million was primarily due to amortization of goodwill associated with our acquisition of certain assets and liabilities of NYC Connect, LLC over a 15 year life for tax purposes. This creates a deferred tax liability which is not anticipated to reverse in the foreseeable future and cannot be offset against our deferred tax assets under U.S. generally accepted accounting principles, or GAAP.

The deferred tax expense of $1.0 million for 2009 was primarily due to amortization of goodwill associated with our acquisition of certain assets and liabilities of NYC Connect, LLC over a 15 year life for tax purposes. This creates a deferred tax liability which is not anticipated to reverse in the foreseeable future and cannot be offset against our deferred tax assets under GAAP. The $0.5 million current tax expense for 2009 was due primarily to federal alternative minimum tax and California franchise tax which could not be offset by net operating losses.

Net Loss


	For the year ended December 31,						$ Change		% Change
	For the year ended December 31,
	2010			2009
	($ in thousands)
Net loss	$	(284	)	$	(9,919	)	$	9,635		97	%

Net loss was $0.3 million for 2010 compared to $9.9 million for 2009. The change in net loss of $9.6 million, or 100%, was the result of a $15.6 million improvement in operating income resulting from an increase

in revenue of $31.9 million and a decrease in sales and marketing expense of $9.9 million, partially offset by an increase in general and administrative expenses of $5.0 million and an increase in cost of revenues of $21.2 million. Also, there was an increase of $6.4 million of interest expense.

Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

Revenues


	For the year ended December 31,				$ Change		% Change
	2009		2008		$ Change		% Change
	($ in Thousands)
Revenues	$	98,335	$	70,038	$	28,297		40	%

Revenues increased by $28.3 million, or 40%, to $98.3 million for 2009 compared to $70.0 million for 2008. Recurring revenues increased by $24.7 million from the sale of our products and services to new and existing customers. The increase in recurring revenues consisted of $14.5 million of colocation revenues and $10.2 million of interconnection revenues. The increase in revenues reflected an increase in the number of customers as well as higher average revenue per customer, driven in part by (i) facilities expansions during 2008 and 2009 which created additional capacity available for sale, and (ii) increasing interconnection growth between new and existing customers. Existing customers continue to drive revenue growth and comprised 70% of incremental revenues in 2009 compared to 72% in 2008. Cabinet equivalents billed increased 32% to 5,781 at December 31, 2009 compared to 4,390 at December 31, 2008. The number of cross connects was 28,272 at December 31, 2009, which reflects an 18% increase over December 31, 2008 cross connects of 23,867. Non-recurring revenues increased by $3.6 million primarily related to interconnection installations and technical support services as a result of the increase in customer installations and support services for an increased customer base.

Cost of Revenues


	For the year ended December 31,						$ Change		% Change
	2009			2008			$ Change		% Change
	($ in Thousands)
Cost of Revenues	$	60,577		$	41,701		$	18,876		45	%
As a percentage of revenue		62	%		60	%

Cost of revenues increased by $18.9 million, or 45%, to $60.6 million for 2009 compared to $41.7 million for 2008. Total rent expense increased $8.4 million primarily due to the expansion of 21,910 square feet of space in our Los Angeles, Chicago and Phoenix markets in 2009, and the full year impact of the 2008 expansion of 85,974 square feet at our New York, New Jersey, Chicago, San Francisco, and Dallas facilities. Utilities increased $3.4 million due to the addition of new customers, additional usage by our existing customers, and rate increases. Due to the growth of our customer base and the expansion of our facilities, labor and materials increased by $2.3 million, repairs and maintenance increased $0.7 million, and cost related to interconnection services increased $0.4 million as we connected several of our facilities together in 2009. Depreciation and amortization of fixed assets increased $3.6 million to $5.5 million from $1.9 million, due to expansion of our colocation and interconnection facilities. We anticipate our cost of revenues will increase in absolute dollars as we continue our expansion efforts.

Sales and Marketing


	For the year ended December 31,						$ Change			% Change
	2009			2008			$ Change			% Change
	($ in Thousands)
Sales and Marketing	$	23,753		$	36,826		$	(13,073	)		(35	)%
As a percentage of revenue		24	%		53	%

Sales and marketing expenses decreased by $13.1 million, or 35%, to $23.8 million for 2009 compared to $36.8 million for 2008. The decrease was attributable to the reduction of amortization expense related to our customer relationship intangible assets to $14.0 million in 2009 from $28.2 million in 2008, or a $14.2 million decrease, as certain of these intangible assets became fully amortized. Excluding the amortization of intangible assets, sales and marketing expenses increased $1.1 million in 2009 from 2008, and were 9.9% and 12.3% of revenue, respectively, for 2009 and 2008. This $1.1 million increase was mainly the result of increased personnel related expenses resulting from an increase in headcount. We expect sales and marketing expenses to increase consistent with revenue growth as we continue to invest in sales distribution and marketing to achieve that growth.

General and Administrative


	For the year ended December 31,						$ Change		% Change
	2009			2008			$ Change		% Change
	($ in Thousands)
General and Administrative	$	15,607		$	14,805		$	802		5	%
As a percentage of revenue		16	%		21	%

General and administrative expenses increased by $0.8 million, or 5%, to $15.6 million for 2009 compared to $14.8 million for 2008. The increase was attributed to an increase in personnel related expenses of $1.2 million resulting from an increase in headcount, partially offset by a $0.4 million reduction in other general and administrative expenses. We expect general and administrative expenses to increase as we add corporate support resources for our expansion efforts.

Interest Expense, Net


	For the year ended December 31,				$ Change			% Change
	2009		2008		$ Change			% Change
	($ in Thousands)
Interest Expense, Net	$	6,847	$	6,984	$	(137	)		(2	)%

The decrease in interest expense, net was due to lower interest rates on the mortgages on our 56 Marietta Loans (as defined under our Debt Obligations below), partially offset by higher interest rates and higher debt balances on our NY Credit Agreement (as defined below under our Debt Obligations below) as we borrowed an additional $25 million in two transactions in March and October 2009. Also, 2009 interest expense includes $0.4 million of fees associated with the amendments to our loan facilities in 2009. Interest expense was partially offset by $0.4 million in interest income in both 2009 and 2008.

Provision for Income Taxes


	For the year ended December 31,				$ Change		% Change
	2009		2008		$ Change		% Change
	($ in Thousands)
Provision for Income Taxes	$	1,458	$	772	$	686		89	%

In 2009, we recorded deferred and current income tax expense of $1.0 million and $0.5 million, respectively. The deferred tax expense of $1.0 million was primarily due to amortization of goodwill associated with our acquisition of certain assets and liabilities of NYC Connect, LLC over a 15 year life for tax purposes. This creates a deferred tax liability which is not anticipated to reverse in the foreseeable future and cannot be offset against our deferred tax assets under GAAP. The $0.5 million current tax expense in 2009 was due primarily to federal alternative minimum tax and California franchise tax which could not be offset by net operating losses.

The deferred tax expense of $0.8 million in 2008 was primarily due to amortization of goodwill associated with our acquisition of certain assets and liabilities of NYC Connect, LLC over a 15 year life for tax purposes. This creates a deferred tax liability which is not anticipated to reverse in the foreseeable future and cannot be offset against our deferred tax assets under GAAP.

Net Loss


	For the year ended December 31,						$ Change		% Change
	2009			2008			$ Change		% Change
	($ in Thousands)
Net Loss	$	(9,919	)	$	(31,380	)	$	21,461		68	%

Net loss decreased by $21.5 million or 68%, to $9.9 million for 2009 compared to a net loss of $31.4 million for 2008. The improvement was the result of a $21.7 million improvement in operating income resulting from an increase in revenue of $28.3 million and a decrease in sales and marketing expense of $13.1 million, partially offset by an increase in cost of revenues of $18.9 million and an increase of general and administrative expenses of $0.8 million. In addition there was a reduction of $0.5 million on interest, net and other expenses due to reduced interest rates and an increase in taxes of $0.7 million.

Liquidity and Capital Resources

As of March 31, 2011, we had $63.7 million of cash on hand (excluding restricted cash of $4.8 million). This cash balance is maintained primarily for operating and capital expenditure reasons and for short-term access to liquidity. We also have $25.0 million available for use under our revolving credit facility. On March 18, 2011, we entered into an amendment to our senior secured credit facility, pursuant to which, among other things, certain lenders provided an incremental term loan in the amount of $50.0 million. After fees and expenses, the net proceeds from the amendment was $45.0 million.

Historically, we have funded our operations and met our capital expenditures requirements primarily from our cash flows provided by operating activities, and through equity and debt financing. Our principal uses of cash have been for acquisitions, such as our acquisition of NYC Connect, LLC in March 2007, capital expenditures for expansion of operating facilities within existing and new sites throughout 2007, 2008, 2009 and 2010, and funding our operating expenses, including any cash flow shortfalls from operations. These uses of cash were funded increasingly by cash provided by operating activities of $14.8 million, $27.9 million, $30.5 million and $0.1 million in 2008, 2009, 2010 and the three months ended March 31, 2011, respectively. However, the cash used in investing activities of $14.5 million, $29.0 million, $40.6 million and $16.0 million for 2008, 2009, 2010 and the three months ended March 31, 2011, respectively, exceeded the cash provided by operating activities. As a result, we were required to secure equity and debt financing during these periods. We secured new equity and debt financing in 2008, 2009, 2010 and the three months ended March 31, 2011, which provided cash flow from financing activities of $14.6 million, $19.1 million, $5.0 million and $44.0 million respectively, to support our operations and expansion projects. We expect our cash used in investing activities, primarily as a result of our expansion efforts, will continue to be greater than our cash flows generated from operating activities for at least the next twelve months.

We expect our principal sources of future liquidity to come from cash flows provided by operating activities and additional financing activities we may pursue, such as this offering of common stock. We intend to use cash from operations and the net proceeds generated by this offering for capital expenditures, working capital and other general corporate purposes. We currently anticipate making aggregate capital expenditures of approximately $50 million to $80 million in 2011. In addition, we may also use a portion of the net proceeds of this offering to finance growth through the acquisition of, or investment into, businesses, products, services or technologies complementary to our current business, through mergers, acquisitions, joint ventures or otherwise. However, we have no agreements or commitments for any specific acquisitions at this time.

We believe we have sufficient cash on hand, coupled with anticipated cash generated from operating activities and the proceeds from this offering to meet our operating and debt service requirements, and to complete our expansion plans, for at least the next twelve months. Our long-term future capital requirements will depend on many factors, most importantly the acquisition of additional facilities and the expansion of sellable space within our existing facilities, the continued growth of our revenue, the expansion of sales and marketing activities, and the continued demand for our products and services.

Our ability to generate cash depends on our financial performance, general economic conditions, technology trends and developments, and other factors. The U.S. economy is currently undergoing a period of economic uncertainty, and the U.S. financial markets are experiencing significant volatility. Despite the continued adverse general economic conditions, we have not experienced any material liquidity issues. While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may want to pursue additional expansion opportunities within the next year which could require additional financing, either debt or equity. If we are unable to secure additional financing at favorable terms in order to pursue such additional expansions opportunities, our ability to maintain our desired level of revenue growth could be materially adversely affected.

Debt Obligations

On October 3, 2006, in connection with our acquisition by the GI Partners Funds, we entered into a $70.0 million demand note with GI Partners Fund II, L.P. and a $28.0 million demand note with GI Partners Side Fund II, L.P. (collectively, the Demand Notes). The Demand Notes were payable on demand, and bore interest at 10% per annum, which was also due and payable upon demand. In March 2007, $78.0 million of the Demand Notes were refinanced with proceeds from the 56 Marietta Loans (as defined below) and in September 2007, the remainder of the Demand Notes were refinanced with proceeds from the NY Credit Agreement (as defined below).

On March 8, 2007, (i) Colo Properties Atlanta, LLC (“Colo Properties”), our indirect, but wholly owned subsidiary, entered into a Loan Agreement with UBS Real Estate Securities, Inc. (the “Colo Properties Mortgage Loan”) pursuant to which UBS made a $60.0 million mortgage loan to Colo Properties secured by Colo Properties datacenter facility at 56 Marietta Street in Atlanta, Georgia, and (ii) CP Atlanta, LLC, the parent entity to Colo Properties, entered into a Mezzanine Loan Agreement with UBS pursuant to which UBS made a $20.0 million mezzanine loan to CP Atlanta, LLC. On August 10, 2007, these agreements were amended to bifurcate the mezzanine loan into two separate $10.0 million mezzanine loans (the “56 Marietta Mezzanine Loans”), one to CP Atlanta, LLC and the other to CP Atlanta II, LLC the parent of CP Atlanta, LLC, and to reflect certain minor changes. Collectively and as amended, we refer to these three loans as the 56 Marietta Loans.

In September 2007, telx—New York Holdings, LLC, our wholly owned subsidiary, and three of its subsidiaries (collectively, the “New York Borrowers”) entered into a senior secured credit agreement with CIT Lending Services Corporation, as agent (“CIT”), and certain lenders (as amended, the “NY Credit Agreement”). The credit agreement initially permitted the NY Borrowers to borrow up to $31.0 million, comprised of a $25.0 million term loan and a $6.0 million revolving credit facility, including letters of credit. In March 2009, the NY Borrowers amended and restated these agreements to provide for an additional $15.0 million of term loan borrowings. In June and September 2009, the New York Borrowers entered into amendments to these agreements, under which the lenders extended certain deadlines to request further expansions to the facility, among other things. On October 9, 2009, the New York Borrowers entered into another amendment to these agreements to further increase the term loan borrowings under the NY Credit Agreement by $10.0 million. The term loan facility provided by the NY Credit Agreement is sometimes referred to herein as the “NY Term Loan.”

On June 17, 2010, we and certain of our subsidiaries entered into a senior secured credit facility, consisting of a $150.0 million term loan and a $25.0 million revolving facility, which we refer to herein as the New Credit Facility. The term loan matures on June 17, 2015 and the revolving loan matures on June 17, 2014. The credit facility is guaranteed by all of our current subsidiaries, and certain of our subsidiaries that we may acquire or

create in the future, and is secured by substantially all of our and such subsidiary guarantors’ assets. Under the New Credit Facility, the non-default interest rates for the loans under the credit facility are determined by reference to either LIBOR plus 6.00% or, at our election, a prime-based rate plus 5.00%. These margins are subject to increase in certain circumstances as set forth in the credit agreement. Pursuant to the credit agreement, the margin increase will terminate, to the extent it occurs, if our senior secured leverage ratio drops below a threshold set forth in the credit agreement or once leasehold mortgages with respect to all of our leasehold properties with Digital Realty Trust have been obtained and the related leases (or memoranda of such leases) have been recorded to give constructive notice of such leasehold mortgages. As of November 4, 2010, leasehold mortgages with respect to all of our leasehold properties with Digital Realty Trust were obtained in accordance with the credit agreement and the related leases (or memoranda of such leases) were recorded. The credit agreement provides for a floor of 2.00% for LIBOR and a floor of 3.00% for loans based on the prime rate.

We used $138.1 million of the proceeds of the term loan to repay indebtedness outstanding under our NY Credit Agreement, the 56 Marietta Loans, other minor indebtedness, and to pay the fees and expenses of the transaction, and we used an additional $1.1 million of proceeds to pay accrued interest on repaid indebtedness. We intend to use the remaining proceeds from the borrowings to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes. We did not draw upon the revolving facility at closing or through March 31, 2011, but when or if we do so, such proceeds will be used to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes. See “Description of Indebtedness—Secured Credit Facility.”

On March 18, 2011, we entered into an amendment to our senior secured credit facility, which we refer to herein as the First Amendment and Incremental Agreement, pursuant to which, among other things, certain lenders provided an incremental term loan in the amount of $50.0 million, which we refer to herein as the Incremental Term Loan. The existing term loan matures on June 17, 2015 and the revolving loan matures on June 17, 2014. The Incremental Term Loan will mature on June 17, 2015. The obligations under the Incremental Term Loan are guaranteed by all of our current subsidiaries, and certain of our subsidiaries that we may acquire or create in the future, and is secured by substantially all of our and such subsidiary guarantors’ assets on a pari passu basis as the existing term loans and revolving loans. Pursuant to the First Amendment and Incremental Agreement, (i) the non-default interest rates for the Incremental Term Loan will be determined, at our election, by reference to either LIBOR plus 5.00% or a prime-based rate plus 4.00%, (ii) the non-default interest rates for the existing term loans were decreased from their previous levels and will, going forward, be determined, at our election, by reference to either LIBOR plus 5.00% or a prime-based rate plus 4.00%, and (iii) the floor for LIBOR loans that are Incremental Term Loans or existing term loans was decreased to 1.50% and the floor for prime rate loans that are Incremental Term Loans or existing term loans was decreased to 2.50%. The interest rates and floors for revolving loans did not change. The margins are subject to increase in certain circumstances as set forth in the credit agreement. We incurred costs in the amount of $5.0 million related to the First Amendment and Incremental Agreement. In accordance with FASB ASC Topic 470-50, Modifications and Extinguishments, $1.3 million of these costs were charged to expense in the consolidated statement of operations and $3.7 million were capitalized as deferred financing costs in the consolidated balance sheet in 2011.

Sources and Uses of Cash

The following table sets forth a summary of our cash flows for the periods indicated:


	Three Months Ended March 31,						Year Ended December 31,
	2011			2010			2010			2009			2008
	($ in thousands)
Net cash provided by operating activities	$	130		$	8,068		$	30,469		$	27,918		$	14,845
Net cash used in investing activities		(16,022	)		(9,571	)		(40,585	)		(28,982	)		(14,502	)
Net cash provided by (used in) financing activities		44,027			(3,416	)		4,997			19,081			14,590

Operating Activities

Net cash provided by operating activities was $0.1 million for the three months ended March 31, 2011 compared to $8.1 million for the three months ended March 31, 2010. The decrease in net cash provided by operating activities was primarily due to the net loss for the three months ended March 31, 2011 and a reduction in working capital primarily due to the timing of vendor payments.

Net cash provided by operating activities was $30.5 million, $27.9 million and $14.8 million for 2010, 2009 and 2008, respectively. The increase in net cash provided by operating activities was primarily due to improved operating results as discussed above and timing of vendor payments. We expect that cash from operations will continue to be a principal source of cash for the foreseeable future.

Investing Activities

Net cash used in investing activities was $16.0 million and $9.6 million for the three months ended March 31, 2011 and 2010, respectively. For the three months ended March 31, 2011, our primary use of cash was for capital expenditures associated with our expansion efforts in our Atlanta, New Jersey, Dallas and New York facilities. For the three months ended March 31, 2010, our primary use of cash was for capital expenditures associated with our expansion efforts across our Atlanta and New York facilities.

Net cash used in investing activities was $40.6 million, $29.0 million and $14.5 million for 2010, 2009 and 2008, respectively. In 2010, our primary use of cash was for capital expenditures associated with our expansion efforts in our Atlanta, Chicago, Los Angeles and New York facilities. In 2009, our primary use of cash was for capital expenditures associated with our expansion efforts across our New York, Chicago and New Jersey facilities. In 2008, our primary use of cash was for capital expenditures associated with our expansion efforts across our New York, Chicago, San Francisco and Dallas facilities. We expect to continue to prudently expand our facilities and therefore capital expenditures will continue to be our primary use of cash.

Financing Activities

Net cash provided by financing activities was $44.0 million for the three months ended March 31, 2011 compared to net cash used in financing activities of $3.4 million for the three months ended March 31, 2010. For the three months ended March 31, 2011, financing activities included the additional incremental borrowing of $50 million offset by payments of financing costs of $5.1 million as well as payments for capital lease obligations and debt repayments of $0.8 million. For the three months ended March 31, 2010, our financing activities included an excess cash flow payment on our NY Credit Agreement of $3.7 million and $0.8 million in payments on our other financing and capital lease obligations, partially offset by proceeds from additional borrowings of $1.0 million.

Net cash provided by financing activities was $5.0 million, $19.1 million and $14.6 million for 2010, 2009 and 2008, respectively. For 2010, net cash provided by financing activities included a new debt financing of $150.0 million and proceeds from other financing obligations of $1.0 million. This was partially offset by payments on the Colo Properties Mortgage Loans, the 56 Marietta Mezzanine Loans and the NY Term Loan of approximately $130.0 million, payments of $2.9 million for other financing obligations and $11.8 million of costs primarily for the new debt financing. Financing activities also included payments on our capital lease obligations of $1.3 million. In 2009, our financing activities included additional borrowings under the NY Credit Agreement in March for $15.0 million and October for $10.0 million in addition to capital leases entered into to finance equipment related to our expansion efforts, offset by repayments against the NY Term Loan, other loans, and capital leases. In 2008, our financing activities included the addition of $15.0 million of equity investment by the GI Partners Funds and $0.2 million of equity investment by Telxinvest, LLC, offset by repayments against the NY Term Loan, other loans, and capital leases. We expect that cash provided by financing activities will continue to be a principal source of cash for the foreseeable future.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of March 31, 2011.

Capital Lease Obligations

Obligations under capital leases at March 31, 2011 total $2.5 million.

We have entered into various lease agreements for equipment. These lease agreement terms are for three years and the base terms expire between 2011 and 2013. Certain lease agreements also include a bargain purchase option.

Contractual Obligations

The following table summarizes, as of December 31, 2010, our minimum payments for long-term debt and other obligations for the next five years and thereafter:


	2011		2012		2013		2014		2015		2016 and Thereafter		Total
	($ in Thousands)
Capital lease and other financing obligations⁽²⁾	$	1,720	$	1,279	$	709	$	351	$	387	$	1,323	$	5,769
Long-term debt⁽²⁾⁽³⁾		1,500		1,500		1,500		1,500		143,250		—		149,250
Interest expense on long-term debt, capital lease and other financing obligations⁽¹⁾		12,241		12,096		11,894		11,732		5,867		236		54,066
Operating lease obligations		36,135		44,803		44,948		46,740		49,225		794,809		1,016,660

Total contractual obligations	$	51,596	$	59,678	$	59,051	$	60,323	$	198,729	$	796,368	$	1,225,745

(1)	Interest is based on timing of debt repayments included in this schedule.

(2)

On June 17, 2010, we and certain of our subsidiaries entered into a senior secured credit facility consisting of a $150.0 million term loan and a $25.0 million revolving facility. We used $138.1 million of the proceeds to repay indebtedness outstanding under our NY Credit Agreement, the 56 Marietta Loans and other minor indebtedness. See the section entitled “Description of Indebtedness.”

(3)

On March 18, 2011, we entered into an amendment to our senior secured credit facility pursuant to which, among other things, certain lenders provided an incremental term loan (Incremental Term Loan) in the amount of $50.0 million. We intend to use the proceeds of the Incremental Term Loan for expansions, and to pay the fees and expenses of the transaction. We intend to use the remaining proceeds from the borrowings to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes.

In addition, pursuant to a management agreement, as amended, with the manager of the GI Partners Funds, or GI Manager, GI Manager is entitled to a management base fee as compensation for certain non-transaction related services specifically requested by our board of directors, in an annual amount to be determined by our board of directors during the first calendar quarter of each year during the term of the agreement, but not to exceed $0.8 million per year, plus reasonable expenses. For each of the years ended December 31, 2008, 2009 and 2010, our board of directors did not request from GI Manager any non-transaction related services and therefore, a management base fee was never incurred. In addition to this management base fee, GI Manager is also entitled to a 1.5% transaction closing fee with respect to any refinancing (other than with respect to the New Credit Facility and the Incremental Term Loan which GI Manager is entitled to a 0.75% transaction closing fee and was paid $1.3 million for the New Credit Facility and $0.4 million for the Incremental Term Loan), restructuring, equity or debt offering, acquisition, merger, consolidation, business combination, sale or divestiture. The management agreement will terminate immediately upon the date that this registration statement, of which this prospectus forms a part, is declared effective by the SEC.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Cap and Swap Agreements

On August 2, 2010, we entered into an interest rate cap agreement with a notional amount of $87.5 million with SunTrust Bank as required by the new credit agreement. The term of the agreement is eleven months, beginning on August 3, 2010 and ending on June 30, 2011. The agreement calls for a cap rate of 3% and a floating option of USD-LIBOR-BBA.

Also, on August 2, 2010, the Company entered into an interest rate swap agreement with a notional amount of $87.5 million with SunTrust Bank. The term of the agreement is two years, beginning on June 30, 2011 and ending on June 30, 2013. The agreement calls for a cap rate of 1.44% and a floating option of USD-LIBOR-BBA. On September 1, 2010, SunTrust Bank entered into a Novation Confirmation Agreement that transferred half of their rights, or $43.8 million, in the Swap Agreement as Floating Rate Player to J. Aron & Company.

Fair Value. We do not have material exposure to market risk with respect to investments, as all such investments are kept in money market accounts. We do not use derivative financial instruments for speculative or trading purposes; however, this does not preclude our adoption of specific hedging strategies in the future.

Commodity Price Risk. Operating costs incurred by us are subject to price fluctuations caused by the volatility of underlying electricity prices at our facilities. We monitor the cost of electricity at our interconnection and colocation facilities closely. In a limited number of our facilities, we enter into power purchase agreements to fix the price at which we acquire electricity, typically over a one-year period. An immediate 10% increase or decrease in current power rates from their price as of March 31, 2011 would not have a material impact on our results of operations and would represent less than a $0.4 million difference in our aggregate power expense or approximately 1.5% of our cost of sales for the three months ended March 31, 2011. Power costs vary by geography and the source of the power generation and they further exhibit substantial seasonal fluctuation, however, we have not experienced fluctuations of this magnitude in the past across all facilities.

Critical Accounting Policies and Estimates

The discussion of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. In preparing our consolidated financial statements, we make estimates and assumptions that can have a significant impact on our financial position and results of operations. The application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgments by us. In applying those policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions, and these differences could be material.

Critical accounting policies are defined as those policies that require significant judgments and assumptions about matters that are highly uncertain at the time of the estimate and could potentially result in materially different results under different assumptions and conditions. See Note 2 of the Consolidated Financial Statements for additional information.

Revenue Recognition. We follow the provisions of SEC Staff Accounting Bulletin No. 104, Revenue Recognition, and Accounting Standards Codification (ASC) FASB ASC Topic 605-25, Multiple-Element Arrangements.

We generate recurring revenue from providing colocation and interconnection services. More than 90% of our revenues are provided from these recurring revenues. The remaining revenues are nonrecurring and consist of installation services and technical support.

•

Colocation services are governed by the terms and conditions of a master service agreement. Customers typically execute agreements for one to three year terms. We bill customers on a

monthly basis and recognize the revenue over the term of the agreement as the services are performed. Installation services for colocation services are recognized on a straight-line basis over the estimated life of the customer relationship.

•

Interconnection services are generally provided on either a month-to-month or one or multi-year term under an arrangement separate from those services provided under colocation services. Interconnection services include port and cross connect services. Port services are typically sold on a one or multi-year term and revenue is recognized in a manner similar to colocation services. Cross connect services are typically sold on a month-to-month basis. These interconnection services are considered as a separate earnings process that is provided and completed on a month-to-month basis. We bill customers on a monthly basis and recognize the revenue in the period the service is provided. Installation service revenue for these cross connect services is recognized in the period when the installation is complete. The earnings process from cross connect installation is culminated in the month the installation is complete.

•

Technical support services are provided on a time and materials basis and are billed and recognized in the period services are provided.

Revenue is recognized only when the service has been provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. Our customers generally have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term. However, in the event that a customer cancels its contract, it remains obligated to the service commitments for the reminder of the term.

Allowance for Doubtful Accounts. We make judgments as to our ability to collect outstanding receivables and provide allowances when collection becomes doubtful. Judgment is required to assess the likelihood of ultimate realization of recorded accounts receivable. If the financial condition of our customers were to deteriorate, resulting in an impairment of either their ability or willingness to make payments, an increase in the allowance for doubtful accounts would be required. Similarly, a change in the payment behavior of customers generally may require an adjustment in the calculation of the appropriate allowance. Each month, management reviews customer payment patterns, historical data and anticipated customer default rates of the various aging categories of accounts receivables in order to determine the appropriate allowance for doubtful accounts. We write off customer accounts receivable balances to the allowance for doubtful accounts when it becomes likely that we will not collect from the customer.

Property and Equipment and Other Long Lived Assets. We have a substantial amount of property and equipment recorded on our balance sheet at cost. The vast majority of our property and equipment represents the costs incurred to build out or acquire our interconnection and colocation facilities. The majority of facilities are in properties that are leased. We commence depreciation when the assets are placed in service. We depreciate our property and equipment using the straight-line method over the estimated useful lives of the respective assets (subject to the term of the lease in the case of leased assets or leasehold improvements).

Accounting for property and equipment involves a number of accounting issues including determining the appropriate period in which to depreciate such assets, making assessments for leased properties to determine whether they are capital or operating leases and assessing the initial asset retirement obligations required for certain leased properties that require us to return the leased properties back to their original condition at the time we decide to exit a leased property. We determine estimated useful lives based on established accounting guidelines. Leasehold improvements are amortized on a straight-line basis over the lesser of the term of the related lease (including renewal periods, which are reasonably assured) or the estimated life of the asset.

Periodically we assess potential impairment of our property and equipment, primarily located at our facilities, and intangible assets with finite useful lives, in accordance with the provisions of FASB ASC Topic 360, Property, Plant and Equipment. We perform an impairment review whenever events or changes in

circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant loss of customers within a facility, significant changes in the manner of our use of the acquired assets or our overall business strategy, and significant industry or economic trends. When we determine that the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators, we determine the recoverability by comparing the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. We recognize an impairment charge equal to the amount by which the carrying amount exceeds the fair market value of the assets.

Goodwill and Other Intangible Assets. Goodwill, which consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired, is evaluated for impairment on an annual basis, or whenever events or circumstances indicate that impairment may have occurred. We follow the provisions of FASB ASC Topic 350, Intangibles—Goodwill and Others when evaluating goodwill for impairment.

Intangible assets, including tradenames, contracts, customer relationships, and non-compete agreements arising principally from acquisitions, are recorded at cost less accumulated amortization. Intangible assets deemed to have indefinite useful lives, such as goodwill, are not amortized and are subject to annual impairment tests or whenever events or circumstances indicate impairment may have occurred. The goodwill impairment test involves a two-step approach. The first step involves a comparison of the fair value of each of the reporting units with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, the second step is performed. The second step involves a comparison of the implied fair value and carrying value of that reporting unit’s goodwill. To the extent that a reporting unit’s carrying amount exceeds the implied fair value of its goodwill, an impairment loss is recognized. Besides goodwill, we have no other intangible assets with indefinite lives. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We have completed our annual impairment reviews as of September 30, 2010, 2009 and 2008 and determined that the fair value amount of our reporting units exceeded our carrying amount, and we are not at risk of failing step one; accordingly no impairment was recorded.

There are many assumptions and estimates used that directly impact the results of impairment testing, including an estimate of future expected revenues, earnings and cash flows, and discount rates applied to such expected cash flows in order to estimate fair value. We use both the income and market approach in step one of our goodwill impairment reviews and weight the results of both equally. Under the income approach, we develop an eight-year cash flow forecast and use our weighted-average cost of capital applicable to our reporting units as a discount rate. The weighted-average cost of capital was derived based on comparable public companies. We considered both what a market participant would likely consider and the characteristics of each public company, including an evaluation of the industry sector, size, growth rates, margins, and leverage profiles of the selected public guideline companies. This resulted in twelve guideline public companies that were used as a basis to derive the expected assumptions for our weighted-average cost of capital. This analysis requires assumptions and estimates derived from a review of our actual and forecasted operating results, approved business plans, future economic conditions and other market data. These assumptions require significant management judgment and are inherently subject to uncertainties.

Future events, changing market conditions and any changes in key assumptions may result in an impairment charge. While we have never recorded an impairment charge against our goodwill or intangible assets to date, the development of adverse business conditions in our reporting unit, such as higher than anticipated churn or significantly increased operating costs, or significant deterioration of our market comparables that we use in the market approach, could result in an impairment charge in future periods.

Operating and Capital Leases. We occupy and operate facilities and offices under various leases. The leases include scheduled base rent increases over the terms of the leases. We recognize rent expense from operating leases with periods of free and scheduled rent increases on a straight-line basis over the applicable

lease term. We consider lease renewals in the useful life of its leasehold improvements when such renewals are reasonably assured. From time to time, we may receive construction allowances from our lessors. These amounts are recorded as deferred liabilities and amortized over the remaining lease term as a reduction of rent expense.

We lease certain property and equipment under capital lease agreements. The assets held under capital lease agreements and the related obligations are recorded at the lesser of the present value of aggregate future minimum lease payments, including estimated bargain purchase options, or the fair value of the assets held under capital lease. Such assets are amortized over the shorter of the terms of the leases, or the estimated useful lives of the assets.

Accounting for Income Taxes. We account for income taxes in accordance with the provisions of FASB ASC Topic 740, Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. We periodically assess the realizability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local state, and federal statutory tax audits or estimates and judgments used.

Realization of deferred tax assets associated with net operating loss and credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration in the applicable tax jurisdiction. We periodically review the recoverability of tax assets recorded on our balance sheet and provide valuation allowances as we deem necessary. Deferred tax assets could be reduced in the near term if our estimates of taxable income during the carryforward period are significantly reduced or alternative tax strategies are no longer viable.

Our income tax returns are periodically audited by the Internal Revenue Service and state and local jurisdictions. We reserve for tax contingencies when it is probable that a liability has been incurred and the contingent amount is reasonably estimable. These reserves are based upon our best estimation of the potential exposures associated with the timing and amount of deductions, as well as various tax filing positions.

Effective January 1, 2009, we adopted FASB ASC Topic 740. FASB ASC Topic 740 provides guidance for the recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The adoption of FASB ASC Topic 740 resulted in no cumulative effect of a change in accounting principle being recorded on our consolidated financial statements for the years ended December 31, 2009 and 2010. See Note 9 to our consolidated financial statements for the year ended December 31, 2010, for more information on income taxes.

Prior to 2009 and the adoption of FASB ASC Topic 740, reserves were recorded when management determined that it was probable that a loss would be incurred related to these matters and the amount of the loss was reasonably determinable. Subsequent to the adoption of FASB ASC Topic 740, we are required to recognize, at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority, the impact of an uncertain income tax position on our income tax return. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The tax positions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments to those positions.

Stock-Based Compensation

Effective January 2006, we adopted the fair market value method of recording stock-based compensation in accordance with FASB ASC Topic 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors. Under the fair-value recognition provisions of FASB ASC Topic 718, stock-based compensation cost is

measured at the grant date based on the fair market value of the award using an option-pricing model and is recognized as an expense over the requisite service period, which is generally the vesting period.

Information regarding our stock option and restricted stock unit grants from 2007 through March 31, 2011 is summarized as follows:


Grant Dates	Number of Options Granted		Number of Restricted Stock Units Granted		Exercise Price		Estimated Fair Market Value of Our Common Stock	Estimated Fair Value of Our Common Stock Options
May 1, 2007 – November 12, 2007		64,064		—	$	20.00	$16.90 - $36.20	$11.68 - $25.60
June 2, 2008		41,121		—	$	40.00	$39.70	$25.61
January 1, 2009		25,375		—	$	40.00	$37.26	$23.32 - $24.21
July 1, 2009		11,400		—	$	40.00	$39.65	$26.87 - $27.31
January 8, 2010		19,440		—	$	45.00	$110.00	$89.49
November 1, 2010		899		—	$	125.00	$124.51	$79.74
November 1, 2010		—		5,734		—	$124.51	—
January 1, 2011		25,428		—	$	135.10	$135.10	$87.54
January 1, 2011		—		23,720		—	$135.10	—
February 16, 2011		—		27,386		—	$135.10	—
March 4, 2011		—		5,657		—	$135.10	—

Background of Valuations

Prior to this offering, in evaluating the fair market value of our common stock, we followed procedures that are consistent with the recommendations of the American Institute of Certified Public Accountants (AICPA) Practice Aid regarding “Valuation of Privately-Held Company Equity Securities Issued as Compensation”. Our management and board of directors made its determinations as to the fair market value in connection with the grant of stock options exercising its best reasonable judgment at the time. In the absence of a public market for our common stock, numerous objective and subjective factors, referred to as the key valuation considerations, were analyzed to determine the fair market value at each grant date, including the following:

Business Conditions and Results:

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our actual financial condition and results of operations during the relevant period;

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the status of strategic initiatives to expand our facilities to increase the target market for our products and services;

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the competitive environment that existed at the time of the valuation;

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all important developments for us including the growth of our customer base, the progress of our business model, and the introduction of new services;

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the status of our efforts to build our management team and to retain and recruit the talent and organization required to support our anticipated growth;

Market Conditions:

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the market conditions affecting the colocation/datacenter, hosting and technology industries;

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the general economic outlook in the U.S.;

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the market prices of various publicly-held colocation/datacenter, hosting and technology companies operating in our industry and other marketplaces similar to our business;

Liquidity and Valuation:

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the fact that the option grants involved illiquid securities in a private company;

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the likelihood of achieving a liquidity event for the shares of our common stock underlying the options, such as an initial public offering or sale of our company, given prevailing market conditions and our relative financial condition at the time of grant; and

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a series of valuations conducted by an independent third party valuation firm.

The major drivers and assumptions used in calculating the fair market value of our shares include:

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Company Performance and Projections. Management prepared financial forecasts for an eight-year period from the date of valuations, which were used, along with historical financials and information in regard to any material events and trends, as a basis for the valuations.

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Comparable Companies. Several companies in the colocation/datacenter, hosting or technology services industry publicly traded on securities markets were selected in all valuations for reference as our comparable companies in order to derive market multiples.

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Capital Market Valuation Multiples. Updated capital market data of selected comparable companies was obtained and assessed, and multiples of enterprise value to revenue and enterprise value to earnings before interest, taxes, depreciation, and amortization were used for market approach valuation requirements.

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Valuation Approach. We utilized the income approach and market approach in our historical valuations. The income approach differs from the market approach in that the income approach is based on entity-specific assumptions, whereas the market approach is based on observable valuation ratios of comparable companies. We utilized the market approach as the primary valuation approach for grants between May 1, 2007 and August 31, 2007 because the acquisition of us by the GI Partners Funds in October 2006 and the substantial remaining operational deployment risks associated with achieving management’s forecasts at this time resulted in the conclusion that the recent acquisition price established a reasonable estimate of our enterprise value. We also considered subsequent events and changes in circumstances from October 2006 to the grant dates to arrive at a concluded grant-date fair value estimate. Given the differences between the rights, restrictions and preferences of the various classes of preferred and common stock holders (see discussion below), we selected the option method to allocate the resulting enterprise value.

For the 2007, 2008 and 2009 grants, we determined that there was sufficient data to develop reasonable income and cash flow estimates, and therefore we utilized the income and market approach under a probability-weighted expected return method to estimate grant-date fair value of the awards. Under this methodology, the enterprise value of the Company and the common stock is estimated based upon an analysis of future value for the entire enterprise assuming various future outcomes. Share value is based upon the probability-weighted present value of these expected outcomes, as well as the rights of each class of preferred and common stock. For purposes of these probability-weighted present values, we contemporaneously modeled our future outcomes to include six different potential future scenarios all of which involved an initial public offering, a strategic merger or sale event within one to four years of the respective valuation date, with a consistent weighting of 40% to the scenarios assuming an initial public offering in one to two years from the respective valuation date. We did not allocate any probability to a long term “stay private” scenario as the likelihood of this occurring was estimated to be very small in consideration of the majority stockholder’s investment strategy. Our valuation for the January 8, 2010 grants initially began with an evaluation of the key valuation considerations discussed above as well an updated independent valuation report prepared as of a September 30, 2009 valuation date. Consistent with our valuation process established prior to 2010, this valuation utilized a consistent probability-weighted expected return method to estimate fair value based upon the probability-weighted present value of these expected outcomes, as well as the rights of each class of preferred and common stock, and we contemporaneously modeled our future outcomes to include six different

potential future scenarios. This valuation resulted in a grant date fair value of common stock of $45.00 per share, which was the basis for establishing the exercise price for the employee stock options issued on the January 8, 2010 grant date. However, in connection with the preparation of the financial statements for the three months ended March 31, 2010, we reassessed the estimated grant date fair value of our common stock in light of the potential completion of our initial public offering and preliminary discussions relating to our potential pricing range. As a result of this reassessment, we determined our grant date fair value is $110 per share. During this process, we also reviewed comparable company market prices around the January 2010 grant date, and indicators of potential pricing from discussions with our underwriters. As part of this reassessment, we also determined that a discount for lack of marketability of 10.0% was more appropriate with respect to the determination of fair value for the grants in 2010, rather than the prior discounts which ranged from 25.2% to 38.7% over exit alternatives that ranged from one to four years. We also determined that a 100% probability should be assigned to the scenario that considered an initial public offering within the following twelve months. This determination was made because, in retrospect, we now consider the formal discussions with investment bankers in mid-January 2010 to be a key event that has proven to have provided additional certainty that we could achieve an initial public offering. For our November 1, 2010 January 1, 2011, February 16, 2011 and March 4, 2011 grants, we utilized a consistent valuation methodology and discount for lack of marketability as utilized for the January 2010 grant valuation and determined a fair value of $124.51, $135.10, $135.10 and $135.10 per share, respectively. Over the course of 2010 and the three months ended March 31, 2011, our underwriters have periodically communicated an estimated valuation range per share of common stock to be sold in our initial public offering. While our underwriters have noted fluctuations in the market values of comparable public companies during this period, the current expected valuation range is consistent with our assessment of fair value in January and November 2010 and January, February and March 2011.

We also reassessed the estimated accounting fair value of our common stock prior to 2010, considering key valuation considerations, including each independent valuation report delivered during the period 2007 through 2009. Our most recent prior grant was on January 8, 2010. Throughout 2007, 2008 and 2009, our management and board of directors talked with advisors with respect to the potential acceptance and success of our business plan in the market. We believed that during 2007 and 2008, there was significant uncertainty as to whether we could achieve the necessary scale and profitability and therefore uncertainty that a liquidity event would occur or whether we would achieve an attractive valuation in a liquidity event. From late 2008 to October 2009, our board of directors took into consideration the occurrence of adverse changes in global financial and stock markets and deteriorating business conditions in the United States. These changes and business conditions resulted in a freezing of capital and credit conditions, and the U.S. and global economies fell into a deep recession and economic contraction, before the U.S. financial and stock markets began to recover in March 2009 and the U.S. economy began to stabilize in the third quarter of 2009. The U.S. Gross Domestic Product declined during this period, before beginning to recover slightly in the third quarter of 2009. The U.S. unemployment rate increased significantly throughout this period. A new presidential administration and government proposals to provide economic stimulus in 2009 caused further uncertainty. The enterprise values of many of our publicly-traded peers fell sharply during this period before beginning to recover during the second and third quarters of 2009. The factors noted above more than offset any positive financial results and adversely affected our assumptions of the expected type, timing and likelihood of possible liquidity scenarios, and reduced the fair market value of our common stock under various initial public offering and sale scenarios as determined by our board of directors before improving in the third quarter of 2009. As a result, the fair market value of our common stock decreased during this period before recovering in part during the third quarter of 2009. As a result of these considerations, given the uncertainty of our business projections and market dynamics, our board of directors determined that the exit event probabilities utilized in the contemporaneous valuation performed prior to 2010 were appropriate in light of the 40% weighting being ascribed to scenarios involving an initial public offering.

Between October 2009 and December 2009, the U.S. economy and financial and stock markets continued to recover and the capital and debt markets continued to improve. For example, between October 2009 and December 2009, the Dow Jones Industrial Average increased 8.6% and the U.S. economy and U.S. Gross Domestic Product are estimated to have continued to improve. In addition, we believe that technology capital spending generally continued to increase. Our prospects and our expectations of growth continued to improve and our outlook regarding the fair market value of our common stock under various initial public offering and sale scenarios improved. In addition, in January 2010 we held our “organizational meeting” for our initial public offering; in March 2010 we filed the registration statement of which this prospectus is a part; and in May 2010 we filed our first amendment to the registration statement. All of these actions signaled that an initial public offering was becoming more likely, which would result in liquidity for the common stock and elimination of the superior rights and preferences of the preferred stock. This positively affected assumptions of the expected type, timing and likelihood of possible liquidity scenarios.

Critical assumptions required to perform the probability-weighted expected return method included the following:

Valuations – Expected valuations under each future event scenario were estimated based upon consideration of management’s performance and projections, review of capital market data and review of changes in comparable company multiples.

Timing – Expected dates of each event were estimated based upon discussion with our management and analysis of public market and economic conditions. Exit events ranged from one to four years in the future depending on the valuation date, for an estimated event date between 2009 and 2012.

Discount rates – Risk-adjusted rates of return were standardized across scenarios at the cost of equity as determined under capital asset pricing models. Discount rates ranged from 18.7% to 21.1% depending on the event timing under consideration.

Event probabilities – Estimates of the probability of occurrence of each event were based on discussions with our management and an analysis of market conditions as discussed above. Generally, a higher probability of achievement means a lower risk of achieving the operating projection or event timing objective and vice versa.

Discounts – Appropriate marketability discounts, required to estimate the per share value of the various share classes in each scenario. For marketability discounts, we considered both qualitative and quantitative methods to estimate the discount for lack of marketability, including (i) qualitative assessment based on company characteristics and restricted stock studies, (ii) statistical regression analysis based on restricted stock studies and (iii) protective put option analysis. Discount for lack of marketability ranged from 19.8% to 39.8% depending on the event timing under consideration, except in the case of the January and November 2010 grants as noted above.

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Rights, restrictions and preferences of our preferred and common stock holders. The distribution of equity value to our various ownership classes was a consideration in determining the fair market value of our common stock in these historical valuations. We had Series A Preferred Stock, Series B Contingent Preferred and Common Stock outstanding as of each valuation date, as well as an outstanding option to acquire Series A Preferred Stock that expired unexercised in October 2008. Shares of Series A Preferred Stock are entitled to receive, prior and in preference to any distribution of any of our assets to the holders of Series B Preferred Stock or Common Stock, an amount per share equal to a 10% preferential return. Shares of the Series B Contingent Preferred participate in distributions under certain liquidation scenarios and are subject to certain conversion ratios based on the internal rate of return to the Series A Preferred Stock. The rights, restrictions and preferences of our preferred and common stock impact the distribution of proceeds in a hypothetical exit event and thus impact the fair market value of our common stock. For example, influencing factors include (i) Series A Preferred Stock dividends that accumulate as time passes between valuations and future exit events,

increasing the requirement for greater enterprise value changes to increase value to the common stockholders, (ii) distributions to the Series B Contingent Preferred increase or decrease based on internal rate of return to the Series A Preferred Stock stockholders, which translate into less or more proceeds to the common stockholders, respectively, (iii) assumptions about the exercise of the Series A Preferred Stock option, and (iv) impacts to equity value based on debt financing and cash balances, which decrease and increase equity value and resulting common stock value, respectively.

All of our valuations were performed at or near the grant dates of the awards and there were no material changes to our business or value drivers between the valuation date and the grant dates.

Although our board of directors carefully considered the key valuation considerations, the primary factors impacting the valuations are (i) our periodic assessment of execution risk in achieving our operating and exit objectives, (ii) the steady and continued improvements in our financial performance primarily in revenue and operating income growth, (iii) the fluctuations resulting in favorable and unfavorable comparisons to our public company comparable set and prevailing economic conditions impacting the capital markets, and (iv) the dynamics of our preferred and common equity class structure which impacts value allocations as a result of certain preferred returns and dividend entitlements.

There is inherent uncertainty in these estimates and if we had made different assumptions than those described above, the amount of our stock-based compensation expense, net loss and net loss per share amounts could have been significantly different. In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation and as we issue additional stock-based awards to continue to attract and retain employees and nonemployee directors.

Board Experience

Our board of directors includes individuals with significant business, finance and/or venture capital experience. During the periods set forth in the table, our board of directors was comprised of several individuals with experience in valuing technology companies and pricing stock options. These board members are familiar with the valuations of technology companies entering into initial public offerings, as well as with the market for the acquisition of technology companies similar to our stage of development.

Consideration of Independent Valuation Firm Qualifications

Our consideration of the valuations from the independent third party valuation firm at the time of the determination of fair market value is consistent with the guidance set forth in the AICPA because:

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The independent third party valuation firm is independent;

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The independent third party valuation firm considered the cost, income and market methods of valuation and determined the method to use based on our stage of life, revenues and outlook;

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The independent third party valuation firm’s valuations were finalized before we established fair market value, not after the fact; and

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The independent third party valuation firm documented its assumptions and methods in its reports and those assumptions and methods were considered to be a consistent and reasonable basis for that assessment.

Consistent with the AICPA and the Staff Commentary, the independent third party valuation firm’s valuations utilized historical and prospective discussions of our performance. The prospective analysis was based on financial plans provided to the independent third party valuation firm by management.

The independent third party valuation firm also selected companies utilized for the market valuation approach, and we and the independent third party valuation firm agreed these were comparable peers due to the

nature of their products and services, size and current market positions. In the analyses, factors that distinguished us from the peer companies were noted and taken into account.

Information regarding the third party valuations of our common stock during the period beginning December 31, 2006 and ending on September 30, 2009 is summarized as follows:


Date of Valuation Report	Effective Date of Valuation (as stated in the Valuation Report)	Value of Common Stock
March 27, 2007	December 31, 2006	$	16.90
April 8, 2008⁽¹⁾	September 30, 2007	$	36.20
June 11, 2008⁽¹⁾	May 1, 2008	$	39.70
April 2, 2009	September 30, 2008	$	37.26
July 14, 2009	May 1, 2009	$	39.65
December 22, 2009⁽²⁾	September 30, 2009	$	36.03

(1)

Both of these valuation reports were reviewed in conjunction with determining the fair value of our common stock for the June 2, 2008 grants.

(2)

This valuation was completed before we began the initial public offering planning process and reflects a probability-weighted valuation across six scenarios. We adjusted this valuation to reflect a 100% probability scenario for an initial public offering within one year to determine our grant date fair value for accounting purposes in the first quarter 2010. We have used a consistent valuation methodology for the subsequent grants in 2010 and 2011.

In accordance with FASB ASC Topic 718, we use the Black-Scholes option pricing model to determine the fair market value of the stock options on the grant dates for share awards made on or after January 1, 2006. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions to determine the fair market value of stock-based awards, including the deemed fair market value of the underlying common stock on the date of grant and the expected volatility of the stock over the expected term of the related grants. The value of the award is recognized as expense over the requisite service periods on a straight-line basis in our consolidated statements of income, and reduced for estimated forfeitures. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Based upon an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, the aggregate intrinsic value of options outstanding as of March 31, 2011 was $ million, of which $ million related to vested options and $ million to unvested options.

Claims and Contingencies. We are subject to various claims and contingencies related to legal, regulatory, and other matters arising out of the normal course of business. Our determination of the treatment of claims and contingencies in the consolidated financial statements is based on management’s view of the expected outcome of the applicable claim or contingency. Management may also use outside legal advice on matters related to litigation to assist in the estimating process. We accrue a liability if the likelihood of an adverse outcome is probable and the amount is estimable. If the likelihood of an adverse outcome is only reasonably possible, or if an estimate is not determinable, disclosure of a material claim or contingency is disclosed in the Notes to the Consolidated Financial Statements. We re-evaluate these assessments on a quarterly basis or as new and significant information becomes available to determine whether a liability should be established or if any existing liability should be adjusted. However, the ultimate outcome of various legal issues could be different than management’s estimates and, as a result, adjustments may be required.

Recent Accounting Standards

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements. ASU 2009-13 supersedes certain guidance in FASB ASC Topic 605-25, Multiple-Element Arrangements and requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices (the relative-selling-price method). ASU 2009-13 eliminates the use of the residual method of allocation in which the undelivered element is measured at its estimated selling price and the delivered element is measured as the residual of the arrangement consideration, and requires the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables subject to ASU 2009-13. ASU 2009-13 must be adopted no later than the beginning of the first fiscal year beginning on or after June 15, 2010, with early adoption permitted through either prospective application for the revenue arrangement entered into, or materially modified, after the effective date or through retrospective application to all revenue arrangements for all periods presented. The adoption of ASU 2009-13 did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06 Improving Disclosure about Fair Value Measurements, which amends the use of fair value measures and the related disclosures. ASU 2010-06 requires new disclosures for transfers in and out of Level 1 and Level 2 fair value measurements. ASU 2010-06 is effective for financial statements issued for interim and annual periods ending after December 15, 2009. The adoption of this standard did not have a material impact on our consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855) that amended guidance on subsequent events. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and we adopted these new requirements for the period ended March 31, 2010.

In March 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives (ASU 2010-11) (codified within ASC 815 - Derivatives and Hedging). ASU 2010-11 improves disclosures originally required under SFAS No. 161. ASU 2010-11 is effective for interim and annual periods beginning after June 15, 2010. The adoption of this standard did not have a material impact on our consolidated financial statements.

BUSINESS

Company Overview

As a network neutral provider, we do not own or operate our own network, allowing us to act as an unbiased intermediary in providing the necessary interconnection products and related services that facilitate the exchange of communications network traffic between our customers. Customers within a Telx facility are able to connect to any other customer within the facility, including up to 300 service providers, depending on the facility. These interconnections effectively allow a customer to replace their existing and more expensive network alternatives. Through these interconnections, our facilities host diverse and densely populated ecosystems of communications service providers, enterprises, online media, video and content providers, and other entities. Our customers benefit from a wide choice of networks, reduced network costs, improved capital budget efficiency, improved performance and access to revenue opportunities with accelerated time to market.

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favorable datacenter supply and demand dynamics (according to Tier1 Research’s Multi-Tenant Datacenter Supply 2011 report, between 2010 and 2014, datacenter supply growth is forecast to vary between 5% and 11%, lagging demand growth varying between 13% and 16%);

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continued growth in Internet traffic (according to Cisco Visual Networking Index, from 2009 to 2014, worldwide consumer Internet traffic is forecasted to grow at a 36% compound annual growth rate);

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continued adoption of Ethernet technologies (according to a 2010 market research study from The Insight Research Corporation, U.S. enterprises and consumers are expected to spend more than $37 billion over the next five years on Ethernet services provided by telecommunications carriers);

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continued growth in Internet video (according to Cisco Visual Networking Index, Internet video will account for 57% of all consumer Internet traffic in 2014);

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emerging computing technologies such as cloud computing (according to Gartner predictions, the cloud computing market will reach approximately $149 billion in 2014, growing from approximately $59 billion in 2009 (Source: Gartner, Dataquest Forecast: Public Cloud Services Worldwide and Regions, Industry Sectors, 2009-2014; June 2, 2010)); and

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increasing demand for proximity hosting and low latency networking (according to a recent SEC concept release, the New York Stock Exchange’s average speed of execution for small, immediately executable (marketable) orders decreased from 10.1 seconds in January 2005 to 0.7 seconds in October 2009).

Our revenue growth since 2007 is primarily the result of organic growth, consisting of increasing amounts of our products and related services provided to existing and new customers. From December 31, 2007 to December 31, 2010, we grew our customer base from 495 to 884 customers representing a 21% compound annual growth rate and our total physical interconnections from 19,692 to 32,882 representing a 19% compound annual growth rate. Over the same period, to meet our customers’ increasing demand for our products and related services, we expanded our facility footprint from 370,543 gross square feet to 604,368 gross square feet representing a compound annual growth rate of 18%. At March 31, 2011, our customer base had increased to 914, total physical interconnections had increased to 34,083 and our facility footprint had increased to 626,105 square feet. The growth in our facility footprint was accomplished through the addition of three new facilities and the expansion of our existing space within our other facilities. We believe that our existing customer base, products and services will continue to grow which will enhance the ecosystems within our facilities and in turn support our ability to attract new customers.

Industry Overview

The increased adoption of network centric applications such as SaaS, on-line video, social networking, cloud computing services, and enterprise IT systems requires an increasing number of connections among the networks that provide the underlying infrastructure. Interconnection and colocation providers have secure and reliable facilities that enable those connections to be made. In the markets we serve, we believe that our facilities offer the greatest number of interconnection options due to their strategic locations in dense, urban population centers where global communications networks intersect.

No single communications network connects every origin and destination point, and as a result, networks must connect with other networks to reach beyond the physical infrastructure of an individual network. Historically, the numerous networks that comprise the Internet initially connected with each other through public

network access points that were established by non-profit organizations and government entities. Later, during the 1990s, ownership of the network access points transferred to telecommunications carriers. However, limited investment by the telecommunications carriers, difficulties scaling the various networks, and increased competition among telecommunications service providers resulting from the deregulation of the communications industry, then led Internet service providers to establish independent links connecting their facilities.

Ultimately, the expense associated with implementing, maintaining and upgrading these independent links led to the creation of commercial, network neutral Internet exchanges and interconnection facilities to accommodate the growing global data transfer needs of the Internet as well as private networks. The increasing amount of data exchanged across the Internet and private networks resulted in increasing demands on enterprise IT systems and datacenters that necessitated expanding levels of related expenditures. The development of colocation facilities allowed datacenter equipment to be housed in secure and reliable offsite facilities operated by third parties, providing access to competencies and capital efficiencies that were attractive from both a financial and business continuity perspective.

Interconnection

Interconnection facilitates the cost efficient exchange of information between communications service providers, enterprises, online media, video and content providers and other entities either directly between two parties (referred to as physical interconnection) or within an intermediary device among multiple parties (referred to as peering). Direct connections most commonly take the form of a fiber optic or Ethernet cable connected between the communications equipment of the two parties. Peering requires the use of an intermediate device, such as an Ethernet switch, to connect one network to many networks. With datacenter equipment of numerous communications services providers and enterprises located in close proximity, thousands of interconnections can be made without the need to add incremental space or to incur significant cost.

Interconnection generally provides a more cost-effective, lower latency, more rapidly deployed method of network traffic exchange than the metro fiber or local loop alternatives, which generally require the deployment of underground fiber to physically connect the datacenter facilities of entities. Parties interconnecting within a common interconnection facility can connect directly, do not require a third party to manage the connection once initially established, and can exchange data over shorter distances with lower capital requirements. Furthermore, the proximity of numerous interconnection customers within a single facility generates network efficiencies that result in cost savings and shorter time to market.

Colocation

Colocation offers the space and power required by customers which locate their datacenter equipment (including routers, switches, servers and storage arrays) within offsite facilities. Colocation facilities are usually characterized by temperature controlled environments for optimal equipment operation as well as redundant power supplies and network access. Colocation space is generally sold as units of cabinets or cages, which hold multiple cabinets. In order to promote more efficient methods of network access, colocation facilities are generally located near a clustering of communications service providers and offer interconnection products and services between the enterprises, online media, video and content providers, communications service providers and others housed within them.

Colocation facilities are generally divided into two groups: non-network neutral and network neutral.

Non-network neutral colocation facilities are run by companies that own or operate one or more networks. Generally they require companies located within their facilities to use their networks and services. These limitations on a customer’s network options can result in higher pricing for network access, as well as an inability to easily change network providers to achieve efficient operating results by altering network providers when required by technology. In addition, the use of a single network provider limits disaster recovery capabilities should the network fail.

Network neutral colocation facilities are run by companies that do not own or operate a network. As a result, they offer customers access to multiple networks and allow customers to select the networks best suited to their communications needs. We believe network neutral facilities provide the customer with a choice of providers and therefore lower costs, improved disaster recovery capabilities and better operational performance than non-network neutral providers who necessarily limit their customers’ options.

Customer requirements for colocation products vary due to the nature of the underlying customer application and their associated space and latency requirements. Generally, applications within the communications service provider, online media, video and content provider, and certain other sectors require low latency interconnection to multiple parties. To meet these requirements, numerous entities must be colocated in proximity to each other, which places a premium on space. On a relative basis, applications such as shared hosting, data storage and business continuity/disaster recovery, place a greater emphasis on their need for physical space to accommodate equipment that houses large volumes of data. To meet their primary volume requirement at reasonable cost levels, owners of these applications generally tolerate higher latency thresholds and do not require the same diversity of interconnections. We believe that our customers are willing to pay a premium for colocation space within our facilities given the robust, low latency interconnection products and related services we provide.

Industry Trends

The global Internet datacenter market is estimated to grow at a compound annual growth rate of approximately 19% from $13.2 billion in 2010 to $22.4 billion in 2013 according to Tier1 Research’s Multi-Tenant Datacenter Global Markets Overview—2011 report. We believe that principal drivers of this growth include favorable datacenter supply and demand dynamics, continued growth in Internet traffic, increasing enterprise adoption of datacenter outsourcing and network based business applications, continued adoption of Ethernet technologies, continued growth of Internet video, emerging computing technologies such as cloud computing, and increasing demand for proximity hosting and low latency enablement. Additionally, the increasing power and cooling requirements of datacenter equipment may result in increasing demand for colocation products and related services.

Favorable Datacenter Supply and Demand Dynamics. We believe that the demand dynamics in the colocation industry are attractive relative to supply expectations as a result of consolidation, historical underinvestment and accelerated demand growth. From 2010 through 2014, growth in supply for datacenters is forecast to vary between 5% and 11% according to Tier1 Research, significantly below expectations for growth in demand for datacenters, which Tier1 Research’s Multi-Tenant Datacenter Supply 2011 report expects to grow at annual rates varying between 13% and 16% over the same time period. We believe this favorable supply and demand dynamic will continue to support a stable pricing environment for our products and related services.

Continued Growth in Internet Traffic. According to Cisco Visual Networking Index, from 2009 to 2014, worldwide consumer Internet traffic is forecasted to grow at a 36% compound annual growth rate while worldwide business Internet traffic is forecasted to grow at a 20% compound annual growth rate. This growth is attributed to a number of trends including increased broadband penetration, popularity of online video content, use of peer-to-peer web applications and smartphone adoption. We believe this ongoing growth in the amount of data created, transferred and exchanged will continue to drive demand in interconnection and colocation products and related services.

Increasing Enterprise Adoption of Datacenter Outsourcing and Network Based Business Applications. We believe enterprises are reassessing the management of their IT requirements and will increasingly elect to outsource their datacenters to facilities operated by third parties that have superior infrastructure and increased access to interconnection opportunities for communicating with customers, suppliers and peers. Previously, companies often purchased datacenter systems and placed them locally on premises which required significant capital expenditures to support the infrastructure necessary to house the datacenter equipment. On average, the cost to construct a datacenter is in the $1,000 – $1,300 per square foot range according to the Tier 1

Multi-Tenant Datacenter Supply 2011 report. Moreover, depending on the communications service providers in the area, companies constructing their own datacenters were also potentially limited in the networks they could access. Furthermore, as the uninterrupted access to data becomes increasingly important, datacenter outsourcing allows for increased redundancy opportunities that are supportive of business continuity and disaster recovery needs.

In addition, enterprises are increasingly integrating network-based business applications into their IT environments to drive scale economies and achieve greater processing capabilities at lower costs. These applications can cover a host of mission-critical business processes, such as human resource and accounting functionality, sales and customer response management tools and operational efficiency databases. These network-based applications lead to increased requirements for the breadth and depth of the interconnection options that are available at interconnection and colocation facilities, but more difficult to obtain and manage on an in-house basis.

Continued Adoption of Ethernet Technologies. U.S. enterprises and consumers are expected to spend more than $37 billion over the next five years on Ethernet services provided by telecommunications carriers, according to a 2010 market research study from The Insight Research Corporation. And with metro-area and wide-area Ethernet services now available from virtually all major data service providers, the market is projected to grow at a compounded annual rate of approximately 22% between 2009 and 2014, increasing to nearly $12 billion, according to Vertical Systems Group. We believe that the growth of Ethernet technologies will drive even more data traffic through the networks within our customer base, increasing the demand for our products and related services.

Continued Growth in Internet Video. According to Cisco Visual Networking Index, Internet video will account for 57% of all consumer Internet traffic in 2014. We believe that this increasing prevalence of video Internet traffic will drive more data traffic through the networks that make up our customer base and consequently increase the demand for our products and services.

Emerging Computing Technologies Such as Cloud Computing. Enterprises are increasingly reconsidering how they purchase software and IT infrastructure. Rather than purchasing a local version of a program which is installed on an individual user’s computer and is limited to the data available on such computer, a company may opt to purchase a web based service or cloud version accessible by any computer. As the program or application is housed on a remote server, accessing it requires more data transfer over a network than accessing a local version. Enterprises are increasingly using cloud computing as it provides flexible, scalable and ubiquitously available applications with charges based on actual usage rather than long-term commitments. According to Gartner, the cloud computing market was estimated to be approximately $59 billion in 2009 and is expected to reach approximately $149 billion by 2014 (Source: Gartner, Dataquest Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2009-2014; June 2, 2010). We believe the movement towards cloud computing will increase the amount of data housed in colocation facilities as well as increase the demand for interconnection products and related services due to increased connectivity requirements of cloud computing.

Increasing Demand for Proximity Hosting and Low Latency Networking. We believe that as enterprise applications are becoming increasingly dependent on high speed, low latency data exchange capabilities, the demand for strategically located interconnection and colocation facilities will increase rapidly. For example, financial companies that utilize trading strategies that demand these high speed connections require close proximity to other, similarly situated companies, market data providers and service providers to achieve desired results.

Increasing Datacenter Power and Cooling Requirements. Computers operating at faster speeds within smaller physical dimensions have resulted in increased power and cooling infrastructure requirements. Since upgrading power capacity at an existing datacenter generally is expensive and in some cases impossible, enterprises may increasingly pursue colocation as an alternative. In addition, power and cooling infrastructure requirements are generally greater for colocation products than for interconnection products due to the nature of

the equipment employed. Given this lower power requirement for interconnection products, we believe that interconnection-centric providers will be able to increase the number of customers served within a given facility relative to a colocation-centric business within a similar facility.

Our Competitive Strengths

Customers typically use our products and related services because we provide them with a level of interconnection access, quality of service, reliability and flexibility that is difficult to replicate independently or with another interconnection and colocation provider. We believe our key competitive strengths, which are described below, position us well to take advantage of the favorable trends in our industry.

Strategically Focused Footprint. Our 15 facilities in nine tier-1 markets across the United States are located at the primary intersections of multiple, major international and domestic fiber routes where we believe Internet and private network traffic is most concentrated and interconnection demand is highest. These markets are major population centers covering 23% of the U.S. population and generating 29% of U.S. GDP in 2009. We are focused on maintaining a geographic footprint that supports the needs of our customers and provides an appropriate return on our invested capital. In 2010, 90% of our top 20 customers by revenue and 67% of our top 100 customers by revenue utilized our products and related services in multiple facilities. For the three months ended March 31, 2011, 90% of our top 20 customers by revenue and 68% of our top 100 customers by revenue utilized our products and services in multiple facilities. In February 2010, we entered into a services agreement with Tata Communications Limited, a leading international interconnection service provider, which enables us to provide access to interconnection and colocation products and related services for our customers in key non-U.S. markets including London, Singapore and Mumbai. In August 2010, we entered into a referral agreement and mutual resale agreement with Interxion Headquarters, B.V., a leading international service provider, which enables us to provide access to interconnection and colocation products and related services for our customers in key non-U.S. markets including 11 countries across Europe.

The map below indicates the geographic locations of our 15 interconnection and colocation facilities in the United States and the population per square mile in those locations.

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Source: U.S. Census

Industry Leader in Physical Interconnections. As of March 31, 2011, we facilitated a total of 34,083 physical interconnections between our customers, which represent an average of 37 physical interconnections per customer. This allows our customers to achieve the seamless exchange of information across hundreds of communications service providers, enterprises, online media, video and content providers, government agencies, cloud computing providers and SaaS providers. We believe that our average of 37 physical interconnections per customer as of March 31, 2011, represents greater physical interconnection density than our peers in the United States. We believe these high network densities are a result of our strategically focused footprint and value of the ecosystems that these interconnections create.

Network Neutral Business Model. We do not own or operate our own network. The ecosystems in our facilities provide our customers with the flexibility to optimize their connection partners based on their individual application and connectivity requirements. We believe the ability to directly and immediately connect with a dense network of communications service providers, enterprises, online media, video and content providers and other entities allows our customers to optimize both their revenue opportunities and expenditures as well as accelerate the deployment of new applications to market.

High Barriers to Entry. We believe our network neutral interconnection-centric model has high barriers to entry primarily resulting from the difficulty in replicating the ecosystems that exist within our facilities and the resulting network effect that exists among our customers. Significant time and resources are required to develop these ecosystems. Infrastructure and implementation barriers also exist, including the lack of suitable space in proximity to major network service providers, adequate power supply levels, regulatory and environmental approvals and the capital intensity and time-consuming nature of greenfield projects. In addition, the buildings in which we operate are already the primary landing points and crossroads for global fiber networks and the ability to replicate this network proximity would be cost prohibitive for both emerging colocation products and services providers as well as communications service providers. While significant barriers to entry exist, we believe that our experience, relationships with a critical mass of communities of interest and leading communications service providers, reputable brand, associated track record and proven business model enable us to pursue expansion opportunities more effectively than potential competitors.

Exclusive Operator of Interconnection Areas within 10 Digital Realty Trust Wholesale Datacenter Buildings. Our relationship with Digital Realty Trust, one of the leading datacenter real estate investment trusts, generally provides us with the exclusive ability to operate the interconnection areas in 10 tier-1 wholesale datacenter buildings across the United States. The initial terms of these Digital Realty Trust leases expire in 2026, and we have options to extend them through 2046. With the exception of certain legacy arrangements, these interconnection areas are the primary way in which Digital Realty Trust tenants or subtenants in such buildings interconnect to other tenants within such buildings. As a result of this exclusivity, we provide both interconnection for customers in Telx facilities as well as inter-suite connections for the other colocation providers with facilities within these buildings, making us uniquely positioned to meet customer interconnection needs.

Engineering and Operational Excellence. Our facilities provide the structural integrity and redundant power and cooling infrastructure required for a secure, reliable and effective networking and computing environment. Since 2003, we have been able to provide over 99.999% uptime on our overall power and cooling systems. Based on our industry experience and customer feedback, we believe that we also offer best-in-class installation and technical support services that enhance networking opportunities and maximize exposure to the marketplace. We also provide our customers with numerous tools such as the Telx Portal, which is a web-based solution that allows seamless ordering by our customers and implementation of our products and related services over the Internet.

Our Strategy

Continue to Expand our Relationships with Existing Customers. We will continue to offer our existing customers best-in-class interconnection and colocation products and related services to meet their growing requirements. Over 70% of our revenue growth during 2009, and over 80% of our revenue growth during both 2010 and the three months ended March 31, 2011, resulted from revenues from existing customers. As of December 31, 2010, 90% of our top 20 customers by revenue and 67% of our top 100 customers by revenue had space in multiple Telx facilities. For the three months ended March 31, 2011, 90% of our top 20 customers by revenue and 68% of our top 100 customers by revenue utilized our products and services in multiple facilities. We will strive to continue to provide the quality of service and interconnections that have resulted in low average monthly churn of 0.6%, 0.7% and 0.4%, respectively, during 2009, 2010 and the three months ended March 31, 2011.

Continue to Acquire Profitable New Customers. We recognize the ability of additional customers to enhance the value proposition of our interconnection ecosystems. We will continue to target and develop relationships with customers that will benefit most from their inclusion in a Telx ecosystem and that will increase the value proposition to our other customers due to their expected demand for interconnections. During the years ended December 31, 2009 and 2010, and for the three months ended March 31, 2011, we successfully increased our customer base by 137, 121 and 30 customers, respectively. We intend to continue to price our products and services at a level that reflects both the market demand for our products and related services, as well as our short and long term profitability goals and return on invested capital expectations.

Further Penetrate Attractive Industry Sectors. A substantial portion of our revenue is derived from communications service providers that require the high level of interconnections we offer. Revenue from other industry sectors, however, has grown as a percentage of our revenues, from an annualized rate of 15% for the year ended December 31, 2007 to an annualized rate of 28% for both the year ended December 31, 2010 and the three months ended March 31, 2011. The enterprise, online media, video and content provider, government, cloud computing provider and SaaS provider industry sectors have grown significantly within the ecosystems that exist within our facilities and provide attractive opportunity for further ecosystems development and growth. We also believe other industry sectors, such as healthcare, will provide additional long-term opportunities for ecosystems development and growth. We intend to continue to focus our efforts to further penetrate these sectors.

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The Telx Video Exchange launched in 2009 enables the interconnectivity of disparate video conferencing systems. Today it is difficult to make video calls across companies and across networks because most of this traffic runs on private networks. The Telx Video Exchange solves this problem by allowing the secure interconnection of private networks. We believe this product will increase interconnection among our diverse customer base.

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In June 2010, we announced an Ethernet Exchange product that allows the efficient interconnection of geographically dispersed Ethernet based products and related services through virtual interconnection. As a result, Ethernet service providers will be able to expand their geographic reach and connect to new customers. As of March 31, 2011, 19 service provider customers have ordered the service.

obligations, reduce risk and improve our return on capital. We intend to offer global interconnection and colocation products and related services and will focus our expansion efforts on major population centers with extensive fiber routes and where network traffic is most concentrated. In some markets where we already operate an interconnection facility, we may choose to expand our footprint with a new colocation facility (which we refer to as an “Annex”) and we will connect it to the interconnection facility through a private fiber network. To date, we have successfully deployed Annexes in Clifton, New Jersey and Dallas, Texas. We are also considering operating interconnection and colocation facilities in other companies’ wholesale datacenter buildings similar to our arrangement with Digital Realty Trust.

Pursue Selective Acquisitions. We believe our industry has favorable consolidation characteristics and expect this trend to continue in the foreseeable future. Given the limited availability of interconnection and colocation facilities within tier-1 markets, acquisitions of existing businesses may provide a cost-effective method of increasing network densities, expanding our customer base and broadening our geographic footprint. We intend to pursue attractive opportunities as they arise.

Our Products and Related Services

We provide network neutral interconnection and colocation products and certain related installation and technical support services to our customers. To access our products and related services, customers purchase and install their datacenter equipment within space in our facilities. We believe that the majority of our customers buy colocation products from us due to the network density in the facility, the ecosystems that exist within the facility, and the proximity and low latency interconnection access to numerous communications service providers and other customers within our facilities. We do not sell colocation products without the accompanying sale of interconnection products.

Our facilities enable our customers to interconnect and exchange network traffic with each other, and a number of ecosystems have developed in our facilities from this interconnection. We view an ecosystem as a set of related businesses and organizations that use our facilities to exchange information with each other. Examples of ecosystems that have developed in one or more of our facilities include:

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Communication Service Provider Ecosystem: In a communications service provider ecosystem, a diverse collection of service providers can extend the reach of their physical networks through interconnections with other communications service providers. These communications service providers can also utilize our facilities to interconnect with their direct customers rather than building an independent fiber link. While the accessibility to our communications service providers ecosystem participants is attractive to enterprises who benefit from access to multiple network providers, enterprises also benefit from the ability to exchange network traffic directly with other enterprises in a low latency environment.

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Financial Ecosystem: A financial ecosystem can consist of financial exchanges, financial clients and information exchanges that exchange large volumes of real-time financial market data. Direct interconnection with partners in a low latency environment may enable more effective network exchange of time-sensitive data. The financial ecosystem also relies on interconnections with communications service providers to move network traffic between other external locations.

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Media and Content Ecosystem: A media/content ecosystem can consist of media content providers, content management and storage providers, and media aggregators who each play an important role in the production, storage and distribution of content across various channels. Within this ecosystem, interconnection with communications service providers allows for content to be effectively transferred to additional external locations.

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Government and Education Ecosystem: A government and education ecosystem can consist of educational institutions, government organizations and research networks, and other peering exchanges and networking organizations that exchange network traffic that pertains to research studies, clinical trials and other activities.

Interconnection Products

Our interconnection products, including our cross connect (a physical interconnection), Internet exchange and other related products, generated 39% of our recurring revenues during the year ended December 31, 2010 and 41% of our recurring revenues for the three months ended March 31, 2011. Our cross connect products enable our customers to connect directly to any communications service provider, enterprise or other customer in our facilities. These products are typically provided for a recurring monthly fee per connection. Our Internet exchange products enable our customers to connect directly to our Internet exchange, which provides for public or private peering with other customers on an intermediary switch device. Our customers license ports to connect to our Internet exchange for a recurring monthly fee per port, based on port bandwidth capacity. Our interconnection products are predominantly direct connections via cross connects, however, we also provide Internet peering exchanges for the convenience of our customers. We also generate recurring revenues from reselling Internet access, which we sell to accommodate certain customers’ requests for these products. We contract with certain Internet service providers and then resell their Internet access service to customers typically in one megabit per second to one hundred megabits per second increments. Customers typically sign a contract for this offering that matches the term of their order for space and pay us a recurring monthly fee per megabits per second.

Our interconnection products are outlined in more detail below.


Product		Description

Physical Cross Connect		Physically connects customer networks within our facilities.

Telx Internet Exchange		Facilitates the exchange of IP traffic between service providers through a peering platform.

Telx Virtual Exchange Platform		Provides customers the ability to exchange communications traffic that consists of different communications protocols. It also allows customers to combine multiple slow circuits into a single fast circuit, or vice versa.

Metro Cross Connect		Provides ability to interconnect between two Telx facilities in the same metro area, enabling seamless connectivity between customers within these facilities.

Virtual Meet Me Room (VMMR)		Provides virtual interconnections between Frankfurt and New York with other communications service providers, without having to invest in a physical point-of-presence with expensive hardware.

Telx Video Exchange		Provides video service providers the ability to exchange video traffic in a secure carrier-rich environment translating among various protocols.

Telx Ethernet Exchange		Provides customers the ability to interconnect Ethernet networks.

Colocation Products

Our facilities provide our customers with a reliable, secure and climate controlled environment to house their networking and computing equipment and facilitate interconnections. Our colocation products, consisting of customized space options, redundant power and cooling systems, physical security, fire suppression and water leak detection systems, generated 61% of our recurring revenue in 2010 and 59% of our recurring revenues for the three months ended March 31, 2011.

Colocation Space. We provide colocation space for a recurring monthly fee for a cabinet or on a per square foot basis for cage space. Our customers that license cage space typically use between 50 and 500 square feet in an interconnection and colocation facility, and often license such space in multiple interconnection and colocation facilities. As of December 31, 2010, 90% of our top 20 customers by revenue and 67% of our top 100

customers by revenue had space in multiple Telx facilities. For the three months ended March 31, 2011, 90% of our top 20 customers by revenue and 68% of our top 100 customers by revenue utilized our products and services in multiple facilities. Customers sign service orders, governed by the terms and conditions of a master services agreement, with a typical term of one to three years.

Power. We provide access to power for a recurring monthly fee under our standard colocation contract. We provide both alternating current and direct current power circuits. Our customers pay for power on a per amp basis, typically in 20 to 30 amp increments. Our redundant power and cooling systems have enabled us to provide over 99.999% uptime since 2003.

Related Services

In addition to our core interconnection and colocation products, we offer customers certain related installation and technical support services on a 24 hours per day, 365 days per year basis to all customers located within our facilities. Designed to provide our customers with an always-available presence, our services allow our customers faster access to their equipment, minimizing cost and time to resolution. Depending on the nature of the services, revenues from these services may be either recurring or non-recurring.

Installation Services. We provide installation services to assist our customers in accessing our interconnection and colocation products. We receive one-time installation fees determined by the complexity of the installation. We typically receive fees per interconnection circuit or port installed, per cabinet or square foot of cage space installed and per amp of power installed.

Technical Support Services. Technical support services are provided by our technicians, who are available 24 hours per day, 365 days per year. These services include system reboots, hardware and software troubleshooting, circuit, loop and fiber troubleshooting, equipment installation and provisioning, and infrastructure installations. We charge customers for these services using 15 minute increments (with 1 hour minimums), or under contractual subscription arrangements for a certain number of hours of technical support per month.

The diagram below is just an example of how customers that are colocated in a Telx facility can interconnect, both physically and via our Telx Internet Exchange, to other Telx customers through our interconnection areas.

LOGO

Our Customers

Our customers include communications service providers, enterprises, online media, video and content providers, government agencies, cloud computing providers and SaaS providers who utilize our interconnection-centric offering. Our communications service providers include leading global and domestic telecommunications networks, multi-system operators, Internet Service Providers and wireless providers. Our online media, video and content provider customers consist of businesses that deliver content and content based services over the Internet. Our enterprise, government, cloud computing and SaaS customers include entities that are dependent on the Internet as well as private networks. For the year ended December 31, 2010, our top ten customers represented 26% of our total revenue and our largest customer represented approximately 5% of our total revenue. For the three months ended March 31, 2011, our top ten customers represented 24% of our total revenue and our largest customer represented approximately 5% of our total revenue. As of December 31, 2010, we had 884 customers and 90% of our top 20 customers by revenue and 67% of our top 100 customers by revenue had space in multiple Telx facilities. For the three months ended March 31, 2011, we had 914 customers and 90% of our top 20 customers by revenue and 68% of our top 100 customers by revenue utilized our products and services in multiple facilities.

Our communications service provider customers represented approximately 72% of revenues for the year ended December 31, 2010. Our enterprise and government customers represented approximately 7% of revenues and our financial customers represented approximately 15% of revenues for the same time period, while our online media, video and content provider customers and cloud, SaaS and other customers represented approximately 5% and 1% of revenues, respectively. For the three months ended March 31, 2011,

communications service providers represented approximately 72% of revenues, enterprise and government customers represented approximately 7% of revenues, financial customers represented approximately 16% of revenues, online media, video and content providers represented approximately 4% of revenues and cloud, SaaS and other customers represented 1% of revenues.

The majority of our customer agreements are structured as master service agreements that contain all of the general terms and conditions, including payment terms, termination provisions, indemnity provisions and limitations on liability. The master agreements do not have any specific products and related services or associated prices or terms of specific products and services as those terms are all set forth in separate service orders. The services order sets forth the type of service and the monthly, hourly, one-time charge or subscription fee, as applicable, for the service. We typically have the ability to pass through increased power costs to our customers, although we do not always elect to do so. In general, customers may not terminate their agreements without providing advance notice, generally 60 to 90 days, of their intent to terminate and paying all remaining amounts due under the contract. Failure to provide notice of termination typically results in an automatic extension of the contract for an additional year. Our liability is generally limited to amounts paid under the contract, and we are not generally liable for any consequential damages. Furthermore, customers are required to name us as an additional insured with rights of subrogation on their insurance policies.

Sales and Marketing

We sell our products and related services through our direct sales force and through indirect channel sales.

Direct Sales. As of March 31, 2011, our direct sales organization was comprised of 26 sales representatives and 2 sales engineers. Our direct, commission-based sales team generates leads primarily from customer referrals, unsolicited outbound calls and our marketing efforts. Our direct sales effort also includes a strategic accounts sales force to target opportunities with large existing customers. We utilize a combination of sales representatives and sales engineers to efficiently provide our customers with technical solutions tailored to their individual requirements.

Indirect Channel Sales. As of March 31, 2011, our channel sales organization was comprised of 3 employees who direct and organize our indirect channel sales efforts. Our channel sales program consists of over 200 third-party sales agents worldwide. These third-party sales agents include communications service providers, management and technical consultancies, technology integrators and software application providers. Third-party sales agents are typically paid a percentage of the customer’s monthly recurring fees for the length of the customer contract.

Marketing. Our marketing efforts communicate the advantages of our products and related services and generate customer demand. Our marketing activities include web-based paid and natural search, participation in technology trade shows, conferences and customer events, web-based and mail-based advertisements, advertisements in business and technology publications, and targeted regional public relations activities. For the benefit of our customers, we operate an online global marketplace with advanced customer portal capabilities that allow our customers to access important information and connect with each other seamlessly and efficiently. We believe our reputation for providing efficient cross connects has generated a significant amount of word-of-mouth recommendations and referrals.

Our Facilities

Our corporate headquarters are located in New York, New York. We typically locate our operating facilities in buildings with a significant concentration of communications service providers or buildings located near primary communications sites, which reduce the cost and complexity of connecting our facilities to communications networks. The number of customers and availability of interconnections varies from facility to facility, depending primarily on the market and its potential customer base as well as on the stage of our development in such market.

As of May 16, 2011, we operated 15 facilities with 648,102 total gross square feet. Due to infrastructure requirements, gross square footage is greater than the total square footage we have available for sale. All of our facilities are leased except our Atlanta facility, which we own. We constantly monitor the space and power utilization of our facilities relative to market opportunity to manage our facilities requirements appropriately. In addition, we continue to review and implement green technologies. The table below shows the number, address, gross square footage and expiration date of our facilities in each of our markets as of May 16, 2011.


Market	Number of Our Facilities		Facilities Addresses	Gross Square Footage		Lease Expiration Dates⁽¹⁾
New York City Area⁽²⁾		4	60 Hudson Street, NY 111 8^th Avenue, NY⁽³⁾ 100 Delawanna Ave., Clifton, NJ 300 Blvd E., Weehawken, NJ (*)		275,148	2022 through 2050
Atlanta		1	56 Marietta St., Atlanta		152,650	Telx owned facility
Dallas⁽⁴⁾		2	2323 Bryan St., Dallas (*) 8435 Stemmons Frwy., Dallas		69,780	2028 through 2046
Chicago		2	600 S. Federal St., Chicago () 350 E. Cermak Rd., Chicago ()		63,032	2046
San Francisco Bay Area		2	200 Paul Ave., San Francisco () 1100 Space Park Dr., Santa Clara ()		30,366	2046
Miami		1	36 N.E. 2^nd St., Miami (*)		23,805	2046
Phoenix		1	120 E. Van Buren St., Phoenix (*)		13,484	2046
Los Angeles		1	600 W. 7^th St., Los Angeles (*)		18,468	2046
Charlotte		1	113 N. Myers St., Charlotte (*)		1,369	2046

Total		15			648,102

(1)	Assumes exercise of all renewal terms.

(2)

The lease for approximately 88,790 square feet of space expires in 2022, the lease for approximately 64,766 square feet of space expires in 2032, the colocation agreement for approximately 40,048 square feet of space expires in 2024, the lease for approximately 598 square feet of space expires in 2046, and the lease for approximately 58,931 square feet of space expires in 2050.

(3)	We have 64,766 square feet of space under direct lease with the landlord and 40,048 square feet of space under a colocation agreement with Digital Realty Trust.

(4)	The lease for approximately 34,901 square feet of space expires in 2033, the lease for approximately 15,552 square feet of space expires in 2046, and the lease for approximately 19,327 square feet of space expires in 2046.

(*)	Digital Realty Trust owned facility.

Generally, interconnection and colocation facilities consist of a number of suites, or segmented floorplans, which are leased, managed or utilized by various communications service providers, network neutral interconnection and colocation service providers, and managed service providers, web hosting companies and Internet service providers. While physical interconnections can be implemented intra-suite by the manager of a suite, physical interconnections between multiple suites (which we refer to as inter-suite physical interconnections) generally occur within a specific physical location in the datacenter called an interconnection area. Multiple providers may provide interconnection products within a given interconnection area.

Our relationship with Digital Realty Trust, one of the leading datacenter real estate investment trusts, generally provides us with the exclusive ability to operate the interconnection areas in 10 tier-1 wholesale datacenter buildings across the United States. Subject to certain exceptions described below, these interconnection areas are the primary way in which Digital Realty Trust tenants or subtenants in such buildings interconnect to other tenants within such buildings. In addition to our operation of such interconnection areas, we also lease space from Digital Realty Trust for our own offerings. As a result of these arrangements, we provide both interconnection for customers in Telx facilities as well as inter-suite connections for other colocation providers who have facilities within these buildings. Generally, our interconnection area leases with Digital Realty Trust provide that we pay Digital Realty Trust monthly rental fees along with a certain percentage of facility specific annual gross revenue that exceeds a stipulated threshold.

Although Digital Realty Trust has designated us as its exclusive interconnection area operator, certain legacy tenants within Digital Realty Trust buildings continue to be able to facilitate certain inter-suite connections that existed prior to our arrangement with Digital Realty Trust. In addition, Digital Realty Trust itself operates its own interconnection facility where it can facilitate inter-suite connections. Typically, the Digital Realty Trust interconnection facilities are used for the purpose of connecting tenants to our interconnection areas and rarely facilitate more than one or two physical interconnections per tenant.

Competition

We operate in a highly competitive market that is evolving rapidly. Our principal competitors include the providers described below. Several of the companies with which we compete are also our customers.

Network Neutral Interconnection and Colocation Providers. These competitors offer products and services that are similar to ours, including interconnection and colocation products and related services. We consider Equinix, Coresite and Terremark our peers when analyzing our performance against our primary competitors.

The primary competitive factors in our market are:

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market and specific location of facilities;

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density of cross connections;

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customer ecosystems;

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presence of major communications service providers;

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customer service and technical expertise;

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robustness of datacenters;

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breadth of service offered; and

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price.

During the initial stage of the sales cycle, we also compete with the service providers described below.

U.S.-based Communications Service Providers. Communications service providers, such as AT&T, Level 3 Communications and Verizon, typically provide interconnection products and services through their owned networks. We believe these competitors operate colocation facilities primarily to cross-sell their core services including communications and Internet access and typically benefit from brand recognition and financial resources.

Managed Service Providers, Web Hosting Companies and Internet Service Providers. Businesses may choose to use a hosting provider other than us to provide products and services and support for their IT systems in addition to the interconnection and colocation products and related services we offer. Our competitors in this category usually take control over a company’s network, and may provide the actual hardware and software. Companies in this category include IBM, Rackspace and SAVVIS.

In addition to the above, we compete with other regional, typically non-network neutral providers. As we expand domestically and internationally, we expect to encounter additional competition in the respective markets we select to enter.

Intellectual Property

We hold the following trademarks/service marks: Telx Virtual Xchange, telx, TELX | VISION, Managed Hub and TELXVAULT. We consider our trademarks to be materially important to our business and the registered trademarks are renewable for their statutory terms.

Government Regulation

We are not currently subject to industry-specific government regulation.

Employees

As of March 31, 2011, we had 217 employees in the United States. We believe our relations with our employees are good. Our employees are not represented by a labor union and are not covered by a collective bargaining agreement.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, operating results or financial condition.

Corporate Information

MANAGEMENT

Our Directors and Executive Officers

Set forth below is the name, age and position of each of our directors and executive officers as of May 19, 2011:


Name	Age		Positions
Howard Park		48	Chairman of the Board⁽¹⁾⁽²⁾
Eric Shepcaro		53	Chief Executive Officer and Director
Christopher W. Downie		42	President, Chief Financial Officer, Treasurer
William Kolman		57	Executive Vice President, Sales
Michael Terlizzi		37	Executive Vice President, Engineering and Construction
Clayton J. Mynard		48	Senior Vice President, General Counsel and Secretary
Eric Harrison		47	Director⁽¹⁾⁽²⁾
Daniel H. Schulman		53	Director⁽²⁾⁽³⁾
Jesper Andersen		48	Director⁽³⁾
Thomas J. Fitzpatrick		53	Director⁽¹⁾

(1)	Member of our audit committee.

(2)	Member of our compensation committee.

(3)	Member of our nominating and corporate governance committee.

Biographical Information

Set forth below is biographical information for our directors and executive officers.

Howard Park

Mr. Park has been a member of our board of directors since April 2009 and our chairman since March 2010. Mr. Park has been a Managing Director at GI Partners since 2003. Prior to joining GI Partners, Mr. Park was an investment banker with SG Cowen, Smith Barney and Nomura Securities. From 1996 to 2002, Mr. Park was with SG Cowen in its principal finance group covering the West Coast private equity community. Previously, he worked from 1990 to 1996 at Nomura Securities in the High Yield/Principal Finance Group. He has also worked at Booz Allen Hamilton as a strategy consultant from 1988 to 1990. Mr. Park received his B.A. cum laude in Economics from Rice University and his M.B.A from the Amos Tuck School of Business at Dartmouth College. Mr. Park sits on the board of directors of Ladder Capital Finance, AdvoServ, SoftLayer Technologies, Plum Healthcare and PC Helps.

We believe Mr. Park’s qualifications to serve on our board of directors include his expertise in business and corporate strategy and knowledge regarding our company and our industry.

Eric Shepcaro

Mr. Shepcaro has been our chief executive officer and a member of our board of directors since January 2007. Mr. Shepcaro was the chairman of our board of directors from January 2007 until March 2010. Mr. Shepcaro is responsible for leading and directing the strategy, growth and operations of the company. Mr. Shepcaro has over 25 years of experience working in the Network/IT industries. Prior to joining us, Mr. Shepcaro held several positions at AT&T between 2002 and 2007, including Senior Vice President of Business Development and Emerging Services and chairman of the Emerging Technology Customer Board,

where he was responsible for identifying and launching new lines of business by leveraging new and existing technologies. He also served as Vice President of Business Strategy/Development and Emerging Technologies and Chief Strategist, leading AT&T’s transformation into a premier integrator of enterprise and application network solutions, and as the overall Transformation Officer of AT&T, accountable for programs to build shareholder value and create a framework for the future. Prior to joining AT&T, Mr. Shepcaro managed hosting and applications businesses at Digital Island and Netelligence, and spent 17 years at Sprint in a variety of positions in marketing, sales and operations. Mr. Shepcaro received a B.A. from the State University of New York at Albany and an M.B.A. from San Francisco State University.

We believe Mr. Shepcaro’s qualifications to serve on our board of directors include his three years as our chief executive officer and over 25 years of experience working in the Network/IT industries.

Christopher W. Downie

Mr. Downie has been our president, chief financial officer and treasurer since November 2007. From May 2007 until November 2007, Mr. Downie was our chief financial officer and treasurer. Mr. Downie was a member of our board of directors from April 2009 until March 2010. Mr. Downie is responsible for the company’s finance, human resources, procurement, IT and administration initiatives. Prior to joining us, Mr. Downie was Executive Vice President, Chief Operating Officer and Principal Executive Officer at Motient Corporation from 2004 to 2006, and prior to that served as their Senior Vice President and Chief Financial Officer from 2003 to 2004. Mr. Downie was a financial consultant and interim Chief Financial Officer for Communications Technology Advisors, LLC from 2002 to 2003, Senior Vice President and Chief Financial Officer of BroadStreet Communications Inc. from 2000 to 2002, a Vice President in the Investment Banking Division of Daniels & Associates, LP from 1993 to 2000 and an analyst in the corporate finance/mergers and acquisitions department at Bear Stearns & Co. Inc. from 1991 to 1993. Mr. Downie received a B.A. from Dartmouth College and an M.B.A. from New York University.

William Kolman

Mr. Kolman has been our executive vice president of sales since May 2007 and is responsible for directing and implementing all aspects of our sales strategy. Mr. Kolman has over 35 years in technology-based senior sales management positions and extensive knowledge and experience in the telecom sector managing large sales units and providing services and hardware to global enterprises. Prior to joining us, Mr. Kolman was Vice President of Strategic Accounts at SAVVIS from August 2005 to May 2007, an officer at AT&T from 2000 to 2005, where he was responsible for the large global accounts in the Northeast, and a sector head at Concert, the AT&T and British Telecom joint partnership. Mr. Kolman’s prior experience also includes leading the Nortel Networks organization in New York City, managing multiple sales organizations in the Northeast for Sprint and co-founding Tri-State Telephone, where he marketed customer premise-based communications. Mr. Kolman holds a B.A. in Psychology from Dominican College and was a member of the inaugural Telecom Master’s program at New York University.

Michael Terlizzi

Mr. Terlizzi has been our executive vice president, engineering and construction since March 2002, and is responsible for facility construction and day-to-day operations. Prior to joining us, Mr. Terlizzi was Director of Operations for ARBROS Communications from September 2000 to February 2002 and Director of Network Planning and Engineering for Network Plus from August 1999 to September 2000. He has also held technical positions at AT&T and WorldCom/MFS. Mr. Terlizzi received a B.S. from the State University of New York at Albany.

Clayton J. Mynard

Mr. Mynard has served as our senior vice president, general counsel and secretary since August 2010. Prior to joining us, Mr. Mynard served as Vice President, General Counsel and Secretary of Switch & Data Facilities

Company, Inc. (formerly Nasdaq: SDXC), or Switch & Data, from June 2003 until the sale of the company to Equinix, Inc. in April 2010. Upon the closing of such acquisition, Mr. Mynard served as Associate General Counsel of Equinix until August 2010. Prior to joining Switch & Data, Mr. Mynard was Of Counsel at the private law firm of Allen Dell, P.A. from February 2003 to June 2003, and in private practice from May 2002 to June 2003. From October 2000 to April 2002 Mr. Mynard served as Vice President, Business Affairs and General Counsel to Communications Equity Associates (CEA), an international investment and merchant bank specializing in the media, communications and Internet industries. Mr. Mynard holds a J.D. from the University of Florida and a Bachelors degree from Florida State University. Mr. Mynard is a member of the Florida Bar Association.

Eric Harrison

Mr. Harrison has been a member of our board of directors since October 2006. Mr. Harrison has been a partner and Portfolio Manager at Luminous Capital since January 2009. Mr. Harrison has spent the vast majority of his career as a principal investor, principally focused on the technology sector. From October 2008 to December 2009, Mr. Harrison was a consultant to GI Partners. From March 2001 to October 2008, Mr. Harrison served as a Managing Director of GI Partners, where he was involved in all aspects of the business, including deal sourcing, structuring, investment management, fund raising, and managing the internal operations of the firm. Prior to working at GI Partners, Mr. Harrison served as a Partner at Crosspoint Venture Partners from 1999 to 2001. Prior to that, he worked at InnoCal Ventures for five years, where he sourced, analyzed, and managed investments. He also previously worked in business development at Hewlett-Packard and corporate development at Ricoh Corporation. Mr. Harrison earned a B.S. in Finance and Accounting from the University of Colorado and an M.B.A. from The UCLA Anderson School of Management. Mr. Harrison currently also serves on the Board of Directors of South Central Scholars and Confianza.

We believe Mr. Harrison’s qualifications to serve on our board of directors include his expertise in business and corporate strategy, knowledge regarding our company and our industry and his expertise in financial accounting matters.

Daniel H. Schulman

Mr. Schulman has been a member of our board of directors since February 2010. Since August 2010, Mr. Schulman has served as Group President — Enterprise Growth of American Express Corporation. Prior to that, Mr. Schulman served as President of the Sprint Prepaid Division beginning in November 2009. Prior to that, Mr. Schulman served as Chief Executive Officer of Virgin Mobile USA, LLC since September 2001. Prior to joining Virgin Mobile USA, Mr. Schulman served as the Chief Executive Officer of priceline.com. Prior to that, Mr. Schulman served in various positions for more than 18 years at AT&T, including as a member of the AT&T Operations Group and President of the long distance division. He also currently serves on the board of directors of Symantec Corporation (Nasdaq: SYMC), where he chairs the compensation committee, and Flextronics International Ltd. (Nasdaq: FLEX), where he chairs the compensation committee. In addition, Mr. Schulman serves on the board of Autism Speaks, the advisory committee of Greycroft, an early stage private equity company, and serves on the board of governors of Rutgers, the state university of New Jersey, and is the chair of the intercollegiate athletics committee. Mr. Schulman has a B.A. in economics from Middlebury College and an M.B.A., majoring in finance from New York University.

We believe that Mr. Schulman’s qualifications to serve on our board of directors include his years of executive leadership, his expertise in business and corporate strategy and his experience serving on the board of directors of two other public companies.

Jesper Andersen

Mr. Andersen has been a member of our board of directors since July 2010. Mr. Andersen has been Senior Vice President of Network Management at Cisco Systems, Inc. since September 2008. Prior to joining Cisco, he

served as Senior Vice President of Application Strategy of Oracle Corp. from January 2005 to September 2008. From August 2003 to December 2004, he was Group Vice President and General Manager of PeopleTools and the technology department at PeopleSoft, and he served as an Executive Vice President of Products of Pivotal Corp. from April 2002 through August 2003. Prior to joining Pivotal, Mr. Andersen served as Vice President of CRM Online Services at Oracle Corporation from August 1999 to March 2002. Mr. Andersen also served as a Senior Director of Development for Service Products in the Customer Relationship Management division at Oracle Corporation from May 1998 to July 1999. Mr. Andersen holds a Master’s Degree in Computer Science from Aalborg University, Denmark in 1986.

We believe Mr. Andersen’s qualifications to serve on our board of directors include his experience as a senior executive of public telecommunications companies, which has positioned him to bring his executive leadership, industry knowledge and technical expertise to our board of directors.

Thomas J. Fitzpatrick

Mr. Fitzpatrick was elected to our board of directors on October 15, 2010. Mr. Fitzpatrick has served as the Chief Financial Officer of Iridium Communications, Inc. since April 2010. From 2002 to December 2009, Mr. Fitzpatrick was Executive Vice President and Chief Financial Officer of Centennial Communications Corp., a publicly traded telecommunications company acquired by AT&T in November 2009. Prior to that, Mr. Fitzpatrick was Chief Financial Officer of several private and publicly traded companies in the telecommunications and technology industries and a Vice President at Bell Atlantic Corporation (now Verizon). He has an M.B.A. from Villanova University and a Bachelor’s degree in business administration from Pennsylvania State University. Mr. Fitzpatrick is also a Certified Public Accountant.

We believe Mr. Fitzpatrick’s qualifications to serve on our board of directors include his experience as a senior executive of public telecommunications companies, which has positioned him to bring his executive leadership, industry knowledge and financial expertise to our board of directors.

Board of Directors

Our board of directors currently has six members. Pursuant to the existing stockholders agreement between us and our existing stockholders, the GI Partners Funds have the right to elect at least four directors. The GI Partners Funds designated Howard Park and Eric Harrison to our board of directors. We expect that the existing stockholders agreement will be amended in connection with our initial public offering such that the right to elect board members, as referenced above, will no longer exist. Upon completion of this offering, we anticipate that our board of directors will have seven members, a majority of whom will be independent under The Nasdaq Marketplace Rules. In June 2010, our board of directors appointed Daniel Schulman as our lead director.

As of the closing of this offering, our amended and restated certificate of incorporation and amended and restated bylaws will provide for a staggered, or classified, board of directors consisting of three classes of directors, each serving staggered three-year terms, as follows:

•

the Class I directors will be , and , and their terms will expire at the annual meeting of stockholders to be held in 2012;

•

the Class II directors will be and , and their terms will expire at the annual meeting of stockholders to be held in 2013; and

•

the Class III directors will be and , and their terms will expire at the annual meeting of stockholders to be held in 2014.

Upon expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which that term expires. Each director’s term continues

until the election and qualification of his successor, or his earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.

Board Committees

Our board of directors has established an audit committee and a compensation committee. Prior to the completion of this offering, our board of directors plans to establish a nominating and corporate governance committee. Our board of directors may also establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our amended and restated certificate of incorporation and amended and restated bylaws.

Audit Committee

Our audit committee currently consists of Thomas Fitzpatrick, the committee chairperson, Eric Harrison and Howard Park. Upon completion of this offering, we expect that Thomas Fitzpatrick will serve as the chairperson of the audit committee and expect that our board of directors will determine that , and are “independent” as defined under and required by the federal securities laws and The Nasdaq Marketplace Rules. We also expect that our board of directors will determine that Thomas Fitzpatrick is an “audit committee financial expert,” as that term is defined by the SEC. Within one year of the effectiveness of the registration statement of which this prospectus forms a part, we intend that the audit committee will be fully independent as required by the federal securities laws, and The Nasdaq Marketplace Rules. The audit committee has direct responsibility for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm, KPMG LLP. In addition, approval of the audit committee is required prior to our entering into any related-party transaction. It is also responsible for “whistle-blowing” procedures and certain other compliance matters.

Compensation Committee

Our compensation committee currently consists of Daniel Schulman, the committee chairperson, Howard Park and Eric Harrison. All of the directors on this committee will be independent under The Nasdaq Marketplace Rules within one year of the completion of this offering. Among other things, the compensation committee will review, and will make recommendations to the board of directors regarding, the compensation and benefits of our executive officers pursuant to the compensation committee’s charter. The compensation committee will also administer the issuance of stock options and other awards under our equity incentive plans and will establish and review policies relating to the compensation and benefits of our employees and consultants.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee currently consists of Daniel Schulman and Jesper Andersen. All of the directors on this committee will be independent under The Nasdaq Marketplace Rules within one year of the completion of this offering. The nominating and corporate governance committee will be responsible for, among other things, developing and recommending to our board of directors our corporate governance guidelines, identifying individuals qualified to become board members, overseeing the evaluation of the performance of the board of directors, selecting the director nominees for the next annual meeting of stockholders, and selecting director candidates to fill any vacancies on the board of directors.

Compensation Committee Interlocks and Insider Participation

No member of the compensation committee is an officer or employee of the company. None of our executive officers serves, or has served during the past fiscal year, as a member of the board of directors or compensation committee of any other company that has one or more executive officers serving as a member of our board of directors.

Code of Conduct and Ethics

Our code of conduct and ethics applies to all of our employees, officers and directors, including our chief executive officer and senior financial officers. A full text of the code is posted on our website at www.telx.com under the Corporate Governance section. We intend to disclose future amendments to our code of conduct and ethics, or certain waivers of such provisions, at the same location on our website identified above and also in public filings. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

Director Compensation

The following table provides required information about the compensation that was provided to our directors for the fiscal year ended December 31, 2010:


Name	Fees Earned or Paid in Cash ($)⁽¹⁾			All Other Compensation ($)⁽²⁾			Total ($)
Daniel H. Schulman		$	75,616		$	2,579		$	78,195
Eric Harrison			55,000			4,348			59,348
Rolla P. Huff⁽³⁾			29,238			1,990			31,228
Jesper Andersen			20,164			1,893			22,057
Thomas J. Fitzpatrick		$	20,877		$	1,109		$	21,986

(1)	Reflects pro rata adjustment of annual retainers based on June 2010 implementation of director compensation.

(2)	The figures reported in the “All Other Compensation Column” above include reimbursement for travel expenses which they incurred in connection with their functions and duties as a director.

(3)	Mr. Huff resigned from our board of directors effective April 8, 2011.

Prior to March 15, 2010, our directors did not receive any compensation for their service as directors or as board committee members. After March 15, 2010, Mr. Schulman received an advance on his future board retainer in the amount of $62,500, in order to compensate him for his board service from then through March 15, 2011. Effective in June 2010, we implemented a director compensation policy that provided compensation to our non-employee directors in accordance with the following terms and conditions, provided that payments to directors for services in 2010 and for those who join the board during future years were and shall be pro rated based on the date of the director’s commencement of service as a director, chairman of the board, lead director, chairperson of a board committee, or board committee member:

Annual Retainers. Each non-employee director shall be paid an annual retainer of $35,000 for his or her service on our board of directors. In addition, non-employee directors who serve on board committees were paid the following annual retainers: $10,000 for service on our audit committee; $10,000 for service on our compensation committee, and $5,000 for service on our nominating and corporate governance committee. Our non-employee chairman of the board or lead director was paid an additional annual retainer of $20,000 (or such other amount as determined by our board of directors), and our non-employee directors who serve as chairpersons of board committees received the following additional amounts: $15,000 for chairing our audit committee, $10,000 for chairing our compensation committee, and $8,000 for chairing our nominating and corporate governance committee. No separate meeting fees were paid for attendance at any board or committee meetings. Annual cash compensation (retainers) are payable on January 1 of each year.

Mr. Schulman’s commencement of service began on January 21, 2010. He received, on a pro rata basis, $75,616 for his services as our lead director, as a member of our board of directors, as the compensation committee’s chairperson, as a member of the compensation committee, and as a member of our nominating and corporate governance committee. Mr. Harrison became an independent director of our board on January 1, 2010, which made him eligible to receive compensation under our director compensation policy. He received $55,000 for his services as a member of our board of directors, as a member of the compensation committee, and as a member of the audit committee. Mr. Huff’s commencement of service began on July 1, 2010. He received, on a pro rata basis, $29,238 for his services as a member of our board of directors, as the chairperson for the nominating and corporate governance committee, as a member of the nominating and corporate governance committee, and as a member of the audit committee. Mr. Huff resigned from our board of directors effective April 8, 2011. Mr. Andersen’s commencement of service began on July 1, 2010. He received, on a pro rata basis, $20,164 for his services as a member of our board of directors, and as a member of our nominating and corporate governance committee. Mr. Fitzpatrick’s commencement of service began on August 27, 2010. He received, on a pro rata basis, $20,877 for his services as a member of our board of directors, as the chairperson for our audit committee, and as a

member of our audit committee. Pursuant to the director compensation policy, Mr. Park was not compensated for his role as chairman of the board, as a member of the compensation committee, and as a member of the audit committee due to his position as a Managing Director at GI Partners.

Equity-based Compensation. Our non-employee directors are eligible to receive equity-based compensation awards pursuant to our 2010 Stock Incentive Plan (referred to herein as the 2010 Plan) and pursuant to any other equity-based compensation plan of the company, as follows:

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Initial restricted stock unit, or RSU, grant for new independent directors of $65,000 in equity value, vesting in three equal annual installments on the anniversary of the grant (except as set forth below); provided, however, that such initial grant for our lead director shall be $150,000.

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Annual RSU grants for all non-employee directors (including new directors effective as of their appointment to the board) of $60,000 in equity value, vesting upon the annual anniversary of the grant (except as set forth below).

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On January 1, 2011, our non-employee directors received their initial RSU grants and annual RSU grants on a pro rated basis from their election to our board of directors to December 31, 2010 at a valuation approved by our board of directors consistent with a third party assessment by the board.

•

The vesting period for the RSUs granted to Mr. Schulman and Mr. Harrison were deemed to have commenced on January 21, 2010, and January 1, 2010, respectively, because Mr. Schulman’s board service commenced on January 21, 2010 and Mr. Harrison’s board service as an independent director commenced on January 1, 2010.

Travel Expense Reimbursement. Non-employee directors are entitled to receive reimbursement for reasonable travel expenses which they properly incur in connection with their functions and duties as a director.

Notwithstanding the above, non-employee directors who are affiliated with GI Partners are not entitled to retainers or RSU grants pursuant to this policy.

EXECUTIVE COMPENSATION

Below is an explanation of how our compensation program was designed and operated in 2010 with respect to the following individuals who, based on applicable securities laws, were our named executive officers, or NEOs, for 2010: (i) Eric Shepcaro, as our principal executive officer, (ii) Christopher W. Downie, as our principal financial officer, and (iii) William Kolman, Michael Terlizzi, and J. Todd Raymond (our former senior vice president, facility acquisitions), as our three other most highly compensated executive officers for the fiscal year ended December 31, 2010. For the titles, ages, and biographical information of our NEOs, please refer to “Management” above. The Summary Compensation Table and separate tables below disclose each NEO’s total compensation for fiscal year 2010.

Compensation Discussion and Analysis – 2010 Summary

In 2010, our executive compensation program for NEOs reflected our practices as a privately-held company, and accordingly our board of directors made all decisions in the course of regularly-scheduled meetings. Through having Messrs. Park, Harrison, Fitzpatrick, Huff, Shepcaro, Andersen and Schulman serving as board members, as well as Messrs. Downie and Raymond for part of the year, in 2010, management participated in board meetings at which executive compensation decisions were made, but no NEO participated in or voted on any compensatory decision that affected him personally. The independent members of our board of directors accordingly controlled all of compensation decisions for our NEOs, although our CEO (and prior to March 2, 2010, the chairman of our board) fully participated (from a discussion and voting perspective) in compensation decisions for our NEOs other than himself. We believe that those decisions, as disclosed below, were appropriate based on our 2010 financial performance, on general economic conditions, and on our board of directors’ subjective assessments of individual and corporate performance as well as other factors relevant to our board of directors’ annual salary and bonus determinations. In particular, our NEOs received target-level bonuses and total compensation, principally because we achieved financial and other operating results in 2010 that accomplished the principal objectives identified in our business plan.

Overview of Executive Compensation Philosophy and Its Key Elements

As a general matter, our board of directors undertakes to provide our NEOs with compensation that is highly performance-based and competitive in our industry. We are engaged in a very competitive industry, and our success depends on attracting and retaining qualified executives through providing them with a subjectively considered balance of fixed and variable (performance-based) compensation. To that end, our board of directors provided our NEOs with total compensation in 2010 through a combination of the following components that reflect our consistent practices for past years:

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a base salary commensurate with each NEO’s experience and length of service with us;

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the opportunity to earn incentive compensation through cash bonuses targeted at up to 100% of base salary, and through the vesting of past stock-based awards;

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severance protections through employment agreements that we entered into with Messrs. Shepcaro, Downie, and Kolman in 2007, and with Messrs. Raymond and Terlizzi in 2006, and that we restated, except for Mr. Raymond, effective January 1, 2011 (see discussion at “Severance Protections” below); and

•

participation in our broad-based employee benefits programs providing health and life insurance coverage, retirement benefits, and certain perquisites and other nondiscriminatory fringe benefits.

Elements of Executive Compensation

Base Salary. In general, we provide base salary as fixed compensation for services rendered in the position that the NEO serves. With this in mind, our board of directors determines base salaries in its discretion (subject to the terms of each NEO’s employment agreement), after considering a variety of factors including each NEO’s qualifications and experience, prior employment, industry knowledge, scope of responsibilities, individual performance, and general industry practices as informally observed. Specific weightings are not applied to these factors. Base salaries are generally set when an NEO begins employment and are adjusted annually, if necessary

in our board of directors’ discretion, and are intended to provide competitive and fair compensation for basic job performance.

Annual Bonus. For 2010, our board of directors established performance targets based on our business plan, and made cash bonus awards shortly after year end, in all cases based on our board of directors’ subjective and qualitative assessment of how our financial results compared to performance targets based on our business plan. The target bonuses for all NEOs and employees were targeted to fall within a range of 10%-100% of base salary for the years 2008 through 2010. Annual bonus determinations are typically made shortly after the end of our fiscal year, with payments made soon afterward, with an exception of 2008 when a mid-year bonus payment was made.

Stock-based Awards. In 2006, 2007 and 2008, our NEOs received stock-based compensation in the form of grants of shares of our Series B Contingent Preferred Stock (referred to herein as restricted stock awards) that generally vest in 48 monthly installments, and that were intended to provide stock-based compensation for the ensuing four years. Our board of directors believes that these awards will have served their intended purpose when we complete this offering, and that regular stock-based awards will occur in 2011 and future years. Immediately prior to our initial public offering, each outstanding share of Series B Contingent Preferred stock will convert into between zero and one share of Series B Convertible Preferred Stock. (The precise rate of conversion will be based on the internal rate of return of the GI Partners Funds investment in Telx as set forth in our current amended and restated certificate of incorporation.) The outstanding shares of Series B Convertible Preferred will then immediately convert into our common stock. However, in the event that the GI Partners Funds does not reach a minimum return threshold as provided for in our current amended and restated certificate of incorporation, the Series B Contingent Preferred Stock will not convert at all. In such event the holders of the Series B Contingent Preferred Stock are entitled to receive an amount per share equal to the fair market value of a share of Series B Preferred Stock as of the date of issuance of such stock, in accordance with the terms and conditions of our current amended and restated certificate of incorporation. In February and March 2011, we entered into incentive agreements with Messrs. Shepcaro, Downie, Terlizzi and Kolman, in order to provide for the possible grant of shares of our common stock to such NEOs in the event their shares of Series B Contingent Preferred Stock do not convert into at least a specified minimum level as set forth in the incentive agreements.

Executive Loans. In 2007 and 2008, we made arms-length loans to our NEOs (and certain other employees) in order to enable them to pay the tax liability associated with making tax elections under Section 83(b) of the Internal Revenue Code. These loans bore interest at a fixed rate at the time the loan was made, with 10% of the principal, and accrued interest, being payable in each of the ensuing five years, and with the remaining balance being due in the sixth year. Pursuant to loan termination agreements entered into as of March 2, 2010 by the company and each of Messrs. Shepcaro, Downie, Kolman, Terlizzi and Raymond, loans in the outstanding amounts of $268,833, $149,757, $51,214, $46,816 and $194,670, respectively, were eliminated in connection with our initial public offering in order to comply with the Sarbanes-Oxley Act’s prohibition on such loans. Pursuant to such agreements, each executive repaid 50% of his respective outstanding loan balance and the remaining 50% was cancelled by us. In addition, pursuant to such agreements, each executive agreed that we may, in our sole discretion, take the cancellation of any unpaid indebtedness into account when making future decisions regarding discretionary cash bonuses and stock awards to be made to such executive with respect to his services in 2010. Upon consideration of this past cancellation of indebtedness when determining discretionary cash bonuses and stock awards with respect to their services in 2010, we decided to make no adjustments to their cash bonuses or stock awards.

Perquisites. In order to provide and to maintain a competitive benefits package to attract and retain our NEOs, we have provided them with life insurance policies upon commencement of employment and adjusted the policies as necessary to meet the changing needs of management for life insurance. We do not otherwise provide our NEOs with any perquisites or other fringe benefits than those available on equivalent terms to our employees generally.

Retirement and Welfare Plan Benefits. Our NEOs participate in our broad-based 401(k), health, and other welfare plans on the same terms and conditions that apply to other employees. Regarding the 401(k) plan, our

NEOs are eligible to make before-tax contributions, within the limits imposed under applicable tax laws. We do not currently make any employer matching or other contributions to the 401(k) plan.

Severance Protections. In 2010, Messrs. Shepcaro, Downie, Kolman, Terlizzi and Raymond were entitled to severance benefit protections pursuant to previously entered into employment agreements, referred to herein (with respect to Messrs. Shepcaro, Downie, Kolman and Terlizzi) as the Superseded Employment Agreements. In anticipation of our initial public offering, we prepared new forms of employment agreements for Messrs. Shepcaro, Downie, Kolman and Terlizzi that replace the Superseded Employment Agreements. Messrs. Shepcaro, Downie, Kolman, and Terlizzi entered the new employment agreements effective January 1, 2011. Mr. Raymond did not execute a new agreement because we and Mr. Raymond agreed to discharge his employment without cause effective April 15, 2011. Mr. Raymond’s severance benefits remain subject to his 2006 employment agreement (described below).

The new employment agreements for Messrs. Shepcaro, Downie, Kolman, and Terlizzi are substantially similar to the Superseded Employment Agreements, and generally provide that if the NEO’s employment is terminated by us without cause, then the NEO shall receive the following, with no duty to mitigate: (i) 12 months of base salary continuation for NEOs other than Mr. Shepcaro, who is entitled to receive 18 months of base salary continuation; (ii) a pro rated bonus, and (iii) up to twelve months of company-paid health insurance benefits, increased to 18 months for Mr. Shepcaro. These NEOs are entitled to the same severance benefits upon a resignation from employment for “good reason” as defined in their employment agreements. These severance benefits were provided in order to attract or retain our NEOs, and because we understand that severance arrangements are common in our industry. The remaining key terms of these employment agreements are described below under “New 2011 Employment Agreements.”

Mr. Raymond entered into his employment agreement at the time of our acquisition in 2006 by the GI Partners Funds. Pursuant to Mr. Raymond’s employment agreement, because his employment was discharged by us without cause effective April 15, 2011, Mr. Raymond is entitled to receive the following, with no duty to mitigate: (i) 12 months of base salary continuation; and (ii) up to twelve months of company-paid health insurance benefits.

Specific Executive Compensation Decisions for 2010

Our board of directors made the following decisions in 2010 with respect to each distinctive component of executive compensation for our NEOs:

Base Salary. The annual base salary as of the end of fiscal year 2010 for each NEO is presented in the table below. Salaries for each NEO were the same in 2010 as in 2009.


Executive	2010⁽¹⁾
Eric Shepcaro
Chief Executive Officer and Director		$	300,000
Christopher W. Downie
President, Chief Financial Officer and Treasurer			264,600
J. Todd Raymond
Senior Vice President (SVP), Facility Acquisition			207,000
William Kolman
Executive Vice President (EVP), Sales			200,000
Michael Terlizzi
Executive Vice President (EVP), Engineering and Construction		$	190,800

(1)

With respect to Messrs. Shepcaro, Downie, Kolman and Terlizzi, values in this table reflect amounts paid pursuant to the Superseded Employment Agreements in effect on December 31, 2010. With respect to Mr. Raymond, the value for his base salary reflects an amount paid pursuant to his employment agreement in effect on December 31, 2010. Mr. Raymond’s employment with the Company ended on April 15, 2011.

Annual Bonus. In 2010, we made cash bonus awards under a program designed to reward the achievements of our NEOs and employees over the fiscal year. These achievements were measured based on objectives established at the beginning of the year and weighted in aggregate relative to our focus on aligning incentive with important performance objectives. We also provided measurements for under-performance and over-performance to these performance objectives by applying increases or decreases to resulting percentage achievements by percentages when applied to paid compensation amount.

For our NEOs, sixty percent of their bonuses for 2010 reflected how our incremental Adjusted EBITDA and incremental revenue results ($12 million and $31.9 million, respectively) compared to those in our overall business plan ($11.8 million and $32.5 million, respectively, for targeted incremental EBITDA and incremental revenue). These results represented 102% performance to objectives for incremental Adjusted EBITDA and 98% performance to objectives for incremental revenue. This performance provided for a 104% accelerate achievement for paid compensation for Adjusted EBITDA and 98% performance achievement for paid compensation for incremental revenue. The combined achievement for these primary financial targets for paid compensation was 101%.

Twenty percent of the NEO bonuses for 2010 reflected company objectives related to average percentage attainment of three individual sub-goals, all three with equal weighting. The first sub-goal was related to our churn rate. We set a target churn rate at less than 8.0% for the year. The churn rate for 2010 was 7.9%, representing an achievement for this sub-goal of 101%. This performance provided for a 102% accelerate achievement for paid compensation for this sub-goal.

The second sub-goal was related to the results of customer satisfaction surveys. These customer satisfaction surveys include a field survey as well as an annual survey conducted by a third party, both of which were weighted equally. We set overall targets of 88% and 65% complete satisfaction per customer for the field and customer satisfaction surveys, respectively. Based on the results from these surveys, we received 108% and 80% achievement relative to targets for these customer satisfaction measurement objectives, representing a combined achievement for this sub-goal at 94% and a 94% achievement for paid compensation. The third sub-goal was related to our days sales outstanding, referred to herein as DSOs. We set a target of less than 25 days of DSOs throughout 2010. Our average DSOs for 2010 was 19.9 days, representing an achievement for this sub-goal of 126% and a 112% achievement for paid compensation. Accordingly, the average achievement on a combined basis for these three individual sub-goals was 102.7%.

Twenty percent of the NEO bonuses for 2010 reflected company objectives related to a measurement of our asset utilization and results was based on a target of greater than 10% return of capital, which was defined as EBIT (less customer intangible amortization) divided by the average PPE. Our return of capital was 9.8% for 2010, representing an achievement for this goal of 98% and a 98% achievement for paid compensation.

The actual bonuses that our NEOs received were based on the following determinations that our board of directors made after receiving recommendations from its members who are NEOs (but with those members abstaining from voting):

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Messrs. Shepcaro, Downie, Raymond, Kolman, and Terlizzi had target cash bonuses of 100%, 100%, 100%, 100%, and 73% of their base salary, respectively, based on our board’s application of the criteria disclosed above.

•

The actual bonus for each NEO (other than Mr. Kolman) for 2010 reflected our board of directors’ determinations that (i) the above-mentioned incremental EBITDA and incremental revenue goals representing 60% of total bonuses had been satisfied at 101% of the level set forth in our business plan, (ii) the company objectives have been satisfied at 103% of the level we had targeted and (iii) the asset utilization and results have been satisfied at 98% of the level we had targeted. Mr. Kolman’s bonus was based on the above criteria as well as a sales commission component.

•

The actual bonus payments are reported in the “Bonus” column of the Summary Compensation Table.

Stock-based Awards. As a result of the restricted stock awards that our NEOs received in 2007 and 2008, none of them received, or were considered for, stock-based awards during 2010. This reflects the determination by our board of directors that each NEO had already received sufficient stock-based incentives for the period from 2007 through 2010.

Other Benefits. Other than to increase the life insurance coverage for our NEOs, there were no changes to our severance, retirement, welfare, or fringe benefit plans or practices in 2010, on the premise that these arrangements satisfied current corporate needs and objectives for retaining employees.

2010 Year-end Executive Compensation Development

2010 Stock Incentive Plan. In November 2010, we adopted, and received shareholder approval for, The Telx Group, Inc. 2010 Stock Incentive Plan, referred to herein as the 2010 Plan, having the key terms as set out below. See “Equity Incentive Plans.”

2011 Changes

Approval of 2011 Equity Grants. On January 3, 2011, the board of directors adopted and approved the compensation committee’s recommendation that the board of directors grant equity awards effective January 1, 2011, in the form of RSUs and stock options, to our NEOs pursuant to the 2010 Plan. The RSUs will generally vest in annual installments over a four-year period commencing on January 1, 2011. The following table sets forth information regarding the equity grants that were awarded to our NEOs:

Name

Title

Vesting
Start Date for
RSUs and Options

RSUs

Options

Eric Shepcaro

CEO and Director

1/1/2011

4,071

6,278

Christopher W. Downie

President and CFO

1/1/2011

2,776

4,280

William Kolman

EVP, Sales

1/1/2011

1,110

1,712

Michael Terlizzi

EVP, Construction and Engineering

1/1/2011

1,110

1,712

J. Todd Raymond

SVP, Facility Acquisition⁽¹⁾

1/1/2011

1,110

1,712

⁽¹⁾

Mr. Raymond’s employment with the Company ended on April 15, 2011.

Approval of 2011 Executive Supplemental Equity Grants. In order to motivate and retain our NEOs, on February 16, 2011, the board of directors adopted and approved the compensation committee’s recommendation that our NEOs receive supplemental equity awards effective January 1, 2011, in the form of RSUs, pursuant to the 2010 Plan. The RSUs will generally vest in annual installments over a four-year period commencing on January 1, 2011. The following table sets forth the supplemental equity grants that were awarded to our NEOs:


Name	Title	Vesting Start Date		RSUs Granted
Eric Shepcaro	CEO and Director		1/1/2011		7,402
Christopher W. Downie	President and CFO		1/1/2011		7,402
William Kolman	EVP, Sales		1/1/2011		5,551
Michael Terlizzi	EVP, Construction and Engineering		1/1/2011		4,071
J. Todd Raymond	SVP, Facility Acquisition⁽¹⁾		1/1/2011		1,480

⁽¹⁾

Mr. Raymond’s employment with the Company ended on April 15, 2011.

Employment Agreements. As described above, we entered into new employment agreements with Messrs. Shepcaro, Downie, Kolman and Terlizzi effective January 1, 2011. These new agreements replace the Superseded Employment Agreements and their key terms are set out below. See “New 2011 Employment Agreements.”

Risk Monitoring. Our compensation committee will be responsible for assuring that our compensation structures for NEOs and other employees do not encourage excessive or otherwise undesirable risk-taking.

Tax Considerations. For 2011 and future years, we expect to structure our annual bonus program and stock-based awards in a manner that both exempts them from Internal Revenue Code section 409A, and that maximizes our ability to qualify all awards for an exemption from the limitations imposed by Internal Revenue Code section 162(m), thereby preserving their potential deductibility by us.

Philosophy. Our compensation program for executives will be based on our business needs and challenges in creating shareholder value. To support the achievement of our business strategies and goals, we expect to:

•

tie compensation to performance;

•

emphasize stock compensation to align executives’ financial interests with those of investors;

•

maintain compensation and reward levels that are competitive in both publicly traded and privately held enterprises that enable us to recruit and retain seasoned leadership capable of driving and managing a colocation and interconnection service provider;

•

share risk and reward at all levels of the organization;

•

simplify compensation design to facilitate ease of administration and communication;

•

adhere to the highest legal and ethical standards.

Summary Compensation Table

The following table sets forth summary information concerning certain compensation awarded to, paid to, or earned by, our NEOs for all services rendered to us for fiscal years ended December 31, 2010, 2009 and 2008.


Name and Principal Position⁽¹⁾	Year		Salary ($)			Bonus ($)			Stock Awards ($)⁽²⁾			All Other Compensation ($)⁽³⁾			Total ($)
Eric Shepcaro		2010		$	300,000		$	375,000		$	—		$	135,796		$	810,796
CEO and Director		2009			300,000			375,000			—			13,817			688,817
CEO and Director		2008			300,000			331,870			—			169			632,039

Christopher W. Downie		2010			264,600			265,662			—			75,659			605,921
President, CFO and Treasurer		2009			264,600			265,662			—			10,718			540,980
		2008			252,000			176,997			209,950			85			639,032

J. Todd Raymond⁽⁴⁾		2010			207,000			155,046			—			98,115			460,161
SVP, Facility Acquisition		2009			207,000			155,046			—			14,997			377,043
		2008			207,000			195,133			—			91			402,224

William Kolman⁽⁵⁾		2010			200,000			272,424			—			28,187			500,611
EVP, Sales		2009			200,000			199,861			—			10,324			410,185
		2008			200,000			234,974			—			169			435,143

Michael Terlizzi		2010			190,800			139,557			—			24,188			354,545
EVP, Engineering and Construction		2009		$	190,800		$	119,557			—		$	8,782		$	319,139

(1)	Mr. Terlizzi was not an executive officer at any time during 2008.

(2)

This column reports the grant date fair value of awards computed in accordance with stock-based compensation accounting rules (FASB ASC Topic 718) for 2008, 2009 and 2010. A discussion of the assumptions used in calculating the award values may be found in Note 2 to our 2010 audited financial statements included elsewhere in this prospectus.

(3)

The figures reported in the “All Other Compensation Column” above include the following items: executive loan cancellations and life insurance premiums. With respect to the executive loan cancellations, Mr. Shepcaro received $134,416, Mr. Downie received $74,879, Mr. Raymond received $97,335, Mr. Kolman received $25,607, and Mr. Terlizzi received $23,408.

(4)	Mr. Raymond’s employment with the Company ended on April 15, 2011.

(5)	Mr. Kolman’s bonus award is inclusive of sales commissions earned in such years.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding stock awards that were outstanding with respect to our NEOs as of December 31, 2010:


	Award Date⁽¹⁾		Number of shares or units of stock that have not vested (#)⁽²⁾		Market value of shares or units of stock that have not vested ($)⁽³⁾
Eric Shepcaro		7/8/2007		11,098		$	563,556

Christopher W. Downie		7/8/2007		3,001		$	283,048
		4/11/2008		2,573

J. Todd Raymond		7/8/2007		838		$	42,554

William Kolman		7/8/2007		2,188		$	111,107

Michael Terlizzi		7/8/2007		1,025		$	52,050

(1)	For a better understanding of our stock-related awards included in this table, we have provided the award date for each restricted stock award that was outstanding on December 31, 2010.

(2)

Awards are in the form of restricted stock that generally vest in 48 equal monthly installments following the award date. During the vesting period for restricted shares, the NEOs have full voting and dividend rights. Upon termination of an NEO’s employment for any reason, any restricted stock awards not yet vested are forfeited.

(3)	Values for restricted stock awards were computed by multiplying an estimate of the fair market value of our Series B Contingent Preferred Stock at the end of fiscal year 2010 ($50.78 per share) by the number of restricted shares held by the NEO on that date.

Stock Vested

The following table sets forth information regarding stock awards that vested with respect to our NEOs during the fiscal year ended December 31, 2010:


	Stock Awards
Name	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Eric Shepcaro		19,026		$	568,116
Christopher W. Downie		7,523		$	224,637
J. Todd Raymond		10,993		$	328,251
William Kolman		3,750		$	111,975
Michael Terlizzi		3,594		$	107,317

Other Potential Post-Employment Benefits

The following table sets forth the additional amounts that could have been realized by each NEO (other than Mr. Raymond, who was discharged without cause effective April 15, 2011) if (i) termination of his employment were to occur as of December 31, 2010 under the following circumstances, and (ii) the NEO executes a claims release and abides by applicable post-employment covenants concerning confidentiality, non-competition and non-solicitation.


Name, Principal Position and Reasons for Potential Payments⁽¹⁾⁽²⁾	Cash Severance ($)⁽³⁾		Employer- Paid Health Insurance ($)			Stock Awards ($)
Eric Shepcaro, CEO and Director
Disability	$	450,000	$	24,451	⁽⁴⁾	$	—
Retirement, Death, For Cause, or Voluntary Resignation		—		—		$	—
Without Cause or for Good Reason	$	675,000	$	36,676	⁽⁵⁾	$	—

Christopher W. Downie, President, CFO and Treasurer
Disability	$	—	$	—		$	—
Retirement, Death, For Cause, or Voluntary Resignation		—		—		$	—
Without Cause or for Good Reason	$	240,000	$	23,513	⁽⁴⁾	$	—

William Kolman, EVP Sales
Disability	$	—	$	—		$	—
Retirement, Death, For Cause, or Voluntary Resignation		—		—		$	—
Without Cause or for Good Reason	$	200,000	$	24,451	⁽⁴⁾	$	—

Michael Terlizzi, EVP Engineering and Construction
Disability	$	—	$	—		$	—
Retirement, Death, For Cause, or Voluntary Resignation		—		—		$	—
Without Cause or for Good Reason	$	160,000	$	24,451	⁽⁴⁾	$	—

(1)	Values in the table reflect amounts potentially payable to Messrs. Shepcaro, Downie, Kolman, and Terlizzi, pursuant to the Superseded Employment Agreements in effect on December 31, 2010.

(2)

As discussed above, Mr. Raymond’s discharge without cause effective April 15, 2011, entitles him to receive (i) 12 months of base salary continuation (in total, $200,000) and (ii) up to 12 months of COBRA health insurance premiums for family coverage for Mr. Raymond and his COBRA qualified beneficiaries (in total, $24,451) pursuant to his 2006 employment agreement.

(3)	Represents the total salary continuation payments that the NEO would collect (12 months of payment for the NEOs other than Mr. Shepcaro who was entitled to receive $37,500 per month for 18 months.).

(4)	Represents payment by us of 12 months of COBRA health insurance premiums for family coverage for the NEO and his COBRA qualified beneficiaries.

(5)	Represents payment by us of 18 months of COBRA health insurance premiums for family coverage for the NEO and his COBRA qualified beneficiaries.

New 2011 Employment Agreements

On January 3, 2011, the board of directors adopted and approved new employment agreements for Messrs. Shepcaro, Downie, Kolman, and Terlizzi effective January 1, 2011. These replace the Superseded Employment Agreements. Set forth below are summaries of all of our recently adopted employment agreements and arrangements with our named executive officers. The following summaries do not contain all of the terms of such agreements, and we refer to the agreements, which are included as exhibits to this registration statement, of which this prospectus forms a part of, for a complete understanding of the terms thereof.

Eric Shepcaro. On January 1, 2011, we entered into an employment agreement with Mr. Shepcaro, our Chief Executive Officer and a member of our board of directors. The employment agreement has a term of three years (unless terminated earlier or extended pursuant to the terms therein). Pursuant to the employment agreement, Mr. Shepcaro receives an annual base salary of $340,000. Mr. Shepcaro shall be entitled to receive an annual target bonus of $340,000 (prorated based on Mr. Shepcaro’s duration of service in such year), payable annually in the discretion of the board of directors. In addition, he may receive annual grants of stock options and/or restricted stock at the discretion of the board of directors and/or the compensation committee. If we terminate Mr. Shepcaro’s employment Without Cause (as defined in the employment agreement), or Mr. Shepcaro terminates for Good Reason (as defined in the employment agreement), then we will pay Mr. Shepcaro (i) continued monthly base salary payments (at the rate in effect at the time of his termination) for a period of 18 months from the date of such termination, (ii) a pro rated bonus, and (iii) reimbursement for COBRA health insurance costs for 18 months or, if shorter, until he becomes covered by the group health plan of another employer. If we terminate Mr. Shepcaro due to Permanent Disability (as defined in the employment agreement), then we will pay Mr. Shepcaro (i) continued monthly base salary payments for a period of 12 months from the date of such termination and (ii) reimbursement for COBRA health insurance costs for 12 months or, if shorter, until he becomes covered by the group health plan of another employer. In exchange, Mr. Shepcaro must execute within 30 days after terminating employment (i) a release of claims agreement and (ii) a non-competition and non-solicitation agreement having a term of at least 18 months. If Mr. Shepcaro is terminated by us for Cause (as defined in the employment agreement), we will have no further obligations, except for payment of any base salary compensation and expense reimbursement accrued and unpaid. If Mr. Shepcaro is terminated because of his death, we will have no further obligations, except for payment of all amounts of base salary compensation and expense reimbursement accrued and unpaid as well as a pro rated bonus. In the event of Mr. Shepcaro’s termination by us Without Cause, for Good Reason, or Mr. Shepcaro’s Permanent Disability, he will be subject to customary 18-month post-termination non-compete and non-solicitation provisions and restriction on the unauthorized disclosure of confidential and proprietary information, or in all other events, he will be subject to customary 12-month post-termination non-compete and non-solicitation provisions and restriction on the unauthorized disclosure of confidential and proprietary information. Pursuant to Mr. Shepcaro’s employment agreement, (i) “Without Cause” is generally defined to include termination for any reason other than for Cause, death or Permanent Disability; (ii) “Good Reason” is generally defined to include (A) a material reduction in Mr. Shepcaro’s job title and position such that he is no longer the Chief Executive Officer of the company or no longer reports to the board of directors, (B) Mr. Shepcaro is required to relocate to an office location outside the greater New York City metropolitan area, (C) a material reduction in Mr. Shepcaro’s base salary as set forth in his employment agreement, or (D) in the event of the sale of substantially all of the assets of the Company, the purchaser of such assets does not assume the obligations of the company set forth in the employment agreement, in each case, without the prior consent of Mr. Shepcaro and which continues for 30 days following receipt of written notice; (iii) “Permanent Disability” is generally defined to include the inability to perform duties due to a physical or mental condition for a period of 90 consecutive days or an aggregate of 120 days in any 12 month period; and (iv) “Cause” is generally defined to include (A) gross negligence or willful misfeasance in the performance of duties, (B) refusal to perform ethical and lawful duties assigned by the board of directors that continues uncured for 15 days following receipt of written notice from a majority of the board of directors or the compensation committee, (C) engagement in fraud or embezzlement that adversely affects us and our affiliates, (D) acts of dishonesty that materially adversely affects us or our affiliates, (E) a material breach of certain provisions in the agreement which is not cured within 30 days after notice, (F) the commitment of a felony,

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(G) commencement of employment with another company while an employee of the company without prior consent, (H) an act involving moral turpitude that adversely affects Mr. Shepcaro’s ability to serve us, (I) a violation of any federal, state or local law or regulation applicable to us, any of our affiliates or their respective businesses which causes material injury to us or our affiliates or the intentional or knowing violation of any law or regulation applicable to us, or (J) conduct that constitutes a material breach of any statutory or common law duty of loyalty to us or our affiliates.

Christopher W. Downie. On January 1, 2011, we entered into an employment agreement with Mr. Downie, our President, Chief Financial Officer and Treasurer. The employment agreement has a term of three years (unless terminated earlier or extended pursuant to the terms therein). Pursuant to the employment agreement, Mr. Downie receives an annual base salary of $290,000. Mr. Downie shall be entitled to receive an annual target bonus of $290,000 (prorated based on Mr. Downie’s duration of service in such year), payable annually in the discretion of the board of directors. In addition, he may receive annual grants of stock options and/or restricted stock at the discretion of the board of directors and/or the compensation committee. If we terminate Mr. Downie’s employment Without Cause (as defined in the employment agreement), or Mr. Downie terminates for Good Reason (as defined in the employment agreement), then we will pay Mr. Downie (i) continued monthly base salary payments (at the rate in effect at the time of his termination) for a period of 12 months from the date of such termination, (ii) a pro rated bonus, and (iii) reimbursement for COBRA health insurance costs for 12 months or, if shorter, until he becomes covered by the group health plan of another employer. In exchange, Mr. Downie must execute within 30 days after terminating employment (i) a release of claims agreement and (ii) a non-competition and non-solicitation agreement having a term of at least 12 months. If Mr. Downie is terminated by us for Cause (as defined in the employment agreement), we will have no further obligations, except for payment of any base salary compensation and expense reimbursement accrued and unpaid. If Mr. Downie is terminated because of his death, or Permanent Disability (as defined in the employment agreement), we will have no further obligations, except for payment of all amounts of base salary compensation and expense reimbursement accrued and unpaid as well as a pro rated bonus. Upon Mr. Downie’s termination by us for any reason, he will be subject to customary 12-month post-termination non-compete and non-solicitation provisions and restriction on the unauthorized disclosure of confidential and proprietary information. Pursuant to Mr. Downie’s employment agreement, (i) “Without Cause” is generally defined to include termination for any reason other than for Cause, death or Permanent Disability; (ii) “Good Reason” is generally defined to include (A) a material reduction in Mr. Downie’s job title and position such that he is no longer the President of the company, (B) Mr. Downie is required to relocate to an office location outside the greater New York City metropolitan area, (C) a material reduction in Mr. Downie’s base salary as set forth in his employment agreement, or (D) in the event of the sale of substantially all of the assets of the Company, the purchaser of such assets does not assume the obligations of the company set forth in the employment agreement, in each case, without the prior consent of Mr. Downie and which continues for 30 days following receipt of written notice; (iii) “Permanent Disability” is generally defined to include the inability to perform duties due to a physical or mental condition for a period of 90 consecutive days or an aggregate of 120 days in any 12 month period; and (iv) “Cause” is generally defined to include (A) gross negligence or willful misfeasance in the performance of duties, (B) refusal to perform ethical and lawful duties assigned by the board of directors that continues uncured for 15 days following receipt of written notice from a majority of the board of directors or the compensation committee, (C) engagement in fraud or embezzlement that adversely affects us and our affiliates, (D) acts of dishonesty that materially adversely affects us or our affiliates, (E) a material breach of certain provisions in the agreement which is not cured within 30 days after notice, (F) the commitment of a felony, (G) commencement of employment with another company while an employee of the company without prior consent, (H) an act involving moral turpitude that adversely affects Mr. Downie’s ability to serve us, (I) a violation of any federal, state or local law or regulation applicable to us, any of our affiliates or their respective businesses which causes material injury to us or our affiliates or the intentional or knowing violation of any law or regulation applicable to us, or (J) conduct that constitutes a material breach of any statutory or common law duty of loyalty to us or our affiliates.

William J. Kolman. On January 1, 2011, we entered into an employment agreement with Mr. Kolman, our Executive Vice President, Sales. The employment agreement has a term of three years (unless terminated earlier or extended pursuant to the terms therein). Pursuant to the employment agreement, Mr. Kolman receives an

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annual base salary of $200,000. Mr. Kolman shall be eligible to receive an annual target bonus of $50,000 (prorated based on Mr. Kolman’s duration of service in such year), payable annually in the discretion of the board of directors. In addition, he shall be eligible to receive an annual bonus at the rate of $150,000 (but payable monthly) pursuant to the Company’s Sales Compensation Plan. He may also receive annual grants of stock options and/or restricted stock at the discretion of the board of directors and/or the compensation committee. If we terminate Mr. Kolman’s employment Without Cause (as defined in the employment agreement), or Mr. Kolman terminates for Good Reason (as defined in the employment agreement), then we will pay Mr. Kolman (i) continued monthly base salary payments (at the rate in effect at the time of his termination) for a period of 12 months from the date of such termination, (ii) a pro rated bonus, and (iii) reimbursement for COBRA health insurance costs for 12 months or, if shorter, until he becomes covered by the group health plan of another employer. In exchange, Mr. Kolman must execute within 30 days after terminating employment (i) a release of claims agreement and (ii) a non-competition and non-solicitation agreement for 12 months. If Mr. Kolman is terminated by us for Cause (as defined in the employment agreement), we will have no further obligations, except for payment of any base salary compensation and expense reimbursement accrued and unpaid. If Mr. Kolman is terminated because of his death, or Permanent Disability (as defined in the employment agreement), we will have no further obligations, except for payment of all amounts of base salary compensation and expense reimbursement accrued and unpaid as well as a pro rated bonus. Upon Mr. Kolman’s termination by us for any reason, he will be subject to customary 6-month post-termination non-compete and non-solicitation provisions and restriction on the unauthorized disclosure of confidential and proprietary information. Pursuant to Mr. Kolman’s employment agreement, (i) “Without Cause” is generally defined to include termination for any reason other than for Cause, death or Permanent Disability; (ii) “Good Reason” is generally defined to include (A) a material reduction in Mr. Kolman’s authorities, duties, and responsibilities such that he is no longer a senior executive of the company, (B) Mr. Kolman is required to relocate to an office location outside the greater New York City metropolitan area, (C) a material reduction in Mr. Kolman’s base salary as set forth in his employment agreement, or (D) in the event of the sale of substantially all of the assets of the Company, the purchaser of such assets does not assume the obligations of the company set forth in the employment agreement, in each case, without the prior consent of Mr. Kolman and which continues for 30 days following receipt of written notice; (iii) “Permanent Disability” is generally defined to include the inability to perform duties due to a physical or mental condition for a period of 90 consecutive days or an aggregate of 120 days in any 12 month period; and (iv) “Cause” is generally defined to include (A) gross negligence or willful misfeasance in the performance of duties, (B) refusal to perform ethical and lawful duties assigned by the board of directors that continues uncured for 15 days following receipt of written notice from a majority of the board of directors or the compensation committee, (C) engagement in fraud or embezzlement that adversely affects us and our affiliates, (D) acts of dishonesty that materially adversely affects us or our affiliates, (E) a material breach of certain provisions in the agreement which is not cured within 30 days after notice, (F) the commitment of a felony, (G) commencement of employment with another company while an employee of the company without prior consent, (H) an act involving moral turpitude that adversely affects Mr. Kolman’s ability to serve us, (I) a violation of any federal, state or local law or regulation applicable to us, any of our affiliates or their respective businesses which causes material injury to us or our affiliates or the intentional or knowing violation of any law or regulation applicable to us, or (J) conduct that constitutes a material breach of any statutory or common law duty of loyalty to us or our affiliates.

Michael Terlizzi. On January 1, 2011, we entered into an employment agreement with Mr. Terlizzi, our Executive Vice President, Engineering and Construction. The employment agreement has a term of three years (unless terminated earlier or extended pursuant to the terms therein). Pursuant to the employment agreement, Mr. Terlizzi receives an annual base salary of $205,000. Mr. Terlizzi shall be eligible to receive an annual target bonus of $150,000 (prorated based on Mr. Terlizzi’s duration of service in such year), payable annually in the discretion of the board of directors. In addition, he may receive annual grants of stock options and/or restricted stock at the discretion of the board of directors and/or the compensation committee. If we terminate Mr. Terlizzi’s employment Without Cause (as defined in the employment agreement), or Mr. Terlizzi terminates for Good Reason (as defined in the employment agreement), then we will pay Mr. Terlizzi (i) continued monthly base salary payments (at the rate in effect at the time of his termination) for a period of 12 months from the date

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of such termination, (ii) a pro rated bonus, and (iii) reimbursement for COBRA health insurance costs for 12 months or, if shorter, until he becomes covered by the group health plan of another employer. In exchange, Mr. Terlizzi must execute within 30 days after terminating employment (i) a release of claims agreement and (ii) a non-competition and non-solicitation agreement having a term of at least 12 months. If Mr. Terlizzi is terminated by us for Cause (as defined in the employment agreement), we will have no further obligations, except for payment of any base salary compensation and expense reimbursement accrued and unpaid. If Mr. Terlizzi is terminated because of his death, or Permanent Disability (as defined in the employment agreement), we will have no further obligations, except for payment of all amounts of base salary compensation and expense reimbursement accrued and unpaid as well as a pro rated bonus. Upon Mr. Terlizzi’s termination by us for any reason, he will be subject to customary 6-month post-termination non-compete and non-solicitation provisions and restriction on the unauthorized disclosure of confidential and proprietary information. Pursuant to Mr. Terlizzi’s employment agreement, (i) “Without Cause” is generally defined to include termination for any reason other than for Cause, death or Permanent Disability; (ii) “Good Reason” is generally defined to include (A) a material reduction in Mr. Terlizzi’s authorities, duties, and responsibilities such that he is no longer a senior executive of the company, (B) Mr. Terlizzi is required to relocate to an office location outside the greater New York City metropolitan area, (C) a material reduction in Mr. Terlizzi’s base salary as set forth in his employment agreement, or (D) in the event of the sale of substantially all of the assets of the Company, the purchaser of such assets does not assume the obligations of the company set forth in the employment agreement, in each case, without the prior consent of Mr. Terlizzi and which continues for 30 days following receipt of written notice; (iii) “Permanent Disability” is generally defined to include the inability to perform duties due to a physical or mental condition for a period of 90 consecutive days or an aggregate of 120 days in any 12 month period; and (iv) “Cause” is generally defined to include (A) gross negligence or willful misfeasance in the performance of duties, (B) refusal to perform ethical and lawful duties assigned by the board of directors that continues uncured for 15 days following receipt of written notice from a majority of the board of directors or the compensation committee, (C) engagement in fraud or embezzlement that adversely affects us and our affiliates, (D) acts of dishonesty that materially adversely affects us or our affiliates, (E) a material breach of certain provisions in the agreement which is not cured within 30 days after notice, (F) the commitment of a felony, (G) commencement of employment with another company while an employee of the company without prior consent, (H) an act involving moral turpitude that adversely affects Mr. Terlizzi’s ability to serve us, (I) a violation of any federal, state or local law or regulation applicable to us, any of our affiliates or their respective businesses which causes material injury to us or our affiliates or the intentional or knowing violation of any law or regulation applicable to us, or (J) conduct that constitutes a material breach of any statutory or common law duty of loyalty to us or our affiliates.

Mr. Raymond’s 2006 Employment Agreement

Set forth below is a discussion of our employment agreement with Mr. Raymond, whose employment was discharged without cause effective April 15, 2011. The following discussion does not contain all of the terms of such employment agreement, and we refer you to the agreement, which is included as an exhibit to this registration statement, of which this prospectus forms a part of, for a complete understanding of the terms thereof.

On September 20, 2006, we entered into an employment agreement with Mr. Raymond, whereby he became our Acting Chief Executive Officer, President, General Counsel and Corporate Secretary. Subsequently, Mr. Raymond was appointed Senior Vice President and General Counsel. Prior to Mr. Raymond’s discharge, he served as our Senior Vice President, Facility Acquisition. Pursuant to this employment agreement, Mr. Raymond received an annual base salary of $200,000. Mr. Raymond was also entitled to an annual target bonus in an amount up to $200,000 in the discretion of our board of directors. Pursuant to his employment agreement, Mr. Raymond was granted 38,238 shares of our Series B Contingent Preferred Stock and we agreed to make loans in an amount that would be necessary to pay the tax liability attributable to filing a Section 83(b) election under the Code with respect to the Series B Contingent Preferred Stock. Mr. Raymond was subsequently awarded an additional 5,736 shares of our Series B Contingent Preferred Stock in 2007. Pursuant to Mr. Raymond’s employment agreement, because his employment was discharged by us without cause (as defined in the employment agreement) effective April 15, 2011, Mr. Raymond is entitled to receive the

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following, without duty to mitigate: (i) 12 months of base salary continuation and (ii) up to 12 months of company-paid health insurance benefits. As a result of Mr. Raymond’s discharge, he is subject to customary 12-month post-termination non-compete and non-solicitation provisions and a 24-month restriction on the unauthorized disclosure of confidential and proprietary information.

Equity Incentive Plans

2010 Stock Incentive Plan

In November 2010, we adopted, and received stockholder approval of, The Telx Group, Inc. 2010 Stock Incentive Plan, which we refer to herein as the 2010 Plan. We expect that equity awards will occur only under the 2010 Plan. Stockholder approval of the 2010 Plan primarily enabled us to satisfy Nasdaq listing requirements, and to make awards that qualify as performance-based compensation that is exempt from the deduction limitation set forth under Section 162(m) of the Internal Revenue Code of 1986, as amended, referred to herein as the Code. Section 162(m) generally limits the corporate income tax deduction to $1,000,000 annually for the non performance-based compensation paid to each of the Chief Executive Officer and the three other highest paid executive officers of the Company (other than the CFO).

The 2010 Plan authorizes discretionary awards in the form of stock options, stock appreciation rights, or SARs, restricted shares or units, unrestricted shares, deferred share units, performance awards, and dividend equivalent rights. Our board of directors believes that the 2010 Plan will be an important factor in attracting, retaining and motivating employees, consultants, and directors of the Company and its affiliates, collectively referred to herein as eligible persons. Our board of directors believes that we need the flexibility, acting primarily through our compensation committee, both to have an ongoing reserve of common stock available for future equity-based awards, and to make future awards in a variety of forms.

Pursuant to the 2010 Plan, we may issue up to 200,000 shares of our common stock provided that such number of shares shall automatically increase to 5.2% of the total shares outstanding immediately after our initial public offering closes (in either case with such total number of shares being adjusted for future stock splits, stock dividends, recapitalizations, and other similar transactions). The shares of our common stock that are subject to any award that expires, or is forfeited, cancelled, settled, or becomes unexercisable without the issuance of shares, will again be available for subsequent awards. In addition, future awards may occur with respect to shares of our common stock that we refrain from otherwise delivering pursuant to an award as payment of either the exercise price of an award or applicable withholding and employment taxes. We receive no cash consideration for the granting of awards under the 2010 Plan. However, if a stock option were to be exercised, we would receive the exercise price for the shares being purchased, unless the exercise occurs pursuant to a cashless alternative that we approve.

Administration of the 2010 Plan will be carried out by our compensation committee or our board of directors if no such committee is appointed; provided that our board may act in lieu of the compensation committee at any time. Either our compensation committee or our board of directors may delegate its authority under the 2010 Plan to one or more officers but it may not delegate its authority with respect to making awards to individuals subject to Section 16 of the Exchange Act. As used in this summary, the term administrator means the compensation committee or the board of directors or its delegate, if any. With respect to decisions involving an award intended to satisfy the requirements of section 162(m) of the Internal Revenue Code, the administrator is to consist solely of two or more directors who are “outside directors” for purposes of that Code section, and with respect to awards to individuals subject to Section 16 of the Exchange Act, the administrator is to consist solely of two or more directors who are “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. The 2010 Plan provides that we and our affiliates will indemnify members of the administrative committee and their delegates against any claims, liabilities, or costs arising from the good faith performance of their duties under the 2010 Plan. The 2010 Plan will release these individuals from liability for good faith actions associated with the 2010 Plan’s administration.

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Subject to the terms of the 2010 Plan, the administrator has express authority to determine the eligible persons who will receive awards, the number of shares of our common stock to be covered by each award, and the terms and conditions of awards. The administrator has broad discretion to prescribe, amend, and rescind rules relating to the 2010 Plan and its administration, to interpret and construe the 2010 Plan and the terms of all award agreements, and to take all actions necessary or advisable to administer the 2010 Plan. Within the limits of the 2010 Plan, the administrator may accelerate the vesting of any awards, allow the exercise of unvested awards, and may modify, replace, cancel, or renew any awards. Awards shall become vested over a period of not less than four years (or, in the case of vesting with respect to Performance Awards, over a period of not less than one year measured from the commencement of the period over which performance is evaluated) following the grant date; provided, however, that, notwithstanding the foregoing, awards that result in the issuance of an aggregate of up to 10% of the shares available under the 2010 Plan may be granted to any one or more eligible persons without respect to such minimum vesting provision. The administrator may buy-out, or replace, any award, including (but subject to applicable stockholder approval requirements as set forth in the 2010 Plan) a stock option or SAR having an exercise price that is above the current fair market value of the underlying shares.

The administrator may grant options that are intended to qualify as incentive stock options, which we refer to as ISOs, only to employees, if any, and may grant all other awards to eligible persons. Not more than 200,000 shares shall be issued pursuant to ISOs; provided that any shares that are not issued pursuant to an ISO as a result of its cancellation or expiration shall again be available for future ISO awards. Stock options granted under the 2010 Plan will provide award recipients, or participants, with the right to purchase shares of our common stock at a predetermined exercise price. The administrator may grant stock options that are intended to qualify as ISOs or that are not intended to so qualify, which we refer to as Non-ISOs. The 2010 Plan also provides that ISO treatment may not be available for stock options that become first exercisable in any calendar year to the extent the value of the shares that are the subject of the stock option exceed $100,000, based upon the fair market value of the shares of our common stock on the option grant date.

A SAR generally permits a participant who receives it to receive, upon exercise, cash and/or shares of our common stock equal in value to the excess of the fair market value, on the date of exercise, of the shares of our common stock with respect to which the SAR is being exercised, over the exercise price of the SAR for such shares. The administrator may grant SARs in tandem with options, or independently of them. SARs that are independent of options may limit the value payable on its exercise to a percentage.

The exercise price of ISOs, Non-ISOs, and SARs may not be less than 100% of the fair market value on the grant date of the shares of our common stock subject to the award, although the exercise price of ISOs may not be less than 110% of the fair market value on the grant date of the underlying shares of our common stock subject to the award for participants who own more than ten percent of our shares of common stock on the grant date. To the extent vested and exercisable in accordance with the agreement granting them, a stock option or SAR may be exercised in whole or in part, and from time to time during its term, subject to earlier termination relating to a holder’s termination of employment or service. With respect to stock options, unless otherwise provided in an award agreement, payment of the exercise price may be made in any of the following forms, or combination of them: cash or check in U.S. dollars, certain shares of our common stock, cashless exercise under a program the administrator approves.

The term over which participants may exercise stock options and SARs may not exceed ten years from the date of grant; five years in the case of ISOs granted to employees who, at the time of grant, own more than 10% of our outstanding shares of common stock. Under the 2010 Plan, no participant may receive stock options and SARs that relate to more than 25% of the maximum number of shares of our common stock that are authorized for awards under the 2010 Plan.

Under the 2010 Plan, the administrator may grant restricted stock that is forfeitable until certain vesting requirements are met, may grant RSUs that represent the right to receive shares of our common stock after certain vesting requirements are met or cash under certain circumstances, and may grant unrestricted stock as to

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which the participant’s interest is immediately vested. For restricted awards, the 2010 Plan provides the administrator with discretion to determine the terms and conditions under which a participant’s interests in such awards become vested. The 2010 Plan authorizes unrestricted stock awards that vest in full upon the date of a grant or other date determined by the administrator.

The 2010 Plan also authorizes awards of deferred share units in order to permit certain directors, officers, consultants, or select members of management to defer their receipt of compensation payable in cash or shares of our common stock, including shares that would otherwise be issued upon the vesting of restricted stock and RSUs. Deferred share units represent a future right to receive shares of our common stock.

The 2010 Plan authorizes the administrator to grant performance-based awards in the form of performance units that the administrator may, or may not, designate as “performance compensation awards” that are intended to be exempt from Internal Revenue Code Section 162(m) limitations. In either case, performance units will vest and/or become payable based upon the achievement, within the specified period of time, of performance objectives applicable to the individual, us, or any affiliate. Performance units will be payable in shares of common stock, cash, or some combination of the two, subject to an individual participant limit of $2,000,000 (determined at the time of payout) and 25% of the maximum number of shares of our common stock that are authorized for awards under the 2010 Plan. The administrator will decide the length of performance periods, but the periods may not be less than one fiscal year.

With respect to performance compensation awards, the 2010 Plan requires that the administrator specify in writing the performance period to which the award relates, and an objective formula by which to measure whether and the extent to which the award is earned on the basis of the level of performance achieved with respect to one or more performance measures. Once established for a performance period, the performance measures and performance formula applicable to the award may not be amended or modified in a manner that would cause the compensation payable under the award to fail to constitute performance-based compensation under Internal Revenue Code Section 162(m). Under the 2010 Plan, the possible performance measures for performance compensation awards may include one or more of the following, applied in total or on a per share basis:

•

basic, diluted or adjusted earnings per share;

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sales or revenue;

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EBITDA, or earnings before interest, taxes and other adjustments;

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basic or adjusted net income;

•

returns on equity, assets, capital, revenue or similar measure;

•

economic value added;

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working capital;

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total stockholder return; and

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product development, product market share, research, licensing, litigation, human resources, information services, mergers, acquisitions, and sales of assets of affiliates or business units.

Each performance measure will be, to the extent applicable, determined in accordance with generally accepted accounting principles as consistently applied by us, or such other standard applied by the administrator and, if so determined by the administrator, and in the case of a performance compensation award, to the extent permitted under Internal Revenue Code Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Performance measures may vary from performance period to performance period, and from participant to participant, and may be established on a stand-alone basis, in tandem or in the alternative.

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As a condition to the issuance of shares of our common stock pursuant to awards, the 2010 Plan requires satisfaction of any applicable federal, state, local, or foreign withholding tax obligations that may arise in connection with the award or the issuance of shares of our common stock.

Finally, the 2010 Plan authorizes the awarding of dividend equivalent rights to any eligible person. These rights may be independent of other awards, or attached to awards (other than stock options and SARs), and in all cases represent the participant’s right to collect any dividends that we declare and pay to our stockholders during the term of the dividend equivalent right. Unless an award agreement provides otherwise, the distributions attributable to dividend equivalent rights that are attached to other awards shall occur when shares of our common stock are issued to settle the underlying award.

Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of other than by will or the laws of descent and distribution, except to the extent the administrator permits lifetime transfers to charitable institutions, certain family members, or related trusts, or as otherwise approved by the administrator.

The administrator will equitably adjust the number of shares covered by each outstanding award, and the number of shares that have been authorized for issuance under the 2010 Plan, but as to which no awards have yet been granted or that have been returned to the 2010 Plan upon cancellation, forfeiture, or expiration of an award, as well as the price per share covered by each such outstanding award, to reflect any increase or decrease in the number of issued shares resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the shares of our common stock, or any other increase or decrease in the number of issued shares effected without receipt of consideration by us. In the event of any such transaction or event, the administrator may provide in substitution for any or all outstanding options under the 2010 Plan such alternative consideration, including securities of any surviving entity, as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all options so replaced. In any case, such substitution of securities will not require the consent of any person who is granted options pursuant to the 2010 Plan.

In addition, in the event or in anticipation of a change in control, as defined in the 2010 Plan, the administrator may at any time in its sole and absolute discretion and authority, without obtaining the approval or consent of our stockholders or any participant with respect to his or her outstanding awards, except to the extent an award provides otherwise, take one or more of the following actions: (i) arrange for or otherwise provide that each outstanding award will be assumed or substituted with a substantially equivalent award by a successor corporation or a parent or subsidiary of such successor corporation; (ii) accelerate the vesting of awards for any period, and may provide for termination of unexercised options and SARs at the end of that period, so that awards shall vest (and, to the extent applicable, become exercisable) as to the shares of our common stock that otherwise would have been unvested and provide that our repurchase rights with respect to shares of our common stock issued upon exercise of an award shall lapse as to the shares of our common stock subject to such repurchase right; or (iii) arrange or otherwise provide for payment of cash or other consideration to participants in exchange for the satisfaction and cancellation of outstanding awards.

Notwithstanding the above, an award may provide that in the event a participant holding an award assumed or substituted by the successor corporation in a change in control is involuntarily terminated, as defined in the 2010 Plan, by the successor corporation in connection with, or within 12 months following consummation of, the change in control, then any assumed or substituted award held by the terminated participant at the time of termination shall accelerate and become fully vested, and exercisable in full in the case of options and SARs, and any repurchase right applicable to any shares of our common stock shall lapse in full. The acceleration of vesting and lapse of repurchase rights provided for in the previous sentence shall occur immediately prior to the effective date of the participant’s termination. Finally, if we dissolve or liquidate, all awards will immediately terminate, subject to the ability of our board of directors to exercise any discretion that the board of directors may exercise in the case of a change in control.

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The term of the 2010 Plan is ten years from November 1, 2010. Our board of directors may from time to time, amend, alter, suspend, discontinue, or terminate the 2010 Plan; provided that no amendment, suspension, or termination of the 2010 Plan shall materially and adversely affect awards already granted unless it relates to an adjustment pursuant to certain transactions that change our capitalization or it is otherwise mutually agreed between the participant and the administrator. An amendment will not become effective without the approval of our stockholders if it increases the number of shares of common stock that may be issued under the 2010 Plan (other than changes to reflect certain corporate transactions and changes in capitalization as described above). Notwithstanding the foregoing, the administrator may amend the 2010 plan to eliminate provisions which are no longer necessary as a result of changes in tax or securities laws or regulations, or in the interpretation thereof.

As of March 31, 2011, 26,327 stock options and 62,497 restricted stock units have been granted to employees under the 2010 Plan.

2007 Employee Stock Plan

Certain of our employees hold awards that were made and continue to be outstanding under The Telx Group, Inc. 2007 Employee Stock Plan, which we refer to as the 2007 Plan, and which was initially effective May 1, 2007, and thereafter approved by our stockholders. The 2007 Plan has a ten year term, subject to earlier expiration by our board of directors. No awards will occur pursuant to the 2007 Plan after November 1, 2010 because the 2010 Plan is the sole source for future equity-based awards.

The 2007 Plan initially authorized grants for 125,000 shares of our common stock, and as of December 31, 2010, awards with respect to 607 shares had been exercised, with the foregoing having been adjusted to reflect our July 2008 1-for-10 reverse stock split. All of these awards take the form of options that vest monthly over periods of, normally, 48 months following the employee’s hire date. Terminations of employment for any reason generally result in the forfeiture of all unvested shares. A change in control may result in full vesting of award, their continuation, or their immediate settlement (as determined by our board or the compensation committee).

Our board of directors administers the 2007 Plan except to the extent it delegates that authority to our CEO. Such administration involves broad discretion to interpret the 2007 Plan and to make all determinations that are necessary or advisable for its administration. Our board of directors or an authorized delegate may amend or terminate the 2007 Plan, subject to any applicable stockholder approval requirements. Outstanding awards may also be amended, but such amendments require the consent of any award holder who is adversely affected by the amendment.

Limitations on Liability; Indemnification of Directors and Officers

Our amended and restated certificate of incorporation, which will be in effect upon the completion of this offering, contains provisions that limit the personal liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

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any breach of the director’s duty of loyalty to us or our stockholders;

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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

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unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or

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any transaction from which the director derived an improper personal benefit.

Our amended and restated certificate of incorporation and amended and restated bylaws to be in effect upon the completion of this offering provide that we shall indemnify our directors and officers, in each case to the

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fullest extent permitted by Delaware law. Our amended and restated certificate of incorporation and our amended and restated bylaws also provide that, to the fullest extent allowed by applicable law, we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We expect to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements will provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these certificate of incorporation and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In addition to the director and executive officer compensation arrangements discussed above under “Executive Compensation”, the following is a description of transactions since January 1, 2008 to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or persons or entities affiliated with them, had or will have a direct or indirect material interest.

GI Partners

GI Partners affiliated funds, GI Partners Fund II, L.P. and GI Partners Side Fund II, L.P., which we refer to herein collectively as the GI Partners Funds, own a majority of our outstanding Series A Preferred Stock. The shares of Series A Preferred Stock owned by the GI Partners Funds, together with the shares of common stock owned by the GI Partners Funds, constitute a majority of our outstanding common stock on an as-converted to common stock basis. As of December 31, 2010, GI Partners Funds beneficially owned the substantial majority of our outstanding common stock on an as-converted basis. In connection with our acquisition by the GI Partners Funds in 2006, the GI Partners Funds are parties to several agreements, including, securities purchase agreements, contribution and subscription agreements and/or similar agreements, with us relating to the GI Partners Funds acquisition of our securities.

Howard Park of GI Partners currently serves as the chairman of our board of directors. In addition, Eric Harrison, a former managing director of GI Partners, also serves on our board of directors. GI Partners personnel serving, or who have served, as directors and/or officers of us may have certain indemnification rights from us (including, without limitation, under indemnification agreements or other agreements, our certificate of incorporation and/or bylaws).

Management Agreement with GI Manager

On October 3, 2006, we entered into a management agreement with GI Manager L.P., or the GI Manager, an affiliate of both GI Partners Funds, as amended on March 3, 2010 and June 2, 2010, pursuant to which GI Manager agreed to perform certain financial and management consulting and transaction advisory services at the reasonable direction of our board of directors.

Pursuant to the management agreement, as amended, among other things, GI Manager is entitled to a management base fee, as compensation for certain non-transaction related services specifically requested by our board of directors, in an annual amount to be determined by our board of directors during the first calendar quarter of each year during the term of the agreement, but not to exceed $750,000 per year, plus reasonable expenses. For each of the years ended December 31, 2008, 2009 and 2010, our board of directors did not request from GI Manager any non-transaction related services and therefore, a management base fee was never incurred. In addition to this annual management base fee, GI Manager is also entitled to a 1.5% transaction closing fee with respect to any refinancing (other than with respect to the New Credit Facility which GI Manager was entitled to a 0.75% transaction closing fee), restructuring, equity or debt offering, acquisition, merger, consolidation, business combination, sale or divestiture. Under the management agreement, we also have certain indemnification obligations.

On June 11, 2010, we paid GI Manager a fee of $1.3 million in connection with the New Credit Facility. There have been no other fees owed or paid to GI Manager in 2008, 2009 and 2010 under the management agreement. On March 18, 2011, we paid GI Manager a fee of $375,000 in connection with the Incremental Term Loan.

The management agreement will terminate immediately upon the date that this registration statement, of which this prospectus forms a part, is declared effective by the SEC.

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Securities Purchase Agreement

On April 11, 2008, we sold an aggregate of 1,524,000 shares (not adjusted for our subsequent 1-for-10 reverse stock split) of Series A Preferred Stock at a per share purchase price of $10 pursuant to a securities purchase agreement. Purchasers of the Series A Preferred Stock were the GI Partners Funds and Telxinvest, LLC. Former and current executive officers and directors, including Mr. Shepcaro, our chief executive officer, Mr. Downie, our president, chief financial officer and treasurer and Mr. Kolman, our executive vice president of sales, collectively own 89% of Telxinvest, LLC. Three of our former employees own the remainder. The following table summarizes purchases of Series A Preferred Stock by the above-listed investors:


Name of Stockholder	Number of Shares of Series A Preferred Stock*
GI Partners Fund II, L.P.		107,205
GI Partners Side Fund II, L.P.		42,795
Telxinvest, LLC		2,400

Number of shares adjusted for our July 2008 1-for-10 reverse stock split.

Contribution and Subscription Agreement

On April 1, 2007, we entered into a contribution and subscription agreement with Telxinvest, LLC pursuant to which we agreed to issue and sell to Telxinvest, LLC 80,000 shares (not adjusted for our subsequent 1-for-10 reverse stock split) of Series A Preferred Stock at a per share purchase price of $10 for a total of $800,000 in cash contribution. $100,000 of the purchase price was paid in April 2008.

Loans

In connection with certain 83(b) elections under the Code by former and current executive officers and directors, we extended loans to three of our former executive officers and Messrs. Shepcaro, Downie, Kolman and Terlizzi for an aggregate total of $879,155 (as of March 5, 2010). These loans to our current executive officers are no longer outstanding.

Stockholders Agreement

We are a party to that certain Second Amended and Restated Stockholders Agreement, as amended, effective as of March 15, 2007, among us and certain holders of our common stock and preferred stock, including the GI Partners Funds. The stockholders agreement provides for, among other things, certain rights relating to the registration of the stockholders’ shares of common stock, including those shares issued upon conversion of their preferred stock. See “Description of Capital Stock—Registration Rights” below for additional information.

Digital Realty Trust

As of January 1, 2007, a fund affiliated with GI Partners beneficially owned approximately 12% of Digital Realty Trust. Currently, GI Partners owns 0% of Digital Realty Trust. 10 of our 14 leased facilities are leased to us by Digital Realty Trust, representing 36% of our total facility space as of March 31, 2011. The initial terms of these Digital Realty Trust leases expire in 2026, and we have options to extend them through 2046. Generally, under these Digital Realty Trust leases, we are obligated to pay a certain percentage of facility specific annual gross revenue that exceeds a stipulated threshold. We paid Digital Realty Trust an aggregate total of $12.2 million in 2008, $16.0 million in 2009, $20.2 million in 2010 and $6.9 million for the three months ended March 31, 2011 in lease payments.

In connection with the lease agreements, we entered into an operating agreement with Digital Realty Trust and its affiliates, effective as of December 1, 2006, pursuant to which we agreed to joint sales and marketing

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efforts. In addition, Digital Realty Trust agreed to provide us with an option to lease certain newly acquired or converted buildings and provided us with a $2.4 million alteration allowance. This alteration allowance serves to fund any alterations we request to be made in the facilities we lease from Digital Realty Trust. We have agreed to repay the alteration allowance as supplemental rent payments over a 10 year period at an interest rate of 10% per annum compounded monthly upon substantial completion of the requested alteration. In addition, in connection with the lease agreements, we entered into a management agreement with Digital Realty Trust and its affiliates, effective as of December 1, 2007, pursuant to which we agreed to provide Digital Realty Trust with certain management services in exchange for a management fee of one percent of rents actually collected by us.

Pursuant to a stock option agreement effective as of November 20, 2006 and thereafter amended and restated on March 15, 2007, we granted Digital Realty Trust an option, and certain preemptive rights, to acquire approximately 10% of our Series A Preferred Stock. This option, and the preemptive rights, expired unexercised on October 3, 2008.

Indemnification Agreements

We expect to enter into indemnification agreements with each of our directors and officers. The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws will require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. See “Executive Compensation—Limitation on Liability and Indemnification Matters.”

Director Independence

For a discussion of the independence of our directors, please see “Management—Board of Directors” above.

Other Transactions

ThePlanet.com Internet Services, Inc., or The Planet, provides us with certain IT hosting services pursuant to a service agreement. GI Partners affiliated funds, directly or indirectly, own a supermajority of the outstanding Series A Preferred Stock of The Planet and the shares of Series A Preferred Stock and common stock owned by the GI Partners affiliated funds (directly or indirectly) constitute a majority of The Planet’s outstanding common stock on an as-converted to common stock basis. Our chairman of the board, Howard Park, sits on the board of directors of The Planet. We paid The Planet approximately $174,737, $124,795, and $75,355 for services in 2010, 2009 and 2008, respectively, and $51,634 for services during the three months ended March 31, 2011.

In August 2010, GI Partners acquired Softlayer Technologies (“Softlayer”). Softlayer is a customer of Telx. In November 2010, The Planet and Softlayer merged. Softlayer paid us approximately $141,990 for services in 2010 and paid us $46,557 for services during the three months ended March 31, 2011.

ITC^DeltaCom, Inc. (“DeltaCom”) is a customer of Telx. In December 2010, Earthlink, Inc. acquired DeltaCom. Rolla Huff, a former member of our board of directors, serves as a director and the chief executive officer and president of Earthlink, Inc. DeltaCom paid us approximately $333,928 for services in 2010. Mr. Huff resigned from our board of directors effective April 8, 2011.

We purchase certain network equipment from Cisco Systems, Inc. Jesper Anderson, a member of our board of directors, serves as the Senior Vice President of Network Management at Cisco Systems, Inc. For the three months ended March 31, 2011 and the year ended December 31, 2010, we paid $1.2 million and $2.0 million, respectively, to Cisco Systems, Inc.

Policies and Procedures for Related Party Transactions

Pursuant to our audit committee charter, our audit committee is responsible for reviewing and approving any related party transaction. In addition, our code of conduct and ethics includes a formal policy that our executive officers, directors, and principal stockholders, including their immediate family members and affiliates, will not be permitted to enter into a related party transaction with us without the prior consent of our audit committee, or other

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independent members of our board of directors in the case it is inappropriate for our audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of such persons’ immediate family members or affiliates, in which the amount involved exceeds $100,000 must first be presented to our audit committee for review, consideration and approval. All of our directors, executive officers and employees will be required to report to our audit committee any such related party transaction. In approving or rejecting the proposed agreement, our audit committee shall consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. All of the transactions described above were entered into prior to the adoption of this policy. The full text of the code is posted on our corporate website at www.telx.com.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial ownership of our common stock as of , 2011, subject to certain assumptions set forth in the footnotes and as adjusted to reflect the sale of the shares of our common stock offered in this offering under this prospectus for:

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each stockholder, or group of affiliated stockholders, who we know beneficially owns more than 5% of the outstanding shares of our common stock;

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each of our current directors;

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each of our named executive officers;

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all of our current directors and current executive officers as a group; and

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each of the selling stockholders.

Beneficial ownership is determined in accordance with rules of the SEC and generally includes any shares over which a person exercises sole or shared voting and/or investment power. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated, we believe the beneficial owners of the common stock listed below, based on information furnished by them, have sole voting and investment power with respect to the number of shares listed opposite their names.

Applicable percentage ownership in the following table is based on shares of common stock outstanding as of , 2011, which gives effect to the conversion of all outstanding shares of preferred stock into shares of common stock immediately prior to the completion of this offering.

The table and footnotes set forth the number of shares held by, and the percentage beneficial ownership of, each selling stockholder based on shares of common stock outstanding upon completion of this offering, assuming no exercise of the underwriters’ option to purchase up to an additional shares of our common stock.

Unless otherwise indicated, the address of each of the individuals named below is The Telx Group, Inc., 1 State Street, 21^st Floor, New York, New York 10004.

Shares
Beneficially Owned
Prior to the Offering

Shares
Being
Offered⁽¹⁾

Shares Beneficially
Owned After the
Offering

Name of Beneficial Owner

Number

Percent
(%)

Number

Percent
(%)

5% Stockholders

GI Partners Fund II, L.P.⁽²⁾

GI Partners Side Fund II, L.P.⁽²⁾

Named Executive Officers and Directors

Eric Shepcaro⁽³⁾

Christopher W. Downie⁽³⁾

William Kolman⁽³⁾

Michael Terlizzi⁽³⁾

Howard Park⁽²⁾

Eric Harrison

Daniel H. Schulman

Jesper Andersen

Thomas J. Fitzpatrick

All directors and executive officers as a group
(10 persons)

Other Selling Stockholders

Telxinvest, LLC⁽⁴⁾

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*	less than 1%.

(1)	Assumes no exercise of the underwriters’ option to purchase additional shares.

(2)

Includes 1,357,896 and 542,103 shares of our Series A Preferred Stock held by GI Partners Fund II, L.P. and GI Partners Side Fund II, L.P., respectively, which will convert into and shares of our common stock, respectively, immediately prior to the closing of this offering. The general partner of the GI Partners Funds is GI GP I L.P., a Delaware limited partnership. GI GP LLC, a Delaware limited liability company, is the general partner of GI GP I, L.P. GI Manager L.P., a Delaware limited partnership, is the manager of the GI Partners Funds. GI GP LLC is the general partner of GI Manager L.P. Howard Park, our chairman of the board, is a Managing Director at GI Partners. The address for the GI Partners Funds is 2180 Sand Hill Road, Suite 210, Menlo Park, California 94025.

(3)

Does not include an aggregate of 135,567 shares of Series B Contingent Preferred Stock beneficially owned by Messrs. Shepcaro, Downie, Kolman and Terlizzi. Immediately prior to this offering, each outstanding share of Series B Contingent Preferred Stock will convert into between zero and one share of Series B Convertible Preferred Stock (the precise rate of conversion will be based on the internal rate of return of the GI Partners Funds investment in Telx as set forth in our current amended and restated certificate of incorporation). The outstanding shares of Series B Convertible Preferred Stock will then immediately convert into our common stock. However, in the event that the GI Partners Funds does not reach a minimum return threshold as provided for in our current amended and restated certificate of incorporation, the Series B Contingent Preferred Stock will not convert at all. In addition, does not include up to , , and shares of our common stock that Messrs. Shepcaro, Downie, Kolman and Terlizzi, respectively, will be entitled to receive (at an assumed initial public offering price of $ per share, the mid-point on the range set forth on the cover page of this prospectus) pursuant to the terms and conditions of incentive agreements entered into with such executive officers in February and March 2011 and our 2010 plan.

(4)

Represents 30,400 shares of our Series A Preferred Stock which will convert into shares of our common stock immediately prior to the closing of this offering. Former and current executive officers and directors, including Mr. Shepcaro, our Chief Executive Officer and member of our board of directors, Mr. Downie, our President, Chief Financial Officer and Treasurer and Mr. Kolman, our executive vice president of sales, collectively own 89% of Telxinvest, LLC. Three of our former employees own the remainder.

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be in effect upon the closing of this offering. This summary does not purport to be complete and is qualified in its entirety by the provisions of the amended and restated certificate of incorporation and amended and restated bylaws, copies of which will be filed as exhibits to the registration statement of which this prospectus is a part, and by the provisions of applicable law.

Upon the closing of this offering, our authorized capital stock will consist of million shares of common stock, $0.0001 par value per share, and million shares of undesignated preferred stock, $0.0001 par value per share.

Common Stock

As of , 2011, there were shares of common stock outstanding, held of record by approximately stockholders after giving effect to the conversion of all of our outstanding shares of preferred stock into shares of common stock. There will be shares of common stock outstanding (assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of outstanding options) after giving effect to the sale of the shares of common stock offered by this prospectus.

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of our stockholders and do not have cumulative voting rights. Directors shall be elected by a plurality of the votes cast. Except as otherwise required by law or as provided in our amended and restated certificate of incorporation or amended and restated bylaws, holders of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive ratably any dividends declared by our board of directors out of assets legally available. See the section entitled “Dividend Policy.” Upon our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding shares of preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are, and all shares of common stock to be outstanding upon completion of this offering will be, fully paid and nonassessable.

Preferred Stock

Immediately prior to the closing of this offering, all outstanding shares of our preferred stock will be converted into shares of common stock. Pursuant to our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue from time to time up to shares of preferred stock, in one or more series. Our board will determine the rights, preferences, privileges, and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of any series, any or all of which may be greater than or senior to the rights of the common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and reduce the likelihood that such holders will receive dividend payments and payments upon liquidation, and the likelihood that holders of preferred stock will receive dividend payments and payments upon liquidation may have the effect of delaying, deterring or preventing a change in control, which could depress the market price of our common stock. We have no current plan to issue any shares of preferred stock.

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Warrants

In 2001, we issued a warrant to DSR Holdings III, LLC. After adjustments for reverse stock splits and taking into account the impact of our acquisition by the GI Partners Funds, this warrant has no economic value, since the exercise of the warrant, at a cost to the warrantholder of approximately $112,000, would yield less than $100,000 of cash as the warrantholder’s sale proceeds.

Registration Rights

Upon completion of this offering, and after the expiration of the lock-up agreements described in the section entitled “Shares Eligible for Future Sale,” holders of the substantial majority of our common stock will be entitled to rights to register the shares held by them under the Securities Act pursuant to registration rights granted to such holders of these securities. If we propose to register any of our securities under the Securities Act, either for our own account or for the account of others, the holders of these shares are entitled to notice of the registration and are entitled to include, at our expense, their shares of common stock in the registration and any related underwriting, provided, among other conditions and limitations, that the underwriters may limit the number of shares to be included in the registration and in some cases exclude these shares entirely.

In addition, the holders of these shares may require us to file a registration statement under the Securities Act with respect to their shares of common stock, and we will be required to use our best efforts to effect the registration. See the section entitled “Shares Eligible for Future Sale.”

Anti-Takeover Provisions Under Our Charter and Bylaws and Delaware Law

Certain provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws, which will be in effect upon the completion of this offering, contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, may have the effect of discouraging coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquiror outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

Amended and Restated Certificate of Incorporation; Amended and Restated Bylaws

We expect that our amended and restated certificate of incorporation and our amended and restated bylaws, which will be in effect upon the closing of this offering, will contain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions and certain provisions of Delaware law, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly or unsolicited acquiror outweigh the disadvantages of discouraging a proposal to acquire us.

Undesignated Preferred Stock. As discussed above, our board of directors has the ability to issue, without stockholder approval, preferred stock with voting or other rights or preferences as may be fixed by the board of directors that could impede the success of any takeover attempt. This and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.

Limitations on the Ability of Stockholders to Act by Written Consent or Call a Special Meeting. We expect to provide in our amended and restated certificate of incorporation that our stockholders may not act by written

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consent from and after the date upon which GI Partners and its affiliates, collectively, cease to beneficially own at least 50% of our outstanding common stock. The inability of our stockholders to act by written consent under such circumstances may lengthen the amount of time required to take stockholder actions. As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws.

In addition, our amended and restated certificate of incorporation provides that special meetings of the stockholders may be called only by the chairperson of our board of directors, the chief executive officer, the president or the board of directors. A stockholder may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any action, including the removal of directors.

Requirements for Advance Notification of Stockholder Nominations and Proposals. Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or from otherwise attempting to obtain control of our company.

Board Classification. Our board of directors is divided into three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year term. For more information on the classified board, see “Management—Board of Directors.” A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board.

Board Vacancies Filled Only by Majority of Directors. Vacancies and newly created seats on our board shall be filled only by a majority of the remaining directors then in office. Only our board of directors may determine the number of directors on our board. The inability of stockholders to determine the number of directors or to fill vacancies or newly created seats on our board of directors makes it more difficult to change the composition of our board of directors, but these provisions promote a continuity of existing management.

No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not expressly provide for cumulative voting.

Directors Removed Only for Cause. Our amended and restated certificate of incorporation provides for the removal of directors only for cause and only upon the affirmative vote of the holders of a supermajority of the total voting power of our outstanding capital stock entitled to vote generally in the election of directors.

Amendment of Charter Provisions and Bylaws. The amendment of certain of the above provisions in our amended and restated certificate of incorporation and of any provision in our amended and restated bylaws requires approval by holders of at least two-thirds of our outstanding capital stock entitled to vote generally in the election of directors.

Delaware Anti-Takeover Statute. Our amended and restated certificate of incorporation provides that upon the occurrence of a transaction in which GI partners and its affiliates’ beneficial ownership interest in us is reduced to less than 5% of our outstanding shares of common stock, we will be subject to Section 203 of the DGCL, or DGCL Section 203. Accordingly, we are not currently subject to DGCL Section 203. DGCL Section 203 prevents, subject to certain exceptions set forth therein, certain Delaware corporations, including those whose securities are listed on The Nasdaq Global Market, from engaging, under certain circumstances, in a business combination with any interested stockholder for three years following the date that such stockholder became an interested stockholder.

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For purposes of DGCL Section 203, a business combination includes, among other things, a merger or consolidation involving us and the interested stockholder and the sale of 10% or more of our assets. In general, DGCL Section 203 defines an interested stockholder as any entity or person owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. A Delaware corporation may opt out of DGCL Section 203 with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from amendments approved by the holders of at least a majority of the corporation’s outstanding voting shares. This provision has an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for our shares.

The provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Transfer Agent and Registrar

We expect that the transfer agent and registrar for the common stock will be American Stock Transfer & Trust Company. The transfer agent’s address is 59 Maiden Lane, New York, New York 10038 and its telephone number is (800) 937-5499.

Nasdaq Global Market

We have applied to list our common stock on The Nasdaq Global Market under the symbol “TELX.”

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DESCRIPTION OF INDEBTEDNESS

The key terms of our New Credit Facility are described below. These descriptions are not complete and are qualified in their entirety by reference to the complete texts of the related agreements, copies of which have been filed as exhibits to this registration statement, of which this prospectus forms a part.

Secured Credit Facility

General

On June 17, 2010, we and certain of our subsidiaries entered into a senior secured credit facility, consisting of a $150.0 million term loan and a $25.0 million revolving facility, with Goldman Sachs Lending Partners LLC, as administrative agent and collateral agent, and the other lenders party thereto (the “New Credit Facility”). We used $138.1 million of the proceeds of the term loan to repay indebtedness outstanding under our NY Credit Agreement, the 56 Marietta Loans, other minor indebtedness, and to pay the fees and expenses of the transaction, and we used an additional $1.1 million of proceeds to pay accrued interest on repaid indebtedness. The remaining proceeds from the borrowings will be used to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes. We did not draw upon the revolving facility as of March 31, 2011, but when or if we do so, we will use the proceeds to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes.

Maturity Date

The term loan matures on June 17, 2015 and the revolving loan matures on June 17, 2014.

Guarantee and Security

The obligations under the credit agreement are guaranteed by all of our current subsidiaries, and certain of our subsidiaries that we may acquire or create in the future (collectively, the “subsidiary guarantors”) and are secured by substantially all of our and the subsidiary guarantors’ assets.

Interest and Fees

The non-default interest rates for the loans under the credit agreement are determined either by (i) LIBOR (for the applicable interest period) plus the applicable margin (a “LIBOR Loan”), or at our election, (ii) a prime-based rate (equal to the greatest of (a) the Federal Funds effective rate plus 0.50%, (b) the prime rate published in the Wall Street Journal and (c) LIBOR (using a one-month period) plus 1.0%), plus the applicable margin (a “Base Rate Loan”). The applicable margin is 5.00% for a Base Rate Loan and 6.00% for a LIBOR Loan. The margins for both LIBOR Loans and Base Rate Loans will increase by 0.25% if we are unable to obtain leasehold mortgages on all of our leases with Digital Realty Trust by November 14, 2010, until we obtain all such leasehold mortgages. Pursuant to the credit agreement, the margin increase will terminate, to the extent it occurs, if our senior secured leverage ratio drops below a threshold set forth in the credit agreement or once leasehold mortgages with respect to all of our leasehold properties with Digital Realty Trust have been obtained and the related leases (or memoranda of such leases) have been recorded to give constructive notice of such leasehold mortgages. Leasehold mortgages with respect to all of our leasehold properties with Digital Realty Trust were obtained in accordance with the credit agreement and the related leases (or memoranda of such leases) were recorded. The credit agreement provides for a LIBOR floor of 2.00% and a Base Rate Loan floor of 3.00%. Under the credit facility, we are required to pay annually an unused revolving commitment fee of 0.625% of the amount by which the revolving loan commitments exceed the average daily balance of the outstanding revolving loan and letter of credit. We are also required to pay Goldman Sachs Lending Partners LLC an annual administration fee of $100,000.

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The term loan may be prepaid at any time, and the credit agreement provides for certain mandatory principal prepayments, including certain payments if our consolidated cash flow exceeds certain levels. Any voluntary principal prepayments and mandatory principal prepayments required as a result of the incurrence of indebtedness and any repricing of the term loan at a lower interest rate or weighted average yield, shall be subject to a prepayment premium of 2.00% if repaid or repriced prior to June 17, 2011, or 1.00% if repaid or repriced prior to June 17, 2012. As of December 31, 2010, we were not required to make a mandatory principal repayment.

Covenants

The credit agreement contains restrictive covenants, including financial covenants requiring us and the subsidiary guarantors, collectively, to maintain a maximum senior secured leverage ratio and a minimum interest coverage ratio. The credit agreement restricts our and our subsidiaries’ ability to, among other things, make capital expenditures, pay dividends, incur or make payments on debt, grant liens, make investments, merge with or acquire other companies, sell assets or enter into affiliate transactions. The negative covenants in the credit agreement are subject to exceptions described in the credit agreement. We were in compliance with the covenants of the credit agreement as of December 31, 2010.

Events of Default

The events of default under the credit facility include payment defaults; breaches of representations, warranties or covenants; cross defaults to certain other indebtedness; challenging the validity or enforceability of the credit agreement and related documents; insolvency related proceedings; judgments for the payment of money; certain ERISA events; and changes of control. The occurrence of an event of default could result in the termination of the lenders’ obligation to make loans under the revolving facility, acceleration of the obligations under the credit agreement, an increase in the interest rate, a requirement to post cash collateral to secure outstanding letter of credit obligations, and foreclosure on the pledged assets.

Interest Rate Cap and Swap Agreements

Also, on August 2, 2010, we entered into an interest rate swap agreement with a notional amount of $87.5 million with SunTrust Bank. The term of the agreement is two years, beginning on June 30, 2011 and ending on June 30, 2013. The agreement calls for a cap rate of 1.44% and a floating option of USD-LIBOR-BBA. On September 1, 2010, SunTrust Bank entered into a Novation Confirmation Agreement that transferred half of their rights, or $43.8 million, in the Swap Agreement as Floating Rate Player to J. Aron & Company.

Amendment to Secured Credit Facility

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the existing term loans were decreased from their previous levels and will, going forward, be determined, at our election, by reference to either LIBOR plus 5.00% or a prime-based rate plus 4.00%, and (iii) the floor for LIBOR loans that are Incremental Term Loans or existing term loans was decreased to 1.50% and the floor for prime rate loans that are Incremental Term Loans or existing term loans was decreased to 2.50%. The interest rates and floors for revolving loans did not change. The margins are subject to increase in certain circumstances as set forth in the credit agreement. In addition, as part of the First Amendment and Incremental Agreement, the interest coverage ratio, senior secured leverage ratio and consolidated capital expenditures covenants were revised. We did not draw upon the revolving facility at the closing of the First Amendment and Incremental Agreement, but when or if we do so, such proceeds will be used to fulfill our and our subsidiaries’ working capital requirements and for general corporate purposes.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect the prevailing price of our common stock from time to time or impair our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of shares of common stock, assuming the conversion of all outstanding shares of preferred stock into common stock immediately prior to the closing of this offering and assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of outstanding options or warrants. Of these shares, all of the shares sold in this offering by us and the selling stockholders, plus any shares sold upon exercise of the underwriters’ option to purchase additional shares will be freely tradable without restriction or further registration under the Securities Act, unless these shares are purchased by affiliates. The remaining shares of common stock held by existing stockholders are “restricted securities” as that term is defined in Rule 144 under the Securities Act or are subject to the contractual restrictions described below. Restricted securities may be sold in the public market only if registered or if the transaction qualifies for an exemption from registration described below under Rules 144 or 701 promulgated under the Securities Act.

“Restricted” shares and shares subject to the contractual restrictions described below will be available for sale in the public market as follows:

•

shares will be eligible for sale upon completion of this offering; and

•

shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 180 days after the date of this prospectus.

In addition, of the 128,803 shares of our common stock that were subject to stock options outstanding as of March 31, 2011, options to purchase 80,250 shares of common stock were exercisable as of March 31, 2011 and will be eligible for sale 90 days after the date of this prospectus. In addition, as of March 31, 2011, there were 52,684 shares of common stock issuable upon the vesting of outstanding restricted stock units and warrants to purchase 1,000 shares of our common stock with a weighted average exercise price of $40.00 were outstanding (excluding warrants without any economic value).

Lock-Up Agreements and Obligations

Certain of our officers, directors and stockholders, who together hold % of our outstanding common stock as of , 2011, have agreed, subject to certain exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into shares or exercisable or exchangeable for shares of our common stock, or enter into any swap or other arrangement for transfer to another, in whole or in part, any of the economic consequences of ownership of our common stock, for a period of at least 180 days after the date of this prospectus. Transfers or dispositions can be made sooner only in certain circumstances or with the prior written consent of Goldman, Sachs & Co. and Deutsche Bank Securities Inc. Goldman, Sachs & Co. and Deutsche Bank Securities Inc. may release any of the shares subject to these lock-up agreements at any time without notice.

Rule 144

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to

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the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

•

1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or

•

the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

Rule 701 of the Securities Act, as currently in effect, permits any of our employees, officers, directors, consultants or advisors who purchase or receive shares from us pursuant to a written compensatory plan or contract to resell such shares in reliance upon Rule 144, but without compliance with certain restrictions. Subject to any applicable lock-up agreements, Rule 701 provides that affiliates may sell their Rule 701 shares under Rule 144 beginning 90 days after the date of this prospectus without complying with the holding period requirement of Rule 144 and that non-affiliates may sell such shares in reliance on Rule 144 beginning 90 days after the date of this prospectus without complying with the holding period, public information, volume limitation or notice requirements of Rule 144.

Registration Rights

Upon completion of this offering, the holders of an aggregate of shares of our common stock, or their transferees, will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration.

Form S-8 Registration Statements

Following the completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of our common stock that are issuable pursuant to our equity incentive plans. See the section entitled “Management—Equity Benefit Plans.” Subject to the lock-up agreements described above, other contractual lock-up obligations set forth in the grant agreements under each such plan and any applicable vesting restrictions, shares registered under these registration statements will be available for resale in the public market immediately upon the effectiveness of these registration statements, except with respect to Rule 144 volume limitations that apply to our affiliates.

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS

The following is a general discussion of material U.S. federal income and estate tax considerations relating to the acquisition, ownership and disposition of our common stock that may be relevant to holders who hold shares of our common stock as capital assets. This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect or proposed on the date hereof and all of which are subject to change, possibly with retroactive effect, or different interpretations.

This discussion is for general information only and does not address all of the tax considerations that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal tax laws (such as certain financial institutions, regulated investment companies, real estate investment trusts, partnerships or other pass-through entities, insurance companies, tax-exempt entities, retirement plans, brokers or dealers in securities, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons liable for alternative minimum tax, persons owning, actually or constructively, 10% or more of our stock for United States federal income tax purposes, expatriates, persons who hold our common stock as part of a straddle, hedge, conversion transaction or other risk-reduction or integrated investment, controlled foreign corporations, passive foreign investment companies, foreign personal holding companies, companies that accumulate earnings to avoid U.S. federal income tax, taxpayers whose functional currency is not the U.S. dollar, and persons who hold or receive our common stock as compensation).

This discussion does not address the U.S. state and local or non-U.S. tax considerations relating to the acquisition, ownership and disposition of our common stock.

As used in this discussion, the term “U.S. holder” means a beneficial owner of our common stock that is for U.S. federal income tax purposes:

•

an individual citizen or resident of the United States;

•

a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or of any state or political subdivision thereof or therein, including the District of Columbia;

•

an estate, the income of which is subject to U.S. federal income tax regardless of the source thereof; or

•

a trust, if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions of the trust or (b) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

The term “non-U.S. holder” means a beneficial owner of our common stock that is not a U.S. holder.

An individual may, subject to certain exceptions, be deemed to be a resident of the United States for a calendar year by reason of being present in the United States for at least 31 days in such calendar year and for an aggregate of at least 183 days during a three-year period ending with such current calendar year (counting for such purposes all of the days present in such current calendar year, one-third of the days present in the immediately preceding calendar year, and one-sixth of the days present in the second preceding calendar year).

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Online Media, Video
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Government / Cloud / SaaS /
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Level 3 Communications Qwest

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Telecom Italia

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ACTIV Financial Systems

Emory University

Hewlett Packard

International Securities Exchange (ISE)

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CBS

Justin TV

Jahjah

Viacom

Yahoo!

iLand Internet Solutions

NASA (via Arcata
Associates)

DediPower Managed
Hosting

SoftLayer Technologies

Telx Group, Inc. S-1/A