CHANNELADVISOR CORP (Form: 10-Q, Received: 11/06/2014 16:10:05)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

FORM 10-Q

____________________________________________________

(Mark one)



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

For the quarterly period ended September 30, 2014



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

For the transition period from to

Commission File Number 001-35940

____________________________________________________

CHANNELADVISOR CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________



Delaware		56-2257867
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2701 Aerial Center Parkway, Morrisville, NC		27560
(Address of principal executive offices)		(Zip Code)

(919) 228-4700

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former

fiscal year, if changed since last report)

____________________________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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 Securities Exchange Act of 1934.



Large accelerated filer	¨	Accelerated filer	¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No ý

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of the close of business on October 28, 2014 was 24,889,830 .

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CHANNELADVISOR CORPORATION

INDEX TO FORM 10-Q



	PAGE

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013	2

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013	3

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2014 and 2013	4

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2014	5

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013	6

Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures About Market Risk	28

Item 4. Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	29

Item 1A. Risk Factors	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 6. Exhibits	44

Signatures	45

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ChannelAdvisor Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)



	September 30, 2014			December 31, 2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	82,280		$	104,406
Accounts receivable, net of allowance of $504 and $561 as of September 30, 2014 and December 31, 2013, respectively	12,466			13,951
Prepaid expenses and other current assets	4,509			3,571
Total current assets	99,255			121,928
Property and equipment, net	13,646			9,088
Goodwill	16,106			16,106
Intangible assets, net	374			670
Restricted cash	635			685
Other assets	250			309
Total assets	$	130,266		$	148,786
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,361		$	4,237
Accrued expenses	8,029			7,492
Deferred revenue	16,441			14,093
Other current liabilities	2,526			1,723
Total current liabilities	28,357			27,545
Long-term capital leases, net of current portion	2,171			1,558
Other long-term liabilities	2,624			1,903
Total liabilities	33,152			31,006
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 24,853,614 and 23,643,872 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	25			24
Additional paid-in capital	225,457			218,330
Accumulated other comprehensive loss	(287		)	(471		)
Accumulated deficit	(128,081		)	(100,103		)
Total stockholders’ equity	97,114			117,780
Total liabilities and stockholders’ equity	$	130,266		$	148,786

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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ChannelAdvisor Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenue	$	20,966		$	16,620		$	61,074		$	47,518
Cost of revenue	6,018			4,555			18,169			12,971
Gross profit	14,948			12,065			42,905			34,547
Operating expenses:
Sales and marketing	13,865			9,316			42,131			26,398
Research and development	4,263			2,991			12,572			8,882
General and administrative	5,677			3,499			15,850			8,641
Total operating expenses	23,805			15,806			70,553			43,921
Loss from operations	(8,857		)	(3,741		)	(27,648		)	(9,374		)
Other (expense) income:
Interest expense, net	(55		)	(520		)	(157		)	(2,606		)
Other income, net	(86		)	4			(86		)	17
Total other (expense) income	(141		)	(516		)	(243		)	(2,589		)
Loss before income taxes	(8,998		)	(4,257		)	(27,891		)	(11,963		)
Income tax expense	6			35			87			56
Net loss	$	(9,004	)	$	(4,292	)	$	(27,978	)	$	(12,019	)
Net loss per share:
Basic and diluted	$	(0.36	)	$	(0.20	)	$	(1.14	)	$	(1.13	)
Weighted average common shares outstanding:
Basic and diluted	24,793,869			21,588,578			24,528,263			10,652,921

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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ChannelAdvisor Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss	$	(9,004	)	$	(4,292	)	$	(27,978	)	$	(12,019	)
Other comprehensive loss:
Foreign currency translation adjustments	(119		)	(38		)	184			(196		)
Total comprehensive loss	$	(9,123	)	$	(4,330	)	$	(27,794	)	$	(12,215	)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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ChannelAdvisor Corporation and Subsidiaries

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity

(in thousands, except share data)



	Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance, December 31, 2013	23,643,872	$	24	$	218,330		$	(471	)	$	(100,103	)	$	117,780
Cashless exercise of common stock warrants	664,058	1		(1		)	—			—			—
Exercise of stock options	545,684	—		1,827			—			—			1,827
Stock-based compensation expense	—	—		5,301			—			—			5,301
Net loss	—	—		—			—			(27,978		)	(27,978		)
Foreign currency translation adjustments	—	—		—			184			—			184
Balance, September 30, 2014	24,853,614	$	25	$	225,457		$	(287	)	$	(128,081	)	$	97,114

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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ChannelAdvisor Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)



	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities
Net loss	$	(27,978	)	$	(12,019	)
Adjustments to reconcile net loss to cash and cash equivalents used in operating activities:
Depreciation and amortization	4,393			2,619
Bad debt expense	993			221
Change in fair value of preferred stock warrants	—			1,052
Accretion of debt discount	—			449
Stock-based compensation expense	5,301			1,433
Other items, net	107			18
Changes in assets and liabilities:
Accounts receivable	603			(1,503		)
Prepaid expenses and other assets	(869		)	63
Restricted cash	51			—
Accounts payable and accrued expenses	(1,668		)	2,404
Deferred revenue	2,238			4,227
Cash and cash equivalents used in operating activities	(16,829		)	(1,036		)
Cash flows from investing activities
Purchases of property and equipment	(5,400		)	(1,990		)
Payment of internal-use software development costs	(820		)	(962		)
Cash and cash equivalents used in investing activities	(6,220		)	(2,952		)
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts and commissions	—			86,095
Repayment of debt and capital leases	(1,049		)	(919		)
Payment of deferred offering costs	—			(2,474		)
Proceeds from exercise of stock options	1,827			879
Cash and cash equivalents provided by financing activities	778			83,581
Effect of currency exchange rate changes on cash and cash equivalents	145			(171		)
Net (decrease) increase in cash and cash equivalents	(22,126		)	79,422
Cash and cash equivalents, beginning of period	104,406			10,865
Cash and cash equivalents, end of period	$	82,280		$	90,287
Supplemental disclosure of cash flow information
Cash paid for interest	$	228		$	1,138
Cash paid for income taxes, net	$	53		$	89
Supplemental disclosure of noncash investing and financing activities
Conversion of redeemable convertible preferred stock to common stock	$	—		$	91,150
Conversion of preferred stock warrants to common stock warrants	$	—		$	3,632
Deferred offering costs included in accounts payable and accrued expenses	$	—		$	108
Accrued capital expenditures	$	—		$	526
Capital lease obligations entered into for the purchase of fixed assets	$	2,431		$	1,454

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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ChannelAdvisor Corporation and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of the Business

ChannelAdvisor Corporation (“ChannelAdvisor” or the “Company”) was incorporated in the state of Delaware and capitalized in June 2001. The Company began operations in July 2001. ChannelAdvisor is a provider of software-as-a-service, or SaaS, solutions that allow retailers and manufacturers to integrate, manage and monitor their merchandise sales across hundreds of online channels. The Company is headquartered in Morrisville, North Carolina and has international offices in England, Ireland, Germany, Australia, Hong Kong, Brazil and China.

2. Significant Accounting Policies

Principles of Consolidation

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

Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive loss, changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2013, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") , which provides new guidance for revenue recognition. ASU 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. ASU 2014-09 will be effective for the Company beginning January 1, 2017 and early adoption is not permitted. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.

The Company has reviewed other new accounting pronouncements that were issued as of September 30, 2014 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes and assumptions used for purposes of determining stock-based compensation, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

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Revenue Recognition and Deferred Revenue

The majority of the Company’s revenue is derived from subscription fees paid by customers for access to and usage of the Company’s cloud-based SaaS platform for a specified period of time, which is typically one year. A portion of the subscription fee is typically fixed and is based on a specified minimum amount of gross merchandise value (“GMV”) that a customer expects to process through the Company’s platform over the contract term. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV processed through the Company’s platform in excess of the customer’s specified minimum amount. In addition, other sources of revenue consist primarily of implementation fees, which may include fees for providing launch assistance and training. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is reasonably assured and the amount of the fee to be paid by the customer is fixed or determinable. The Company’s contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds. Customers do not have the contractual right to take possession of the Company’s software at any time.

The Company’s arrangements generally contain multiple elements comprised of subscription and implementation services. The Company evaluates each element in an arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company’s implementation services are not sold separately from the subscription and there is no alternative use for them. As such, the Company has determined the implementation services do not have standalone value. Accordingly, subscription and implementation services are combined and recognized as a single unit of accounting.

The Company generally recognizes the fixed portion of subscription fees and implementation fees ratably over the contract term. Recognition begins when the customer has access to the Company’s platform and transactions can be processed, provided all other revenue recognition criteria have been met. Some customers elect a managed-service solution and contract with the Company to manage some or all aspects of the Company’s SaaS solutions on the customer’s behalf for a specified period of time, which is typically one year. Under these managed-service arrangements, customer transactions cannot be processed through the Company’s platform until the completion of the implementation services. As such, revenue is contingent upon the Company’s completion of the implementation services and recognition commences when transactions can be processed on the Company’s platform, provided all other revenue recognition criteria have been satisfied. At that time, the Company recognizes a pro-rata portion of the fees earned since the inception of the arrangement. The balance of the fees is recognized ratably over the remaining contract term.

The Company recognizes the variable portion of subscription fee revenue in the period in which the related GMV is processed, provided all other revenue recognition criteria have been met.

Sales taxes collected from customers and remitted to government authorities are excluded from revenue.

Deferred revenue represents the unearned portion of fixed subscription fees and implementation fees. Deferred amounts are generally recognized within one year. Those amounts that are expected to be recognized in greater than one year are recorded in other long-term liabilities in the accompanying condensed consolidated balance sheets.

Cost of Revenue

Cost of revenue primarily consists of personnel and related costs, including salaries, bonuses, payroll taxes and stock-based compensation, co-location facility costs for the Company’s data centers, depreciation expense for computer equipment directly associated with generating revenue, credit card transaction fees and infrastructure maintenance costs. In addition, the Company allocates a portion of overhead, such as rent, additional depreciation and amortization and employee benefits costs, to cost of revenue based on headcount.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to their short-term nature. As of September 30, 2014 and December 31, 2013, the Company did not have any assets or liabilities measured at fair value on a recurring or non-recurring basis.

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Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The Company’s cash and cash equivalents accounts exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents accounts to date. To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts.

The Company did not have any customers that individually comprised a significant concentration of its accounts receivable as of September 30, 2014 and December 31, 2013 , or a significant concentration of its revenue for the three and nine months ended September 30, 2014 and 2013 .

Accounts Receivable and Allowance for Doubtful Accounts

The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates.

Other Receivables

Under certain customer arrangements, the Company collects and remits monthly activity-based fees incurred on specific channels on the customers’ behalf. The Company records the amounts due from customers as a result of these arrangements as other receivables.

Other receivables of $1.3 million and $1.7 million are included in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013 , respectively.

Identifiable Intangible Assets

The Company has acquired intangible assets in connection with business combinations. These assets were recorded at their estimated fair values at the acquisition date and are being amortized over their respective estimated useful lives using the straight-line method. The estimated useful lives used in computing amortization are as follows:



Customer relationships	8.0 years
Proprietary software	8.0 years

Amortization expense associated with the Company's intangible assets was $0.1 million for each of the three months ended September 30, 2014 and 2013 and $0.3 million and $0.5 million for the nine months ended September 30, 2014 and 2013, respectively.

Software Development Costs

The Company capitalizes certain internal-use software development costs, consisting primarily of direct labor associated with creating the internally developed software and third-party consulting fees associated with implementing software purchased for internal use. Software development projects generally include three stages: the preliminary project stage (in which all costs are expensed as incurred), the application development stage (in which certain costs are capitalized) and the post-implementation/operation stage (in which all costs are expensed as incurred). The costs incurred during the application development stage primarily include the costs of designing the application, coding and testing of the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software once it is ready for its intended use.

Software development costs of $0.4 million and $0.3 million related to creating internally developed software and implementing software purchased for internal use were capitalized during the nine months ended September 30, 2014 and the year ended December 31, 2013 , respectively, and are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to capitalized internally developed software was $0.1 million and $24,000 for the three months ended September 30, 2014 and 2013 , respectively, and $0.1 million for each of the nine months ended September 30, 2014 and 2013, and is included in cost of revenue or general and administrative expense in the accompanying condensed consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $0.6 million and $0.3 million as of September 30, 2014 and December 31, 2013 , respectively.

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Software development costs of $0.3 million and $1.8 million related to configuring and implementing hosted third-party software applications that the Company will use in its business operations were capitalized during the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively, and are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to hosted third-party software applications was $0.2 million and $8,000 for the three months ended September 30, 2014 and 2013, respectively, and $0.5 million and $8,000 for the nine months ended September 30, 2014 and 2013, respectively, and is included in general and administrative expense in the accompanying condensed consolidated statements of operations. The net book value of hosted third-party software applications was $1.6 million and $1.7 million as of September 30, 2014 and December 31, 2013 , respectively.

Income Taxes

Income taxes are accounted for under the liability method of accounting. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company applies the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return. Additionally, the guidance also prescribes the treatment for accounting in interim periods, derecognition, classification and disclosure requirements for uncertain tax positions. The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes. An uncertain tax position will be recognized if it is not more likely than not to be sustained.

The Company’s income tax provision for the three and nine months ended September 30, 2014 and 2013 reflects its estimates of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events that are recorded in the period in which they occur. For the three and nine months ended September 30, 2014 and 2013 , the Company’s effective tax rate differs from the federal statutory rate primarily due to changes in the valuation allowance and nondeductible expenses.

For the three and nine months ended September 30, 2014 and 2013 , the Company had net operating loss (“NOL”) carryforwards, the benefit of which is dependent on the Company’s ability to generate sufficient taxable income prior to the expiration of the NOL carryforwards. In addition, the maximum annual use of the NOL carryforwards is limited in certain situations, such as a change in stock ownership.

Stock-Based Compensation

The Company accounts for stock-based compensation awards, which include stock options and restricted stock units ("RSUs"), based on the fair value of the award as of the grant date. The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche.

The Company uses the Black-Scholes option pricing model for estimating the fair value of stock options. The use of the option valuation model requires the input of the Company's stock price, as well as highly subjective assumptions, including the expected life of the option and the expected stock price volatility based on peer companies. Additionally, the recognition of expense requires the estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited.

Following the Company’s initial public offering (“IPO”) in May 2013, the fair value of the Company's common stock, for purposes of determining the grant date fair value of option and RSU awards, has been determined by using the closing market price per share of common stock as quoted on the New York Stock Exchange on the date of grant.

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3. Commitments and Contingencies

In June 2014, the Company assigned its previous lease of office space in the United Kingdom to a third party pursuant to an assignment agreement and a transfer agreement. In accordance with the assignment agreement, the Company is not required to collect any payments from the third party and therefore will not recognize any revenue associated with this assignment. All payments associated with the assigned lease will be made directly by the third party to the lessor and appropriate regulatory authorities. However, the Company has guaranteed the lease payments through the remainder of the lease term, which is until February 2022. As of September 30, 2014, the remaining lease payments under this lease totaled $4.2 million . This amount represents the maximum potential liability for future payments under the guarantee and will decrease over time as payments are made by the third party. In the event of default, the indemnity clauses in the transfer agreement govern the Company's ability to pursue and recover damages incurred. During the nine months ended September 30, 2014, the Company recorded a loss of $0.1 million associated with the assigned lease, which has been accounted for as a lease termination. As of September 30, 2014, the Company does not anticipate any default by the third party. Therefore, no liability associated with this transaction has been recorded on the Company's condensed consolidated balance sheet as of September 30, 2014.

In August 2014, the Company entered into a lease agreement for the lease of office space to replace the Company's current corporate headquarters. The building containing the leased space is being constructed, and the lease term will commence on the date that the construction of the leased premises is substantially complete, which is targeted to be October 15, 2015. In the event that the commencement date is delayed beyond October 15, 2015, certain adjustments will be made to the Company's rent obligations under the lease. The initial term of the lease agreement is for seven years following the lease commencement date, and the Company may elect to renew the lease term for two additional five -year periods, subject to certain conditions and notice obligations set forth in the lease agreement. Minimum annual rental payments will be $3.2 million the first lease year, and are scheduled to increase each lease year by 2.75% . Beginning January 1, 2017, the Company will also be obligated to pay its proportionate share of the landlord's operating expenses for the building, subject to certain limitations. Additional information regarding the terms of the lease agreement is set forth in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 20, 2014.

4. Warrants

In 2007 and 2008, the Company issued warrants to purchase 1,616,113 shares of common stock, of which 958,019 and 658,094 have exercise prices per share of $16.00 and $10.96 , respectively. The 2007 warrants expired in 2014 and the 2008 warrants expire in 2015 . Unexpired warrants may be exercised in whole or in part at any time and include a cashless exercise feature, which allows the holder to receive fewer shares of common stock in exchange for the warrant rather than paying cash to exercise.

In January 2014, the holders of certain of these warrants to purchase common stock executed cashless exercises and received 664,058 shares of common stock in exchange for the warrants. As of September 30, 2014 and December 31, 2013, warrants to purchase 3,743 and 986,784 shares of common stock remained outstanding, respectively.

5. Equity Incentive Plan and Stock-Based Compensation

In May 2013, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which the Company initially reserved 1,250,000 shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2013 Plan provides for the grant of incentive stock options to employees, and for the grant of nonqualified stock options, restricted stock awards, RSUs, stock appreciation rights, performance stock awards and other forms of stock compensation to the Company’s employees, directors, and non-employee third parties. The number of shares of common stock reserved for issuance under the 2013 Plan will automatically increase on January 1 each year, for a period of ten years, from January 1, 2014 through January 1, 2023, by 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. Accordingly, on January 1, 2014 the number of shares reserved for issuance under the 2013 Plan increased by 1,182,194 shares. As of September 30, 2014 , 1,548,033 shares remained available for future grant under the 2013 Plan. As a result of the adoption of the 2013 Plan, no further grants may be made under the former 2001 Stock Plan, although outstanding awards under the 2001 Stock Plan continue to vest in accordance with their terms until exercised, forfeited or expired.

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Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Cost of revenue	$	183	$	41	$	373	$	159
Sales and marketing	922		146		1,833		439
Research and development	286		89		584		264
General and administrative	1,143		198		2,511		571
	$	2,534	$	474	$	5,301	$	1,433

Stock Option Awards

The following table summarizes the assumptions used for estimating the fair value of stock options granted for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013
Risk-free interest rate	1.0% - 1.9%	0.3% - 1.7%	0.4% - 2.0%	0.3% - 1.7%
Expected term (years)	6.25	6.06 - 6.25	6.06 - 6.25	5.00 - 6.25
Expected volatility	46% - 54%	49% - 58%	43% - 56%	49% - 59%
Dividend yield	0%	0%	0%	0%

The following table summarizes the stock option activity for the nine months ended September 30, 2014 :



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(in years)	(in thousands)
Outstanding options as of January 1, 2014	2,068,641		$	6.95
Granted	62,300		34.03
Exercised	(546,651	)	3.38
Forfeited	(65,244	)	13.26
Expired	(309	)	25.00
Outstanding options as of September 30, 2014	1,518,737		$	9.07	7.61	$	13,673
Exercisable as of September 30, 2014	762,182		$	5.57	6.88	$	8,645
Vested and expected to vest as of September 30, 2014	1,383,891		$	8.80	7.54	$	12,732

The weighted average grant date fair value for the Company's stock options was $6.51 and $10.56 per share for stock options granted during the three months ended September 30, 2014 and 2013, respectively, and $13.92 and $4.73 per share for stock options granted during the nine months ended September 30, 2014 and 2013, respectively.

The total fair value of stock options vested was $0.4 million and $0.2 million during the three months ended September 30, 2014 and 2013, respectively, and $1.1 million and $0.6 million during the nine months ended September 30, 2014 and 2013, respectively.

The total compensation cost related to nonvested stock options not yet recognized as of September 30, 2014 was $1.6 million and will be recognized over a weighted average period of approximately 1.6 years.

The aggregate intrinsic value of stock options exercised was $2.6 million and $0.7 million during the three months ended September 30, 2014 and 2013 , respectively, and $15.3 million and $1.7 million during the nine months ended September 30, 2014 and 2013 , respectively.

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Restricted Stock Units

The following table summarizes the RSU activity for the nine months ended September 30, 2014 :



	Number of RSUs		Weighted Average Grant-Date Fair Value
Unvested RSUs as of January 1, 2014	—		$	—
Granted	704,144		25.98
Vested	—		—
Forfeited	(12,280	)	21.74
Unvested RSUs as of September 30, 2014	691,864		$	26.05

The total unrecognized compensation cost related to the RSUs as of September 30, 2014 was $11.4 million and will be recognized over a weighted average period of approximately 2.1 years.

6. Net Loss Per Share

The Company uses the two-class method to compute net loss per share because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. During the third quarter of 2013, certain shares issued as a result of the early exercise of options, which are subject to repurchase by the Company, were entitled to receive non-forfeitable dividends during the vesting period and as a result were considered participating securities.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is computed under the two-class method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options, RSUs and warrants. In addition, the Company analyzes the potential dilutive effect of the outstanding participating securities under the “if-converted” method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period. The Company reports the more dilutive of the approaches (two class or “if-converted”) as its diluted net income per share during the period. Due to net losses for the three and nine months ended September 30, 2014 and 2013 , basic and diluted loss per share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

The following securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2014 and 2013 :



	Three and Nine Months Ended September 30,
	2014	2013
Warrants to purchase common stock	3,743	1,625,728
Stock options	1,518,737	2,569,393
Common stock subject to repurchase	—	65,000
RSUs	691,864	—

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7. Segment and Geographic Information

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company’s operations constitute a single operating segment and one reportable segment.

Substantially all assets were held in the United States during the nine months ended September 30, 2014 and 2013 . The following table summarizes revenue by geography for the three and nine months ended September 30, 2014 and 2013 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Domestic	$	16,222	$	13,147	$	47,220	$	37,477
International	4,744		3,473		13,854		10,041
Total revenue	$	20,966	$	16,620	$	61,074	$	47,518

8. Subsequent Events

On October 31, 2014, the Company’s wholly owned subsidiary ChannelAdvisor UK Limited (“ChannelAdvisor UK”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which ChannelAdvisor UK acquired all of the issued and outstanding shares of E-Tale Holdings Limited, a private limited company organized under the laws of England and Wales (“E-Tale”). Under the Purchase Agreement, ChannelAdvisor UK paid to the shareholders of E-Tale a cash purchase price of $8.2 million , which amount is subject to adjustment as set forth in the Purchase Agreement. A portion of the purchase price has been placed into escrow to secure the indemnification obligations of E-Tale’s shareholders until April 30, 2016. In addition to the purchase price paid at the closing, ChannelAdvisor UK may be obligated to pay up to $4.0 million to the E-Tale shareholders upon the achievement of specified financial targets set forth in the Purchase Agreement. The initial accounting of the business combination is incomplete as of the issuance date of these financial statements. Therefore, the Company is unable to determine or disclose the acquisition date fair value of the assets acquired and liabilities assumed.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, particularly in Part II – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission. Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2013, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

Overview

We are a leading provider of software-as-a-service, or SaaS, solutions that enable our retailer and manufacturer customers to integrate, manage and optimize their merchandise sales across hundreds of online channels. Through our platform, we enable our customers to connect with new and existing sources of demand for their products, including e-commerce marketplaces, such as eBay, Amazon and Newegg, search engines and comparison shopping websites, such as Google, Bing, Nextag and Sears, and emerging channels, such as Facebook and Pinterest. Our suite of solutions, accessed through a standard web browser, provides our customers with a single, integrated user interface to manage their product listings, inventory availability, pricing optimization, search terms, data analytics and other critical functions across these channels. Our proprietary cloud-based technology platform delivers significant breadth, scalability and flexibility to our customers.

We sell subscriptions to our SaaS solutions primarily through our direct sales force. Our customers include the online businesses of traditional retailers, online retailers and brand manufacturers, as well as advertising agencies that use our solutions on behalf of their retailer clients. As of September 30, 2014 , we had approximately 2,800 core customers worldwide, including 32% of the top 500 U.S. internet retailers, as identified by Internet Retailer magazine based on their 2013 online sales.

The majority of our revenue is derived from subscription fees paid to us by our customers for access to and usage of our SaaS solutions for a specified contract term, which is usually one year. A portion of the subscription fee is typically fixed and is based on a specified minimum amount of gross merchandise value, or GMV, that a customer expects to process through our platform. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV processed through our platform in excess of the customer’s specified minimum GMV amount.

We do not take title to any of the merchandise processed through our platform and we generally do not collect payments on behalf of our customers. We do not hold any inventory of merchandise and we are not involved in the physical logistics of shipping merchandise to buyers, which is handled by our customers.

We face a variety of challenges and risks, which we will need to address and manage as we pursue our growth strategy. In particular, we will need to continue to innovate in the face of a rapidly changing and increasingly fragmented e-commerce landscape if we are to remain competitive, and we will need to effectively manage our growth, especially related to our international expansion.

Although e-commerce continues to expand as retailers and manufacturers continue to increase their online sales, it is also becoming more complex and fragmented due to the hundreds of channels available to retailers and manufacturers and the rapid pace of change and innovation across those channels. In order to gain consumers’ attention in a more crowded and competitive online marketplace, many retailers and an increasing number of manufacturers sell their merchandise through multiple online channels, each with its own rules, requirements and specifications. In particular, third-party marketplaces are an increasingly important driver of growth for a number of large online retailers, and as a result we need to continue to support

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multiple channels in a variety of geographies in order to support our targeted revenue growth. As of September 30, 2014 , we supported 40 marketplaces, up from 35 at December 31, 2013.

We believe the growth in e-commerce globally presents an opportunity for retailers and manufacturers to engage in international sales. However, country-specific marketplaces are often the market share leaders in their regions, as is the case for Alibaba in Asia and MercadoLibre in much of Latin America. In order to help our customers capitalize on this potential market opportunity, and to address our customers’ needs with respect to cross-border trade, during 2013 and thus far in 2014, we have expanded our presence in the Asia-Pacific and Latin America regions through the opening of offices in China and Brazil. Doing business overseas involves substantial challenges, including management attention and resources needed to adapt to multiple languages, cultures, laws and commercial infrastructure, as further described in this report under the caption “Risks Related to our International Operations.” While we do not expect our growth in China to have a material impact on our overall revenue in 2014, we expect it to be a major growth driver over the long-term. For the year ending December 31, 2014, we expect to invest between $4 million and $5 million related to the expansion of our business in China.

Our senior management continuously focuses on these and other trends and challenges, and we believe that our culture of innovation and our history of growth and expansion will contribute to the success of our business. We cannot, however, assure you that we will be successful in addressing and managing the many challenges and risks that we face.

Key Financial and Operating Performance Metrics

We regularly monitor a number of financial and operating metrics in order to measure our performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.

Core Revenue

Our reported operating results include revenue attributable to the products from two small legacy acquisitions, both of which occurred prior to 2008 and focused on solutions for lower-volume eBay sellers. We do not consider these products to be a core part of our strategic focus going forward. Each of these acquisitions contributed a relatively large number of customers with revenue per customer substantially lower than is characteristic of the rest of our business. We exclude the revenue attributable to these non-core, legacy products in calculating a measure we refer to as core revenue. We anticipate that the revenue associated with these non-core, legacy products will continue to decline over time both in absolute terms and as a percentage of our total revenue.

Number of Core Customers

The number of customers subscribing to our solutions is a primary determinant of our core revenue. We refer to the customers who subscribe to any of our solutions, other than the non-core, legacy products described above, as our core customers. The number of core customers was 2,781 and 2,287 as of September 30, 2014 and 2013 , respectively.

Average Revenue per Core Customer

The average revenue generated by our core customers is the other primary determinant of our core revenue. We calculate this metric by dividing our total core revenue for a particular period by the average monthly number of core customers during the period, which is calculated by taking the sum of the number of core customers at the end of each month in the period and dividing by the number of months in the period. We typically calculate average revenue per core customer in absolute dollars on a rolling twelve-month basis, but we may also calculate percentage changes in average revenue per core customer on a quarterly basis in order to help us evaluate our period-over-period performance. Our average revenue per core customer increased 4.2% to $31,375 for the twelve months ended September 30, 2014 as compared to $30,113 for the twelve months ended September 30, 2013 .

Subscription Dollar Retention Rate

We believe that our ability to retain our core customers and expand the revenue they generate for us over time is an important component of our growth strategy and reflects the long-term value of our customer relationships. We measure our performance on this basis using a metric we refer to as our subscription dollar retention rate. We calculate this metric for a particular period by establishing the cohort of core customers that had active contracts as of the end of the prior period. We then calculate our subscription dollar retention rate by taking the amount of fixed subscription revenue we recognized for the cohort in the period for which we are reporting the rate and dividing it by the fixed subscription revenue we recognized for the same cohort in the prior period. For this purpose, we do not include any revenue from the non-core, legacy products described above, any variable subscription fees paid by our customers or any implementation fees.

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Although some customers in any given period elect not to renew their contracts with us, our customers that do renew their subscriptions often increase their fixed subscription pricing levels to align with their increasing GMV volumes processed through our platform and may subscribe to additional modules as well. If our subscription dollar retention rate for a period is over 100%, this means that the increased subscription revenue we recognized from customers that renewed their contracts during the period, or whose contracts did not come up for renewal during the period, more than offset the subscription revenue we lost from customers that did not renew their contracts.

For each of the twelve months ended September 30, 2014 and 2013 , our subscription dollar retention rate exceeded 100%.

Adjusted EBITDA

Adjusted EBITDA represents our earnings before interest expense, income tax expense and depreciation and amortization, adjusted to eliminate stock-based compensation expense, which is a non-cash item. We believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results. However, adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with U.S. GAAP.

Adjusted EBITDA eliminates the impact of stock-based compensation expense, which we do not consider indicative of our operating performance. Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:


•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;


•	adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;


•	adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;


•	adjusted EBITDA does not reflect interest or tax payments that may represent a reduction in cash available to us; and


•	other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider adjusted EBITDA together with U.S. GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other U.S. GAAP results. The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss	$	(9,004	)	$	(4,292	)	$	(27,978	)	$	(12,019	)
Adjustments:
Interest expense, net	55			520			157			2,606
Income tax expense	6			35			87			56
Depreciation and amortization expense	1,741			886			4,393			2,619
Total adjustments	1,802			1,441			4,637			5,281
EBITDA	(7,202		)	(2,851		)	(23,341		)	(6,738		)
Stock-based compensation expense	2,534			474			5,301			1,433
Adjusted EBITDA	$	(4,668	)	$	(2,377	)	$	(18,040	)	$	(5,305	)

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Components of Operating Results

Revenue

We derive the majority of our revenue from subscription fees paid to us by our customers for access to and usage of our SaaS solutions for a specified contract term, which is usually one year. A portion of the subscription fee is typically fixed and based on a specified minimum amount of GMV that a customer expects to process through our platform. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV processed through our platform in excess of the customer’s specified minimum GMV. In most cases, the specified percentage of excess GMV on which the variable portion of the subscription is based is fixed and does not vary depending on the amount of the excess. We also receive implementation fees, which may include fees for providing launch assistance and training.

The following table shows the percentage of our total revenue attributable to fixed subscription fees plus implementation fees, as compared to the percentage attributable to variable subscription fees, for the three and nine months ended September 30, 2014 and 2013 :



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(as a percentage of total revenue)
Fixed subscription fees plus implementation fees	78.6	%	70.4	%	75.8	%	67.8	%
Variable subscription fees	21.4		29.6		24.2		32.2
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%

Because our customer contracts contain both fixed and variable pricing components, changes in GMV between periods do not translate directly or linearly into changes in our revenue. We use customized pricing structures for each of our customers depending upon the individual situation of the customer. For example, some customers may commit to a higher specified minimum GMV amount per month in exchange for a lower fixed percentage fee on that committed GMV. In addition, the percentage fee assessed on the variable GMV in excess of the committed minimum for each customer is typically higher than the fee on the fixed, committed portion. As a result, our overall revenue could increase or decrease even without any change in overall GMV between periods, depending on which customers generated the GMV. In addition, changes in GMV from month to month for any individual customer that are below the specified minimum amount would have no effect on our revenue from that customer, and each customer may alternate between being over the committed amount or under it from month to month. For these reasons, while GMV is an important qualitative and directional indicator, we do not regard it as a useful quantitative measurement of our historic revenues or as a predictor of future revenues.

We recognize fixed subscription fees and implementation fees ratably over the contract period once the contract has been signed by both parties, the customer has access to our platform and transactions can be processed, the fees are fixed or determinable and collection is reasonably assured.

We generally invoice our customers for the fixed portion of the subscription fee in advance, in monthly, quarterly, semi-annual or annual installments. We invoice our customers for the implementation fee at the inception of the arrangement. Fixed subscription and implementation fees that have been invoiced are initially recorded as deferred revenue and are generally recognized ratably over the contract term.

We invoice and recognize revenue from the variable portion of subscription fees in the period in which the related GMV is processed, assuming that the four conditions specified above have been met.

Cost of Revenue

Cost of revenue primarily consists of salaries and personnel-related costs for employees providing services to our customers and supporting our platform infrastructure, including benefits, bonuses and stock-based compensation. Additional expenses include co-location facility costs for our data centers, depreciation expense for computer equipment directly associated with generating revenue, infrastructure maintenance costs, fees we pay to credit card vendors in connection with our customers’ payments to us and other direct costs. We plan to continue to expand our capacity to support our growth, which will result in higher cost of revenue in absolute dollars.

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Operating Expenses

Sales and marketing expense . Sales and marketing expense consists primarily of salaries and personnel-related costs for our sales and marketing and customer support employees, including benefits, bonuses, stock-based compensation and commissions. We record expense for commissions at the time of contract signing. Additional expenses include marketing, advertising and promotional event programs, corporate communications and travel.

Research and development expense . Research and development expense consists primarily of salaries and personnel-related costs for our research and development employees, including benefits, bonuses and stock-based compensation. Additional expenses include costs related to the development, quality assurance and testing of new technology and enhancement of our existing platform technology, consulting and travel.

General and administrative expense . General and administrative expense consists primarily of salaries and personnel-related costs for administrative, finance and accounting, information systems, legal and human resource employees, including benefits, bonuses and stock-based compensation. Additional expenses include consulting and professional fees, insurance, bad debt expense, other corporate expenses and travel, as well as costs associated with compliance with the Sarbanes-Oxley Act and other regulations governing public companies, directors’ and officers’ liability insurance, increased professional services and an enhanced investor relations function now that we are a public company.

Other Income (Expense)

Other income (expense) consists primarily of interest income and interest expense. Interest income represents interest received on our cash and cash equivalents. During the three and nine months ended September 30, 2014 , interest expense consisted primarily of interest on our capital leases. During the three and nine months ended September 30, 2013 , interest expense consisted primarily of the interest incurred on outstanding borrowings under our credit facilities and subordinated loan, the accretion of the debt discount on our subordinated loan and interest on our capital leases. During the nine months ended September 30, 2013 , interest expense also included changes in the fair value of our preferred stock warrant liability.

Other income (expense) also includes the net effect of foreign currency revaluation gains and losses.

Seasonality

Our revenue fluctuates as a result of seasonal variations in our business, principally due to the peak consumer demand and related increased volume of our customers’ GMV during the year-end holiday season. As a result, we have historically had higher revenue in our fourth quarter than other quarters in a given year due to increased GMV processed through our platform, resulting in higher variable subscription fees. Along with the seasonally higher revenue we have experienced in the fourth quarter, we have also experienced higher gross margins in the fourth quarter. Our cost to run our platform infrastructure is generally fixed. Therefore, when applied against our generally fixed costs, the higher revenue in the fourth quarter has resulted in higher overall gross margins for us.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, and to the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. During the nine months ended September 30, 2014 , there were no material changes to our critical accounting policies and use of estimates, which are disclosed in our audited consolidated financial statements for the year ended December 31, 2013 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

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Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09 , which provides new guidance for revenue recognition. ASU 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. ASU 2014-09 will be effective for us beginning January 1, 2017 and early adoption is not permitted. We are currently evaluating the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.

We have reviewed other new accounting pronouncements that were issued as of September 30, 2014 and do not believe that these pronouncements are applicable to us, or that they will have a material impact on our financial position or results of operations.

Results of Operations

Comparison of the Three Months Ended September 30, 2014 and 2013

The following table presents our results of operations for the three months ended September 30, 2014 and 2013:



	Three Months Ended September 30,
	2014					2013					Period-to-Period Change
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Period-to-Period Change
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Amount			Percentage
	(dollars in thousands)
Revenue	$	20,966		100.0	%	$	16,620		100.0	%	$	4,346		26.1	%
Cost of revenue	6,018			28.7		4,555			27.4		1,463			32.1
Gross profit	14,948			71.3		12,065			72.6		2,883			23.9
Operating expenses:
Sales and marketing	13,865			66.1		9,316			56.1		4,549			48.8
Research and development	4,263			20.3		2,991			18.0		1,272			42.5
General and administrative	5,677			27.1		3,499			21.1		2,178			62.2
Total operating expenses	23,805			113.5		15,806			95.2		7,999			50.6
Loss from operations	(8,857		)	(42.2	)	(3,741		)	(22.6	)	(5,116		)	136.8
Other (expense) income:
Interest expense, net	(55		)	(0.3	)	(520		)	(3.1	)	465			(89.4	)
Other income, net	(86		)	(0.4	)	4			—		(90		)	*
Total other (expense) income	(141		)	(0.7	)	(516		)	(3.1	)	375			(72.7	)
Loss before income taxes	(8,998		)	(42.9	)	(4,257		)	(25.7	)	(4,741		)	111.4
Income tax expense	6			—		35			0.2		(29		)	(82.9	)
Net loss	$	(9,004	)	(42.9	)%	$	(4,292	)	(25.9	)%	$	(4,712	)	109.8

* = not meaningful

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Revenue



	Three Months Ended September 30,				Period-to-Period Change
	2014		2013		Amount		Percentage
	(dollars in thousands)
Revenue	$	20,966	$	16,620	$	4,346	26.1	%

The increase in revenue for the three months ended September 30, 2014 was mainly driven by an increase in our core revenue, which is discussed below, and the expansion of our international operations. The growth in core revenue was partially offset by a $0.1 million , or 30.2% , decrease in our non-core revenue over the same period, as the products associated with our non-core, legacy acquisitions became a less significant part of our overall business focus.

Our revenue from international operations of $4.7 million , or 22.6% of total revenue, for the three months ended September 30, 2014 increased from $3.5 million , or 20.9% of total revenue, for the three months ended September 30, 2013 . The increase in revenue from our international operations was primarily attributable to an increase in the number of international customers. During the three months ended September 30, 2014 , we continued our expansion in the Asia-Pacific and Latin America regions.

Core Revenue



	Three Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount			Percentage
	(dollars in thousands)
Core revenue	$	20,686		$	16,219		$	4,467		27.5	%
Percentage of total revenue	98.7		%	97.6		%
Non-core revenue	$	280		$	401		$	(121	)	(30.2	)%
Percentage of total revenue	1.3		%	2.4		%
Total revenue	$	20,966		$	16,620		$	4,346		26.1	%

The growth in core revenue was primarily attributable to a 21.6% increase in the number of core customers using our platform at September 30, 2014 as compared to September 30, 2013 . The increase in core customers accounted for 82.1% of the increase in core revenue during the three months ended September 30, 2014 .

In addition, we experienced a 4.0% increase in the average revenue per core customer during the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 . The increase in the average revenue per core customer during the three months ended September 30, 2014 accounted for 17.9% of the increase in core revenue during the period. The increase in the average revenue per core customer was primarily attributable to an overall increase in transaction volume and, to a lesser extent, to modest overall increases in the percentage fees assessed on the fixed and variable portions of GMV under our contractual arrangements with some of our customers during the year. Because we generally enter into annual contracts with our customers, we may renegotiate either or both of the fixed and variable components of the pricing structure of a customer’s contract each year. In addition, the increase in average revenue per core customer was due in part to our established customers who have increased their revenue over time on our platform. In general, as customers mature they become more active by contributing a higher amount of GMV and/or subscribing to additional solutions on our platform.

Cost of Revenue



	Three Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Cost of revenue	$	6,018		$	4,555		$	1,463	32.1	%
Percentage of total revenue	28.7		%	27.4		%

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The increase in cost of revenue was primarily attributable to a $0.9 million increase in salaries and personnel-related costs, as we increased the number of employees providing services to our expanding customer base and supporting our platform infrastructure from 129 at September 30, 2013 to 150 at September 30, 2014 . During the three months ended September 30, 2014 , we also experienced a $0.5 million increase in co-location facility costs and depreciation expense associated with equipment for our data centers.

Operating Expenses

Sales and marketing



	Three Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Sales and marketing	$	13,865		$	9,316		$	4,549	48.8	%
Percentage of total revenue	66.1		%	56.1		%

The increase in sales and marketing expense was primarily attributable to a $4.2 million increase in salaries and personnel-related costs, as we increased the number of sales and marketing and customer support personnel to continue driving revenue growth. The number of full-time sales and marketing employees increased from 259 at September 30, 2013 to 375 at September 30, 2014 . In addition, we experienced a $0.3 million increase in our marketing and advertising expenses, promotional event programs and travel costs. The increase in sales and marketing expense as a percentage of revenue for the three months ended September 30, 2014 reflects our strategy of adding sales and marketing professionals and expanding our marketing activities in order to continue to grow our business.

Research and development



	Three Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Research and development	$	4,263		$	2,991		$	1,272	42.5	%
Percentage of total revenue	20.3		%	18.0		%

The increase in research and development expense was primarily attributable to a $1.3 million increase in salaries and personnel-related costs associated with an increase in research and development personnel. The number of full-time research and development employees increased from 80 at September 30, 2013 to 100 at September 30, 2014 .

General and administrative



	Three Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
General and administrative	$	5,677		$	3,499		$	2,178	62.2	%
Percentage of total revenue	27.1		%	21.1		%

The increase in general and administrative expense was primarily attributable to a $1.8 million increase in salaries and personnel-related costs associated with an increase in general and administrative personnel to support our growing business and obligations as a public company. The number of full-time general and administrative employees increased from 48 at September 30, 2013 to 63 at September 30, 2014 . Bad debt expense increased by $0.2 million due to our revenue growth and an increase in the number of our customers. In addition, we experienced a $0.2 million increase in other general administrative costs necessary to support the overall growth in our business.

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Results of Operations

Comparison of the Nine Months Ended September 30, 2014 and 2013

The following table presents our results of operations for the nine months ended September 30, 2014 and 2013:



	Nine Months Ended September 30,
	2014					2013					Period-to-Period Change
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Period-to-Period Change
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Amount			Percentage
	(dollars in thousands)
Revenue	$	61,074		100.0	%	$	47,518		100.0	%	$	13,556		28.5	%
Cost of revenue	18,169			29.7		12,971			27.3		5,198			40.1
Gross profit	42,905			70.3		34,547			72.7		8,358			24.2
Operating expenses:
Sales and marketing	42,131			69.0		26,398			55.6		15,733			59.6
Research and development	12,572			20.6		8,882			18.7		3,690			41.5
General and administrative	15,850			26.0		8,641			18.2		7,209			83.4
Total operating expenses	70,553			115.6		43,921			92.5		26,632			60.6
Loss from operations	(27,648		)	(45.3	)	(9,374		)	(19.8	)	(18,274		)	194.9
Other (expense) income:
Interest expense, net	(157		)	(0.3	)	(2,606		)	(5.5	)	2,449			(94.0	)
Other income, net	(86		)	(0.1	)	17			—		(103		)	*
Total other (expense) income	(243		)	(0.4	)	(2,589		)	(5.5	)	2,346			(90.6	)
Loss before income taxes	(27,891		)	(45.7	)	(11,963		)	(25.3	)	(15,928		)	133.1
Income tax expense	87			0.1		56			0.1		31			55.4
Net loss	$	(27,978	)	(45.8	)%	$	(12,019	)	(25.4	)%	$	(15,959	)	132.8

* = not meaningful

Revenue



	Nine Months Ended September 30,				Period-to-Period Change
	2014		2013		Amount		Percentage
	(dollars in thousands)
Revenue	$	61,074	$	47,518	$	13,556	28.5	%

The increase in revenue for the nine months ended September 30, 2014 was mainly driven by an increase in our core revenue, which is discussed below, and the expansion of our international operations. The growth in core revenue was partially offset by a $0.4 million , or 29.3% , decrease in our non-core revenue over the same period, as the products associated with our non-core, legacy acquisitions became a less significant part of our overall business focus.

Our revenue from international operations of $13.9 million , or 22.7% of total revenue, for the nine months ended September 30, 2014 increased from $10.0 million , or 21.1% of total revenue, for the nine months ended September 30, 2013 . The increase in revenue from our international operations was primarily attributable to an increase in the number of international customers. During the nine months ended September 30, 2014 , we continued our expansion in the Asia-Pacific and Latin America regions.

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Core Revenue



	Nine Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount			Percentage
	(dollars in thousands)
Core revenue	$	60,101		$	46,142		$	13,959		30.3	%
Percentage of total revenue	98.4		%	97.1		%
Non-core revenue	$	973		$	1,376		$	(403	)	(29.3	)%
Percentage of total revenue	1.6		%	2.9		%
Total revenue	$	61,074		$	47,518		$	13,556		28.5	%

The growth in core revenue was primarily attributable to a 21.6% increase in the number of core customers using our platform at September 30, 2014 as compared to September 30, 2013 . The increase in core customers accounted for 83.7% of the increase in core revenue during the nine months ended September 30, 2014 .

In addition, we experienced a 3.9% increase in the average revenue per core customer during the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 . The increase in the average revenue per core customer during the nine months ended September 30, 2014 accounted for 16.3% of the increase in core revenue during the period.

Cost of Revenue



	Nine Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Cost of revenue	$	18,169		$	12,971		$	5,198	40.1	%
Percentage of total revenue	29.7		%	27.3		%

The increase in cost of revenue was primarily attributable to a $3.3 million increase in salaries and personnel-related costs associated with an increase in the number of employees providing services to our expanding customer base and supporting our platform infrastructure. In addition, we experienced a $1.1 million increase in co-location facility costs and depreciation expense associated with equipment for our data centers. During the nine months ended September 30, 2014 , we also incurred a $0.6 million charge for translation costs associated with a short-term initiative designed to expand our customers' presence in certain European countries. Lastly, we experienced a $0.2 million increase in credit card vendor transaction fees.

Operating Expenses

Sales and marketing



	Nine Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Sales and marketing	$	42,131		$	26,398		$	15,733	59.6	%
Percentage of total revenue	69.0		%	55.6		%

The increase in sales and marketing expense was primarily attributable to a $12.8 million increase in salaries and personnel-related costs, as we increased the number of sales and marketing and customer support personnel to continue driving revenue growth. In addition, we experienced a $2.3 million increase in our marketing and advertising expenses, promotional event programs and travel costs. We also experienced a $0.4 million increase in recruiting and placement costs associated with hiring sales and marketing professionals. The increase in sales and marketing expense as a percentage of revenue for the nine months ended September 30, 2014 reflects our strategy of adding sales and marketing professionals and expanding our marketing activities in order to continue to grow our business.

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Research and development



	Nine Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
Research and development	$	12,572		$	8,882		$	3,690	41.5	%
Percentage of total revenue	20.6		%	18.7		%

The increase in research and development expense was primarily attributable to a $3.5 million increase in salaries and personnel-related costs associated with an increase in research and development personnel. We also experienced a $0.1 million increase in recruiting and placement costs associated with hiring research and development professionals.

General and administrative



	Nine Months Ended September 30,						Period-to-Period Change
	2014			2013			Amount		Percentage
	(dollars in thousands)
General and administrative	$	15,850		$	8,641		$	7,209	83.4	%
Percentage of total revenue	26.0		%	18.2		%

The increase in general and administrative expense was primarily attributable to a $4.8 million increase in salaries and personnel-related costs associated with an increase in general and administrative personnel to support our growing business and obligations as a newly public company. Bad debt expense increased by $0.9 million due to our revenue growth and an increase in the number of our customers. We experienced a $0.9 million increase in professional fees related to legal, consulting and audit and tax services. In addition, we experienced a $0.7 million increase in other general administrative costs necessary to support the overall growth in our business.

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Liquidity and Capital Resources

Sources of Liquidity

Prior to our IPO in May 2013, we funded our operations primarily through cash from operating activities, bank and subordinated debt borrowings and private placements of our redeemable convertible preferred stock.

We have a loan and security agreement with a bank, which was last amended on September 17, 2014. Under the loan and security agreement, as amended, we have a borrowing capacity under a revolving line of credit in the amount of $10.0 million. The revolving line of credit has a term through September 17, 2016 and requires interest-only payments to be made monthly on any outstanding advances at the bank's prime rate, which was 3.25% at September 30, 2014 , plus 0.25%. We are also obligated to pay an unused facility fee in the amount of 0.15% per year on any unused borrowing capacity. At September 30, 2014, we did not have any amounts outstanding under the revolving line of credit. We previously had an equipment line of credit of up to $1.0 million with the same bank, although the equipment line of credit expired in June 2014.

The revolving line of credit is collateralized by all of our assets, excluding our intellectual property, although we may not encumber our intellectual property without the consent of the bank. Under the terms of the loan and security agreement, we are required to meet and maintain specified financial and nonfinancial covenants. As of September 30, 2014, we were in compliance with all such covenants.

During 2013, we also had a loan and security agreement with a subordinated lender. Under the agreement, we borrowed $5.0 million in March 2012 and an additional $5.0 million in December 2012. Borrowings under the agreement accrued interest at an annual rate of 10.5%. We were scheduled to make interest-only payments on outstanding balances through March 1, 2015, after which the debt was to be paid in monthly installments of both principal and interest through February 2017. In November 2013, we prepaid in full all amounts due and owing under our subordinated loan agreement.

Public Offerings of Common Stock

On May 29, 2013, we closed our IPO in which we sold 6,612,500 shares of common stock at a public offering price of $14.00 per share, resulting in net proceeds of $82.0 million, after deducting underwriting discounts and commissions. Costs directly associated with the IPO were capitalized and recorded as deferred offering costs prior to the closing of the IPO. These costs were recorded as a reduction of the IPO proceeds received in calculating the amount to be recorded in additional paid-in capital.

Upon the closing of the IPO, certain warrants that would otherwise have expired were automatically net exercised into shares of redeemable convertible preferred stock. All then-outstanding shares of the redeemable convertible preferred stock, including the shares issued upon the cashless exercise of the warrants, were automatically converted into an aggregate of 13,401,499 shares of common stock upon the closing of the IPO. The remaining warrants to purchase redeemable convertible preferred stock outstanding as of the closing of the IPO automatically converted into warrants to purchase 216,491 shares of common stock, and the preferred stock warrant liability was reclassified to additional paid-in capital as of May 29, 2013. See Note 4 to our condensed consolidated financial statements included in this quarterly report for additional details regarding these warrants.

On November 12, 2013, we closed a public offering in which we sold 1,000,000 shares of common stock for net proceeds of $31.9 million, after deducting underwriting discounts and offering-related expenses.

Based on our current level of operations and anticipated growth, we believe our future cash flows from operating activities and existing cash balances, which include the net proceeds from our public offerings, will be sufficient to meet our cash requirements for at least the next 12 months.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:



	Nine Months Ended September 30,
	2014			2013
	(in thousands)
Cash (used in) provided by:
Operating activities	$	(16,829	)	$	(1,036	)
Investing activities	(6,220		)	(2,952		)
Financing activities	778			83,581

Operating Activities

For the nine months ended September 30, 2014 , our cash used in operating activities of $16.8 million consisted of a net loss of $28.0 million , partially offset by $10.8 million in adjustments for non-cash items and $0.4 million of cash provided by changes in working capital. Adjustments for non-cash items primarily consisted of non-cash stock compensation expense of $5.3 million , depreciation and amortization expense of $4.4 million and bad debt expense of $1.0 million . The increase in cash resulting from changes in working capital primarily consisted of an increase in deferred revenue of $2.2 million as a result of an increased number of customers prepaying for subscription services, and a decrease in accounts receivable of $0.6 million as a result of increased cash collections during the period. These increases were partially offset by decreases in operating cash flow due to a decrease in accounts payable and accrued expenses of $1.7 million , primarily driven by timing of payments to our vendors and accrued bonuses and commissions related to the year ended December 31, 2013 that were paid in the first quarter of 2014, and an increase in prepaid expenses and other assets of $0.9 million .

For the nine months ended September 30, 2013, our net cash used in operating activities of $1.0 million consisted of a net loss of $12.0 million, partially offset by $5.8 million in adjustments for non-cash items and $5.2 million of cash provided by changes in working capital. Adjustments for non-cash items primarily consisted of depreciation and amortization expense of $2.6 million, non-cash stock compensation expense of $1.4 million, change in fair value of preferred stock warrants of $1.1 million, which was reclassified to additional paid-in capital upon the closing of our IPO, and accretion of debt discount of $0.4 million. The increase in cash resulting from changes in working capital primarily consisted of an increase in deferred revenue of $4.2 million as a result of an increased number of customers prepaying for subscription services, and an increase in accounts payable and accrued expenses of $2.4 million, primarily driven by increased operating costs during the period. These increases were partially offset by decreases in operating cash flow due to a $1.5 million increase in accounts receivable, primarily driven by increased revenue during the year as we continued to expand our operations, both domestically and internationally.

Investing Activities

For the nine months ended September 30, 2014 , cash used in investing activities was $6.2 million , consisting of $5.4 million for the purchase of property and equipment and $0.8 million for the payment of internal-use software development costs.

For the nine months ended September 30, 2013, cash used in investing activities was $3.0 million, consisting of $2.0 million for the purchase of property and equipment and $1.0 million for the payment of internal-use software development costs.

Financing Activities

For the nine months ended September 30, 2014 , cash provided by financing activities was $0.8 million , consisting of $1.8 million in cash received upon the exercise of stock options, partially offset by $1.0 million used for the repayment of capital leases.

For the nine months ended September 30, 2013, net cash provided by financing activities was $83.6 million, consisting of $86.1 million of proceeds from our IPO, net of underwriting discounts and commissions but before offering expenses, and $0.9 million in cash received upon the exercise of stock options. These amounts were partially offset by $2.5 million in payments for costs related to our IPO that had been deferred and $0.9 million for repayment of debt and capital leases.

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Contractual Obligations

On August 15, 2014, we entered into a lease agreement for the lease of office space to replace our current corporate headquarters. The lease term will commence on the date that construction of the leased premises is substantially complete, which is targeted to be October 15, 2015. The initial term of the lease agreement is for seven years following the lease commencement date, and we may elect to renew the lease term for two additional five-year periods, subject to certain conditions and notice obligations set forth in the lease agreement.

Additionally, during the nine months ended September 30, 2014 , we entered into new leases for office space in England and China and also assigned our previous lease for office space in England to a third party. We have also entered into capital leases pertaining to servers and software to support our production and disaster recovery environments.

As a result of the lease agreements entered into during the nine months ended September 30, 2014 , the following table updates our commitments for operating and capital lease obligations from those presented in our Annual Report on Form 10-K for the year ended December 31, 2013.



Contractual Obligations	Payment due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Operating lease obligations	$	49,584	$	2,937	$	20,248	$	20,326	$	6,073
Capital lease obligations	4,555		2,283		2,161		111		—
Total	$	54,139	$	5,220	$	22,409	$	20,437	$	6,073

Off-Balance Sheet Arrangements

As of September 30, 2014 , we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We are exposed to market risk related to changes in foreign currency exchange rates and interest rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into exchange rate hedging arrangements to manage the risks described below.

Foreign Currency Exchange Risk

With international operations, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, and if our exposure increases, adverse movement in foreign currency exchange rates could have a material adverse impact on our financial results. Our primary exposures are related to non-U.S. dollar denominated operating expenses in the United Kingdom, Europe, Australia, Brazil, China and Hong Kong. As a result, our results of operations would generally be adversely affected by a decline in the value of the U.S. dollar relative to these foreign currencies. However, based on the size of our international operations and the amount of our expenses denominated in foreign currencies, a 10% change in foreign exchange rates would have only a minimal impact on our results of operations for the three and nine months ended September 30, 2014 . The majority of our sales contracts are currently denominated in U.S. dollars. Therefore, we have minimal foreign currency exchange risk with respect to our revenue.

Interest Rate Risk

We are only marginally exposed to interest rate risk through our portfolio of cash and cash equivalents. Interest rates that may affect these items in the future will depend on market conditions and may differ from the rates we have experienced in the past.

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Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Security and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2014 , the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date at the reasonable assurance level.

(b) Changes in Internal Controls Over Financial Reporting

There have not been any changes in our internal controls over financial reporting during our fiscal quarter ended September 30, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

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Item 1A. Risk Factors

Our business is subject to numerous risks. You should carefully consider the following risks, as well as general economic and business risks, and all of the other information contained in this Quarterly Report on Form 10-Q, together with any other documents we file with the SEC. Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline.

Risks Related to Our Business

We have incurred significant net losses since inception, and we expect our operating expenses to increase significantly in the foreseeable future, which may make it more difficult for us to achieve profitability.

We incurred net losses of $20.6 million and $28.0 million during the year ended December 31, 2013 and the nine months ended September 30, 2014 , respectively, and we had an accumulated deficit of $128.1 million as of September 30, 2014 . We anticipate that our operating expenses will increase substantially in the foreseeable future as we invest in increased sales and marketing and research and development efforts. As a result, we can provide no assurance as to whether or when we will achieve profitability. In addition, as a newly public company, we have begun, and will continue, to incur significant accounting, legal and other expenses that we did not incur as a private company. To achieve profitability, we will need to either increase our revenue sufficiently to offset these higher expenses or significantly reduce our expense levels. Our recent revenue growth may not be sustainable, and if we are forced to reduce our expenses, our growth strategy could be compromised. If we are not able to achieve and maintain profitability, the value of our company and our common stock could decline significantly.

A significant portion of our revenue is attributable to sales by our customers on the Amazon and eBay marketplaces and through advertisements on Google. Our inability to continue to integrate our solutions with these channels would make our solutions less appealing to existing and potential new customers and could significantly reduce our revenue.

A substantial majority of the gross merchandise value, or GMV, that our customers process through our platform is derived from merchandise sold on the Amazon and eBay marketplaces or advertised on Google, and a similar portion of our variable subscription fees is attributable to sales by our customers through these channels. These channels, and the other channels with which our solutions are integrated, have no obligation to do business with us or to allow us access to their systems, and they may decide at any time and for any reason to significantly curtail or inhibit our ability to integrate our solutions with their channels. Additionally, Amazon, eBay or Google may decide to make significant changes to their respective business models, policies, systems or plans, and those changes could impair or inhibit our customers’ ability to use our solutions to sell their products on those channels, or may adversely affect the volume of GMV that our customers can sell on those channels or reduce the desirability of selling on those channels. Further, Amazon, eBay or Google could decide to compete with us more vigorously. Any of these results could cause our customers to reevaluate the value of our products and services and potentially terminate their relationships with us and significantly reduce our revenue.

We may not be able to respond to rapid changes in channel technologies or requirements, which could cause us to lose revenue and make it more difficult to achieve profitability.

The e-commerce market is characterized by rapid technological change and frequent changes in rules, specifications and other requirements for retailers and manufacturers to be able to sell their merchandise on particular channels. Our ability to retain existing customers and attract new customers depends in large part on our ability to enhance and improve our existing solutions and introduce new solutions that can adapt quickly to these technological changes on the part of channels. To achieve market acceptance for our solutions, we must effectively anticipate and offer solutions that meet frequently changing channel requirements in a timely manner. If our solutions fail to do so, our ability to renew our contracts with existing customers and our ability to create or increase demand for our solutions will be impaired.

If we are unable to retain our existing customers, our revenue and results of operations could be adversely affected.

We sell our solutions pursuant to contractual arrangements that generally have one-year terms. Therefore, our revenue growth depends to a significant degree upon subscription renewals. Our customers have no obligation to renew their subscriptions after the subscription term expires, and these subscriptions may not be renewed or, if renewed, may not be renewed on the same or more favorable terms for us. We may not be able to accurately predict future trends in customer renewals, and our customers’ renewal rates may decline or fluctuate because of several factors, including their satisfaction or dissatisfaction with our solutions, the cost of our solutions, the cost of solutions offered by our competitors and reductions in our customers’ spending levels. If our customers do not renew their subscriptions, renew on less favorable terms or for fewer modules, or do not purchase additional modules, our revenue may grow more slowly than expected or decline, and our ability to become profitable may be compromised.

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We may not be able to compete successfully against current and future competitors. If we do not compete successfully, we could experience lower sales volumes and pricing pressure, which could cause us to lose revenues, impair our ability to pursue our growth strategy and compromise our ability to achieve profitability.

We face intense competition in the market for online channel management solutions and services, and we expect competition to intensify in the future. We have competitors, including some of the channels themselves, with longer operating histories, larger customer bases and greater financial, technical, marketing and other resources than we do. Increased competition may result in reduced pricing for our solutions, longer sales cycles or a decrease in our market share, any of which could negatively affect our revenue and future operating results and our ability to grow our business.

A number of competitive factors could cause us to lose potential sales or to sell our solutions at lower prices or at reduced margins, including:


•	Potential customers may choose to continue using or to develop applications in-house, rather than pay for our solutions;


•	The channels themselves, which typically offer software tools, often for free, that allow retailers and manufacturers to connect to them, may decide to compete more vigorously with us;


•	Competitors may adopt more aggressive pricing policies and offer more attractive sales terms, adapt more quickly to new technologies and changes in customer requirements, and devote greater resources to the promotion and sale of their products and services than we can;


•	Current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their products and expand their markets, and consolidation in our industry is likely to intensify. Accordingly, new competitors or alliances among competitors may emerge and rapidly acquire significant market share;


•	Current and potential competitors may offer software that addresses one or more online channel management functions at a lower price point or with greater depth than our solutions and may be able to devote greater resources to those solutions than we can; and


•	Software vendors could bundle channel management solutions with other solutions or offer such products at a lower price as part of a larger product sale.

We may not be able to compete successfully against current and future competitors, including any channels that decide to compete against us more vigorously. In addition, competition may intensify as our competitors raise additional capital and as established companies in other market segments or geographic markets expand into our market segments or geographic markets. If we cannot compete successfully against our competitors, our business and our operating and financial results could be adversely affected.

If the e-commerce industry consolidates around a limited number of online channels, or if the complexities and challenges faced by retailers and manufacturers seeking to sell online otherwise diminish, demand for our solutions could decline.

Our solutions enable retailers and manufacturers to manage their merchandise sales through hundreds of disparate online channels. One of the key attractions of our solutions to retailers and manufacturers is the ability to help address the complexity and fragmentation of selling online. Although the number and variety of online channels available to retailers and manufacturers have been increasing, at the same time the share of online sales made through a small number of larger channels, particularly Amazon and eBay, has also been increasing. If the trend toward consolidation around a few large online channels accelerates, the difficulties faced by retailers and manufacturers could decline, which might make our solutions less important to retailers and manufacturers and could cause demand for our solutions to decline.

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Software errors, defects or failures or human error could cause our solutions to oversell our customers’ inventory or misprice their offerings or could cause other errors, which would hurt our reputation and reduce customer demand.

Complex software applications such as ours may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Despite our testing and testing by our customers, our current and future products may contain defects. Our customers rely on our solutions to automate the allocation of their inventory simultaneously across multiple online channels, as well as to ensure that their sales comply with the policies of each channel and sometimes to dynamically determine product pricing at any given moment. Some customers subscribe to our solutions on a managed-service basis, in which case our personnel operate our solutions on behalf of the customer. In the event that our solutions do not function properly, or if there is human error on the part of our service staff, errors could occur, including that our customers might inadvertently sell more inventory than they actually have in stock, make sales that violate channel policies or underprice or overprice their offerings. Overselling their inventory could force our customers to cancel orders at rates that violate channel policies. Underpricing would result in lost revenue to our customers and overpricing could result in lost sales. In addition, our pricing policies with our customers are largely based upon our customers’ expectations of the levels of their GMV that will be processed through our platform over the term of their agreement with us, and errors in our software or human error could cause transactions to be incorrectly processed that would cause GMV to be in excess of our customers’ specified minimum amounts, in which case our variable subscription fee-based revenue could be overstated. Any of these results or other errors could reduce demand for our solutions and hurt our business reputation. Customers could also seek recourse against us in these cases and, while our contractual arrangements with customers typically provide that we are not liable for damages such as these, it is possible that these provisions would not be sufficient to protect us.

If the use of "cookie" tracking technologies is restricted, regulated or otherwise blocked, or if changes in our industry cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of GMV processed on our platform, and our related revenue, could decrease.

Cookies are small data files that are sent by websites and stored locally on an internet user's computer or mobile device. Our customers enable cookies on their sites and monitor internet user activity, such as viewing pages and completing transactions. We collect data via cookies that we ultimately use to report GMV, which translates to revenue. However, internet users can easily disable, delete and block cookies directly through browser settings or through other software, browser extensions or hardware platforms that physically block cookies from being created and stored.

Third-party cookies are downloaded from domains not associated with the address currently being viewed in an internet user's browser. Third-party cookies can be specifically blocked by browser settings, and, for example, the Safari internet browser blocks third-party cookies by default. On the other hand, first-party cookies are downloaded directly from the address domain of an internet user, and are generally considered safer by privacy concerns. We currently collect data from both first-party and third-party cookie implementations. Our customers currently implementing our third-party cookie solution might be slow to migrate their sites to first-party cookie technologies, which could result in less cookie data that we can collect, and therefore less reported revenue data that can we can store.

Privacy regulations might also restrict how our customers deploy our cookies on their sites, and this could potentially increase the number of internet users that choose to proactively disable cookies on their systems. In the European Union, the Directive on Privacy and Electronic Communications requires users to give their consent before cookie data can be stored on their local computer or mobile device. Users can decide to opt out of any cookie data creation, which could negatively impact the revenue we might recognize.

There have been efforts within our industry to replace cookies with alternative tracking technologies. To the extent these efforts are successful, we may have difficulty adapting to those new tracking technologies and we may become dependent on third parties for access to tracking data.

We may have to develop alternative systems to collect user revenue data if users block cookies or regulations introduce barriers to collecting cookie data. In addition, third parties may develop technology or policies to harvest user data (via next generation browsers or other means) and subsequently prevent us from directly importing data to our systems. We may not be able to develop adequate alternatives to cookie data collection.

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We rely on non-redundant data centers and cloud computing providers to deliver our SaaS solutions. Any disruption of service from these providers could harm our business.

We manage our platform and serve all of our customers from third-party data center facilities and cloud computing providers that are non-redundant, meaning that the data centers and providers are currently not configured as backup for each other. While we engineer and architect the actual computer and storage systems upon which our platform runs, we do not control the operation of the facilities at which they are deployed.

The owners of our data facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.

Any changes in third-party service levels at our data centers or any errors, defects, disruptions or other performance problems with our solutions could harm our reputation and damage our customers’ businesses. Interruptions in our services could reduce our revenue, require us to issue credits to customers, subject us to potential liability, cause our existing customers to not renew their agreements or adversely affect our ability to attract new customers.

Our data centers and cloud computing providers are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, cyber attacks and similar events. The occurrence of a natural disaster or an act of terrorism, or vandalism or other misconduct, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in the availability of our SaaS solutions or impair their functionality. Our business, growth prospects and operating results would also be harmed if our customers and potential customers are not confident that our solutions are reliable.

We rely in part on a pricing model under which a variable portion of the subscription fees we receive from customers is based upon the amount of GMV that those customers process through our platform, and any change in the attractiveness of that model or any decline in our customers’ sales could adversely affect our financial results.

We have adopted a pricing model under which a portion of the subscription fees we receive from our customers is variable, based on the amount of our customers’ GMV processed through our platform that exceeds a specified amount established by contract, which we refer to as variable subscription fees. Substantially all of our customer contracts include this variable subscription fee component. If sales by our customers processed through our platform were to decline, or if our customers were to demand fully fixed pricing terms that do not provide for any variability based on their GMV processed through our platform, our revenue and margins could decline.

Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause our stock price to decline.

Our operating results have historically fluctuated due to changes in our business, and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may cause fluctuations in our quarterly operating results include, but are not limited to, the following:


•	seasonal patterns in consumer spending;


•	the addition of new customers or the loss of existing customers;


•	changes in demand for our software;


•	the timing and amount of sales and marketing expenses;


•	changes in the prospects of the economy generally, which could alter current or prospective customers’ spending priorities, or could increase the time it takes us to close sales;


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


•	costs necessary to improve and maintain our software platform; and


•	costs related to acquisitions of other businesses.

Our operating results may fall below the expectations of market analysts and investors in some future periods, which could cause the market price of our common stock to decline substantially.

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The seasonality of our business creates significant variance in our quarterly revenue, which makes it difficult to compare our financial results on a sequential quarterly basis.

Our customers are retailers and manufacturers that typically realize a significant portion of their online sales in the fourth quarter of each year during the holiday season. As a result of this seasonal variation, our subscription revenue fluctuates, with the variable portion of our subscription fees being higher in the fourth quarter than in other quarters and with revenue generally declining in the first quarter sequentially from the fourth quarter. Our business is therefore not necessarily comparable on a sequential quarter-over-quarter basis and you should not rely solely on quarterly comparisons to analyze our growth.

Failure to adequately manage our growth could impair our ability to deliver high-quality solutions to our customers, hurt our reputation and compromise our ability to become profitable.

We have experienced, and may continue to experience, significant growth in our business. If we do not effectively manage our growth, the quality of service of our solutions may suffer, which could negatively affect our reputation and demand for our solutions. Our growth has placed, and is expected to continue to place, a significant strain on our managerial, operational and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:


•	hire additional personnel, both domestically and internationally;


•	implement additional management information systems;


•	maintain close coordination among our engineering, operations, legal, finance, sales and marketing and client service and support organizations; and


•	further develop our operating, administrative, legal, financial and accounting systems and controls.

Moreover, if our sales continue to increase, we may be required to concurrently deploy our hosting infrastructure at multiple additional locations or provide increased levels of customer service. Failure to accomplish any of these requirements could impair our ability to continue to deliver our solutions in a timely fashion, fulfill existing customer commitments or attract and retain new customers.

If we do not retain our senior management team and key employees, or if we fail to attract and retain additional highly skilled sales talent, we may not be able to sustain our growth or achieve our business objectives.

Our future success is substantially dependent on the continued service of our senior management team, particularly Scot Wingo, our chief executive officer, Aris Buinevicius, our chief technology officer, David Spitz, our president and chief operating officer, and John Baule, our chief financial officer. Our future success also depends on our ability to continue to attract, retain, integrate and motivate highly skilled technical, sales and administrative employees. Competition for these employees in our industry is intense. As a result, we may be unable to attract or retain these management and other key personnel that are critical to our success, resulting in harm to our key client relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and pursue our business goals.

Our strategy of pursuing opportunistic acquisitions or investments may be unsuccessful and may divert our management’s attention and consume significant resources.

A part of our growth strategy is to opportunistically pursue acquisitions of, or investments in, other complementary businesses or individual technologies. Any acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities or incur debt. In addition, acquisitions involve numerous risks, any of which could harm our business, including:


•	difficulties in integrating the operations, technologies, services and personnel of acquired businesses, especially if those businesses operate outside of our core competency of providing e-commerce software solutions;


•	cultural challenges associated with integrating employees from acquired businesses into our organization;


•	ineffectiveness or incompatibility of acquired technologies or services;


•	failure to successfully further develop the acquired technology in order to recoup our investment;


•	potential loss of key employees of acquired businesses;


•	inability to maintain the key business relationships and the reputations of acquired businesses;

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•	diversion of management’s attention from other business concerns;


•	litigation for activities of acquired businesses, including claims from terminated employees, customers, former stockholders or other third parties;


•	in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;


•	costs necessary to establish and maintain effective internal controls for acquired businesses; and


•	increased fixed costs.

If current efforts to allow states to require online retailers to collect sales tax on their behalf are successful, e-commerce in general could decline, our solutions could become less attractive and the amount of GMV processed through our platform, and our related revenue, could decline.

Although current U.S. Supreme Court decisions restrict the imposition of obligations to collect state and local sales taxes with respect to remote sales, an increasing number of states have considered or adopted laws that attempt to require out-of-state retailers to collect sales taxes on their behalf. In addition, legislation currently moving through the U.S. Senate and the U.S. House of Representatives, called the Marketplace Fairness Act, would override the Supreme Court rulings and enable states to require that online retailers collect sales tax from the states’ residents. Some larger online retailers, including Amazon, have announced their support for legislation along these lines. This is a rapidly evolving area and we cannot predict whether this or other similar legislation will ultimately be adopted or what form it might take if adopted. For example, while the current Senate and House legislation includes an exception for small retailers, some of the state efforts do not and there can be no assurance that any legislation ultimately adopted would include such an exception. If the states or Congress are successful in these attempts to require online retailers to collect state or local income taxes on out-of-state purchases, buying online would lose some of its current advantage over traditional retail models and could become less attractive to consumers. This could cause e-commerce to decline, which would, in turn, hurt the business of our customers, potentially make our products less attractive and cause the amount of GMV processed through our platform, and ultimately our revenue, to decline. In addition, it is possible that one or more states or the federal government or foreign countries may seek to impose a tax collection, reporting or record-keeping obligation on companies like us that facilitate e-commerce, even though we are not an online retailer. Similar issues exist outside of the United States, where the application of value-added tax or other indirect taxes on online retailers and companies like us that facilitate e-commerce is uncertain and evolving.

If the e-commerce market does not grow, or grows more slowly than we expect, particularly on the channels that our solutions support, demand for our online channel management solutions could be adversely affected.

For our existing customers and potential customers to be willing to subscribe to our solutions, the internet must continue to be accepted and widely used for selling merchandise. If consumer utilization of our primary e-commerce channels, such as Amazon, eBay and Google, does not grow or grows more slowly than we expect, demand for our solutions would be adversely affected, our revenue would be negatively impacted and our ability to pursue our growth strategy and become profitable would be compromised.

Evolving domestic and international data privacy regulations may restrict our ability, and that of our customers, to solicit, collect, process, disclose and use personal information or may increase the costs of doing so, which could harm our business.

Federal, state and foreign governments and supervising authorities have enacted, and may in the future enact, laws and regulations concerning the solicitation, collection, processing, disclosure or use of consumers’ personal information. Evolving regulations regarding personal data and personal information, in the European Union and elsewhere, especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit our ability to operate or expand our business. Such laws and regulations require or may require us or our customers to implement privacy and security policies, permit consumers to access, correct or delete personal information stored or maintained by us or our customers, inform individuals of security incidents that affect their personal information, and, in some cases, obtain consent to use personal information for specified purposes. Other proposed legislation could, if enacted, impose additional requirements and prohibit the use of specific technologies, such as those that track individuals’ activities on web pages or record when individuals click on a link contained in an email message. Such laws and regulations could restrict our customers’ ability to collect and use web browsing data and personal information, which may reduce our customers’ demand for our solutions.

Changing industry standards and industry self-regulation regarding the collection, use and disclosure of data may have similar effects. Existing and future privacy and data protection laws and increasing sensitivity of consumers to unauthorized disclosures and use of personal information may also negatively affect the public’s perception of our customers’ sales practices.

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If our solutions are perceived to cause, or are otherwise unfavorably associated with, invasions of privacy, whether or not illegal, we or our customers may be subject to public criticism. Public concerns regarding data collection, privacy and security may also cause some consumers to be less likely to visit our customers’ websites or otherwise interact with our customers, which could limit the demand for our solutions and inhibit the growth of our business.

Any failure on our part to comply with applicable privacy and data protection laws, regulations, policies and standards or any inability to adequately address privacy concerns associated with our solutions, even if unfounded, could subject us to liability, damage our reputation, impair our sales and harm our business. Furthermore, the costs to our customers of compliance with, and other burdens imposed by, such laws, regulations, policies and standards may limit adoption of and demand for our solutions.

Cybersecurity incidents could harm our business and negatively impact our financial results.

Cybersecurity incidents could endanger the confidentiality, integrity and availability of our information resources and the information we collect, use, store and disclose. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store, and disclose, but there is no guarantee that inadvertent (for example, software bugs or other technical malfunctions, employee error or malfeasance, or other factors) or unauthorized data access will not occur despite our efforts. Any unauthorized access or use of information, virus or similar breach or disruption to our, our customers’, or our partners’ systems and security measures could result in disrupted operations, loss of information, damage to our reputation and customer relationships, early termination of our contracts and other business losses, indemnification of our customers, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, financial penalties, litigation, regulatory investigations, and other significant liabilities.

Risks Related to the Software-as-a-Service (SaaS) Model

If we fail to manage and increase the capacity of our hosted infrastructure, our customers may be unable to process transactions through our platform, which could harm our reputation and demand for our solutions.

We have experienced significant growth in the number of users, transactions and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our hosted infrastructure to be sufficiently flexible and scalable to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments and to handle spikes in usage. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure capacity requirements, particularly in the fourth quarter when we typically experience significant increases in the volume of customer transactions processed through our platform, our customers could experience service outages that may subject us to financial penalties or other liabilities, result in customer losses, harm our reputation and adversely affect our ability to grow our revenue.

We derive most of our revenue from annual subscription agreements, as a result of which a significant downturn in our business may not be immediately reflected in our operating results.

We derive most of our revenue from subscription agreements, which are typically one year in length. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our financial performance in that quarter but might negatively affect our revenue in future quarters. Accordingly, the effect of significant declines in sales and market acceptance of our solutions may not be reflected in our short-term results of operations.

Our business is substantially dependent upon the continued growth of the market for on-demand SaaS solutions. If this market does not continue to grow, demand for our solutions could decline, which in turn could cause our revenues to decline and impair our ability to become profitable.

We derive, and expect to continue to derive, substantially all of our revenue from the sale of our solutions, which are delivered under a SaaS model. As a result, widespread use and acceptance of this business model is critical to our future growth and success. Under the more traditional license model for software procurement, users of the software typically run the applications in-house on their own hardware. Because many companies are generally predisposed to maintaining control of their information technology systems and infrastructure, there may be resistance to the concept of accessing software functionality as a service provided by a third party. In addition, the market for SaaS solutions is still evolving, and existing and new market participants may introduce new types of solutions and different approaches to enable organizations to address their

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needs. If the market for SaaS solutions fails to grow or grows more slowly than we currently anticipate, demand for our solutions and our revenue, gross margin and other operating results could be negatively impacted.

Risks Related to Our International Operations

Our increasing international operations subject us to increased challenges and risks. If we do not successfully manage the risks associated with international operations, we could experience a variety of costs and liabilities and the attention of our management could be diverted.

Since launching our international operations in 2004, we have expanded, and expect to further expand, our operations internationally by opening offices in new countries and regions worldwide. However, our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, taxation systems, alternative dispute systems, regulatory systems and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:


•	recruiting and retaining employees in foreign countries;


•	increased competition from local providers;


•	compliance with applicable foreign laws and regulations;


•	longer sales or collection cycles in some countries;


•	credit risk and higher levels of payment fraud;


•	compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act;


•	currency exchange rate fluctuations;


•	foreign exchange controls that might prevent us from repatriating cash earned outside the United States;


•	economic and political instability in some countries;


•	less protective intellectual property laws;


•	compliance with the laws of numerous foreign taxing jurisdictions in which we conduct business, potential double taxation of our international earnings and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws;


•	increased costs to establish and maintain effective controls at foreign locations; and


•	overall higher costs of doing business internationally.

If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results will suffer.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in full compliance with applicable laws.

Our solutions are subject to export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our solutions must be made in compliance with these laws. If we fail to comply with these U.S. export control laws and import laws, including U.S. Customs regulations, we could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.

Furthermore, the U.S. export control laws and economic sanctions laws prohibit the shipment or export of specified products and services to U.S. embargoed or sanctioned countries, governments and persons. Even though we take precautions to prevent our solutions from being provided to U.S. sanctions targets, if our solutions and services were to be exported to those prohibited countries despite such precautions, we could be subject to government investigations, penalties, reputational harm or other negative consequences.

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Any change in export or import regulations, economic sanctions or related laws, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions, or in our decreased ability to export or sell our solutions to existing or potential customers with international operations. Additionally, changes in our solutions may be required in response to changes in export and import regulations, which could lead to delays in the introduction and sale of our solutions in international markets, prevent our customers with international operations from deploying our solutions or, in some cases, prevent the export or import of our solutions to some countries, governments or persons altogether. Any decreased use of our solutions or limitation on our ability to export our solutions or sell them in international markets would hurt our revenue and compromise our ability to pursue our growth strategy.

Risks Related to Intellectual Property

We operate in an industry with extensive intellectual property litigation. Claims of infringement against us may hurt our business.

Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The internet-related software field generally is characterized by extensive intellectual property litigation. Although our industry is rapidly evolving, many companies that own, or claim to own, intellectual property have aggressively asserted their rights. From time to time, we have been subject to legal proceedings and claims relating to the intellectual property rights of others, and we expect that third parties will continue to assert intellectual property claims against us, particularly as we expand the complexity and scope of our business. In addition, most of our subscription agreements require us to indemnify our customers against claims that our solutions infringe the intellectual property rights of third parties.

Future litigation may be necessary to defend ourselves or our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could:


•	hurt our reputation;


•	adversely affect our relationships with our current or future customers;


•	cause delays or stoppages in providing our services;


•	divert management’s attention and resources;


•	require technology changes to our software that would cause us to incur substantial cost;


•	subject us to significant liabilities; and


•	require us to cease some or all of our activities.

In addition to liability for monetary damages against us, which may be tripled and may include attorneys’ fees, or, in some circumstances, damages against our customers, we may be prohibited from developing, commercializing or continuing to provide some or all of our software solutions unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all.

Our failure to protect our intellectual property rights could diminish the value of our services, weaken our competitive position and reduce our revenue.

We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks, domain names and patent applications, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.

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We have sought patent protection for some of our technologies and currently have two U.S. patent applications and one international patent application on file, although there can be no assurance that these patents will ultimately be issued. We are also pursuing the registration of our domain names, trademarks and service marks in the United States and in jurisdictions outside the United States. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional patent filings that could be expensive and time-consuming.

We have licensed in the past, and expect to license in the future, some of our proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation.

Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries, such as China and India, do not protect our proprietary rights to as great an extent as do the laws of European countries and the United States. Further, the laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically advanced features, which could seriously reduce demand for our software solutions. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing upon our intellectual property rights.

Our use of “open source” software could negatively affect our ability to sell our solutions and subject us to possible litigation.

A portion of our technology platform and our solutions incorporates so-called “open source” software, and we may incorporate additional open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to specified conditions, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software we use were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, including being enjoined from the sale of our solutions that contained the open source software and required to comply with the foregoing conditions, which could disrupt the sale of the affected solutions. In addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to change our products.

Risks Related to Ownership of Our Common Stock

An active trading market for our common stock may not continue to develop or be sustained.

Prior to our IPO in May 2013, there was no public market for our common stock. Although our common stock is listed on the New York Stock Exchange, or NYSE, we cannot assure you that an active trading market for our shares will continue to develop or be sustained. If an active market for our common stock does not continue to develop or is not sustained, it may be difficult for investors in our common stock to sell shares without depressing the market price for the shares or to sell the shares at all.

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The trading price of the shares of our common stock has been and is likely to continue to be volatile.

Since our IPO, our stock price has been volatile. The stock market in general and the market for technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:


•	actual or anticipated variations in our operating results;


•	changes in financial estimates by us or by any securities analysts who might cover our stock;


•	conditions or trends in our industry;


•	stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the software industry;


•	announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships or divestitures;


•	announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;


•	capital commitments;


•	investors’ general perception of our company and our business;


•	recruitment or departure of key personnel; and


•	sales of our common stock, including sales by our directors and officers or specific stockholders.

In addition, in the past, stockholders have initiated class action lawsuits against technology companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our business. As a newly public company, we have only limited research coverage by equity research analysts. Equity research analysts may elect not to initiate or continue to provide research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. Even if we have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

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

Our certificate of incorporation authorizes us to issue up to 100,000,000 shares of common stock and up to 5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue our shares of common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investment, our stock incentive plans or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.

There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by some or all of our stockholders. For example, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock. The board of directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may result in the loss of voting control to other stockholders.

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Our charter documents also contain other provisions that could have an anti-takeover effect, including:


•	only one of our three classes of directors is elected each year;


•	stockholders are not entitled to remove directors other than by a 66 ² / 3 % vote and only for cause;


•	stockholders are not permitted to take actions by written consent;


•	stockholders cannot call a special meeting of stockholders; and


•	stockholders must give advance notice to nominate directors or submit proposals for consideration at stockholder meetings.

In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) December 31, 2018, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, (3) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (4) any date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act and the rules and regulations of the NYSE. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Commencing with our fiscal year ending December 31, 2014, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts. Prior to our IPO, we were never required to test our internal controls within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements and we may in the future discover additional weaknesses that require improvement. In addition, our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

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If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the NYSE, the Securities and Exchange Commission, or SEC, or other regulatory authorities.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and our stock may not appreciate in value.

We have not declared or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude us from paying dividends. There is no guarantee that shares of our common stock will appreciate in value or that the price at which our stockholders have purchased their shares will be able to be maintained.

We will incur increased costs and demands upon management as a result of being a public company.

As a newly public company listed in the United States, we have begun, and will continue, particularly after we cease to be an "emerging growth company," to incur significant additional legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and stock exchanges, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

We may need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.

While we anticipate that our existing cash, together with our cash flow from operations, availability under our existing credit facility and net proceeds from our public offerings, will be sufficient to fund our operations for at least the next 12 months, we may need to raise additional capital to fund operations in the future or to meet various objectives, including developing future technologies and services, increasing working capital, acquiring businesses and responding to competitive pressures. If we seek to raise additional capital, it may not be available on favorable terms or may not be available at all. In addition, pursuant to the terms of our credit facility, we may be restricted from using the net proceeds of financing transactions for our operating objectives. Lack of sufficient capital resources could significantly limit our ability to manage our business and to take advantage of business and strategic opportunities. Any additional capital raised through the sale of equity or debt securities with an equity component would dilute our stock ownership. If adequate additional funds are not available, we may be required to delay, reduce the scope of or eliminate material parts of our business strategy, including potential additional acquisitions or development of new technologies.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

None

(b) Use of Proceeds from Public Offering of Common Stock

On May 22, 2013, our Registration Statement on Form S-1, as amended (File No. 333-187865) was declared effective in connection with the IPO of our common stock, pursuant to which we sold 6,612,500 shares of our common stock, including the full exercise of the underwriters’ over-allotment option, at a price to the public of $14.00 per share. The offering closed on May 29, 2013, and, as a result, we received net proceeds of approximately $82.0 million (after underwriters’ discounts and commissions of approximately $6.5 million and additional offering related costs of approximately $4.1 million). The joint managing underwriters of the offering were Goldman Sachs & Co. and Stifel, Nicolaus & Company, Incorporated.

No expenses incurred by us in connection with our IPO were paid directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates.

The principal purposes of the offering were to create a public market for our common stock and to facilitate our future access to the public equity markets, as well as to obtain additional capital. We currently have no specific plans for the use of a significant portion of the net proceeds of the offering. However, we anticipate that we will use the net proceeds from the offering for general corporate purposes, which may include further expansion of our international operations and sales and marketing capabilities, as well as working capital, capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business.

There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus filed by us with the Securities and Exchange Commission on May 23, 2013.

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Item 6. Exhibits



Exhibit No.		Document

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).

3.2		Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).

4.1		Specimen stock certificate evidencing shares of Common Stock (incorporated herein by reference to Exhibit 4.2 of the Company's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on May 9, 2013).

10.1	* +	Schedule of Compensation for Non-Employee Directors, adopted effective as of July 1, 2014.

10.2	*	Office lease, dated as of August 15, 2014, by and between the Registrant and Duke Realty Limited Partnership.

10.3	*	Eleventh Amendment to Loan and Security Agreement, dated as of September 17, 2014, by and among the Registrant, MerchandisingAdvisor Corporation, CA Marketplaces, Inc., ChannelAdvisor UK Limited, CA Washington, LLC and Silicon Valley Bank.

31.1	*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

31.2	*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.

32.1	**	Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.

101.INS	*	XBRL Instance Document

101.SCH	*	XBRL Taxonomy Extension Schema Document

101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed herewith.

These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


+	Management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		CHANNELADVISOR CORPORATION

Date:	November 6, 2014	By:	/s/ John F. Baule
			John F. Baule
			Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)

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Exhibit Index



Exhibit No.		Document

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).

3.2		Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).

4.1		Specimen stock certificate evidencing shares of Common Stock (incorporated herein by reference to Exhibit 4.2 of the Company's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on May 9, 2013).

10.1	* +	Schedule of Compensation for Non-Employee Directors, adopted effective as of July 1, 2014.

10.2	*	Office lease, dated as of August 15, 2014, by and between the Registrant and Duke Realty Limited Partnership.

10.3	*	Eleventh Amendment to Loan and Security Agreement, dated as of September 17, 2014, by and among the Registrant, MerchandisingAdvisor Corporation, CA Marketplaces, Inc., ChannelAdvisor UK Limited, CA Washington, LLC and Silicon Valley Bank.

31.1	*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

31.2	*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.

32.1	**	Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.

101.INS	*	XBRL Instance Document

101.SCH	*	XBRL Taxonomy Extension Schema Document

101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed herewith.


+	Management contract or compensatory plan.

Exhibit 10.1

As approved July 1, 2014

SCHEDULE OF COMPENSATION FOR

NON-EMPLOYEE DIRECTORS

This schedule describes the compensation payable by ChannelAdvisor Corporation (the “Company”) to individuals who are not employed by the Company but serve as members of the Company's Board of Directors. The compensation consists of cash and equity compensation components as described below. In addition, the Company will pay or reimburse directors for reasonable expenses incurred in performing the duties of the director in accordance with the Company's business expense reimbursement policy and procedures. This schedule is not intended to create any contractual obligation with any director and may be amended by the Company at any time.

Cash Compensation:

Annual retainer for indicated role:



Member of the Board of Directors	$50,000
Chair of the Audit Committee	$20,000
Chair of the Compensation Committee	$10,000
Chair of the Nominating and Corporate Governance Committee	$6,000
Member of the Audit Committee	$7,000
Member of the Compensation Committee	$5,000

Each non-employee director will be paid the retainer listed above for membership on the Board of Directors and for each other role in which the director serves. In lieu of cash payments, non-employee directors may elect to receive grants of restricted stock unit awards. Committee Chairs will receive the retainer for service as chair in lieu of the retainer for committee membership. Effective July 1, 2014, the retainer will be earned on the first day of the fiscal quarter in which the director serves in the indicated role. No adjustment will be made nor any repayment due in the event that a director does not serve in the indicated role for the remainder of the quarter. Retainers are in lieu of meeting fees.

Equity Compensation:

Each non-employee director then serving on the Board will be granted a restricted stock unit award of 6,000 shares of the Company's common stock on the first business day of August. The award will be granted pursuant to the Company's 2013 Equity Incentive Plan. The award vests in full on the first anniversary of the grant date, provided that the director is serving as a member of the Board of Directors or as an employee or Consultant of the Company or an Affiliate under the Plan on the date of vesting. The awards will be awarded only if approved by the Compensation Committee on or before the grant date. Awards will be made pursuant to the applicable form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement as approved by the Compensation Committee from time to time.

Exhibit 10.2

OFFICE LEASE

THIS OFFICE LEASE is executed this 15th day of August, 2014 by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership doing business in North Carolina as Duke Realty of Indiana Limited Partnership ("Landlord"), and CHANNELADVISOR CORPORATION, a Delaware corporation ("Tenant").

ARTICLE 1 - LEASE OF PREMISES

Section 1.01 . Basic Lease Provisions and Definitions .

(a) Leased Premises (shown outlined on Exhibit A attached hereto): Suites 100, 300, 400, and 500 of the building to be constructed by Landlord, which will be commonly known as Perimeter Four (the "Building"), located at 3025 Carrington Mill Boulevard, Morrisville, North Carolina 27560, within Perimeter Park (the "Park").

(b) Rentable Area: approximately 136,538 rentable square feet. The Rentable Area includes the square footage within the Leased Premises plus a pro rata portion of the square footage of the common areas within the Building, as reasonably determined by Landlord. For information purposes only, Landlord used the Building Owners and Managers Association International ("BOMA") Standard Method for Measuring Floor Area In Office Buildings (American National Standard ANSI-Z65.1-1996 approved June 7, 1996 by American National Standards Institute, Inc.) in determining the useable area of the Building plus a 10.5% add-on factor for single-tenant floors or a 17.4% add-on for multi-tenant floors for common areas to determine the rentable area of the Leased Premises. Landlord and Tenant hereby acknowledge and agree that the square footage of the Rentable Area as set forth above is estimated by Landlord based upon the preliminary construction plans and will be subject to re-measurement by Landlord on or before the Commencement Date (as hereinafter defined). Without limiting the foregoing, if Tenant delivers to Landlord a written objection to Landlord's re-measurement of the Rentable Area within ten (10) days after Tenant's receipt of Landlord's determination of the same, and the parties cannot agree on the Rentable Area within ten (10) days after Tenant's written objection, Tenant may choose arbitration to determine the Rentable Area. If Tenant chooses arbitration, Tenant shall give Landlord written notice of its desire to seek arbitration within five (5) days after expiration of such ten (10) day period ("Arbitration Notice"). Within ten (10) days after Tenant provides Landlord with its Arbitration Notice, Tenant shall appoint an architect to determine the Rentable Area. If the architects cannot agree upon the Rentable Area within ten (10) days after the appointment of Tenant's architect, then, within ten (10) days after the expiration of such ten (10) day period, the two architects shall select a third architect. Once the third architect has been selected as provided for above, then such third architect shall within five (5) days after appointment make its determination of the Rentable Area. The average of the two closest determinations of the Rentable Area shall be used and shall be binding on both Landlord and Tenant. Landlord and Tenant shall each bear the cost of its architect and shall share the cost of the third. If Tenant fails to provide the Arbitration Notice as provided above, then Tenant shall have no further right to object to Landlord's determination of the Rentable Area. At the option of either party, Landlord and Tenant shall enter into an amendment to this Lease confirming the terms of such re-measurement.

(c) Tenant's Proportionate Share: 71.03% (based on 136,538 rentable square feet within the Leased Premises divided by the 192,225 rentable square feet within the Building).

(d) Minimum Annual Rent

H:\ChannelAdvisor.7(final).doc

Year 1 $3,208,643.00 ($23.50 per rsf)

Year 2 $3,296,880.60 ($24.15 per rsf)

Year 3 $3,387,544.70 ($24.81 per rsf)

Year 4 $3,480,702.20 ($25.49 per rsf)

Year 5 $3,576,421.40 ($26.19 per rsf)

Year 6 $3,674,772.90 ($26.91 per rsf)

Year 7 $3,775,829.00 ($27.65 per rsf)

(e) Monthly Rental Installments:

Months 1 – 12 $267,386.91

Months 13 – 24 $274,740.05

Months 25 – 36 $282,295.39

Months 37 – 48 $290,058.51

Months 49 – 60 $298,035.11

Months 61 – 72 $306,231.07

Months 73 – 84 $314,652.41

(f) Base Year: 2016.

(g) Target Commencement Date: October 1, 2015 with a day-for-day adjustment for each day after July 31, 2014 that this Lease is not yet executed by Tenant and delivered to Landlord).

(h) Lease Term: Seven (7) years.

(i) Security Deposit: $3,208,643.00, which shall be in the form of a Letter of Credit (as defined in Article 4 below).

(j) Broker(s): Duke Realty Services of Indiana, LLC representing Landlord and Synergy Commercial Advisors, LLC representing Tenant.

(k) Permitted Use: General office purposes, including without limitation software development and training.

(l) Address for notices and payments are as follows:

Landlord: Duke Realty Limited Partnership

c/o Duke Realty Corporation

Attn.: Raleigh Market – Vice President,

Asset Management & Customer Service

3005 Carrington Mill Road, Suite 100

Morrisville, North Carolina 27560

With

Payments to: Duke Realty Limited Partnership

75 Remittance Drive, Suite 3205

Chicago, Illinois 60675-3205

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Tenant (prior to occupancy): ChannelAdvisor Corporation

2701 Aerial Center Parkway

Morrisville, North Carolina 27560

Tenant (following occupancy): ChannelAdvisor Corporation

3025 Carrington Mill Boulevard, Suite 100

Morrisville, North Carolina 27560

(m) Guarantor(s): None.

EXHIBITS

Exhibit A: Leased Premises

Exhibit B: Tenant Improvements

Exhibit B-1: Base Building Specifications

Exhibit B-2: Preliminary Plans

Exhibit C: Letter of Understanding

Exhibit D: Rules and Regulations

Exhibit E: Form of Irrevocable Letter of Credit

Exhibit F: Dog Relief Area

Exhibit G: Expansion Space

Exhibit H: Form of Tenant Event Agreement

Section 1.02 . Lease of Premises . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Leased Premises, under the terms and conditions herein, together with a non-exclusive right, in common with others, to use the following (collectively, the "Common Areas"): the areas of the Building and the underlying land and improvements thereto that are designed for use in common by all tenants of the Building and their respective employees, agents, customers, invitees and others, including without limitation the main Building lobby, elevators, multi-tenant floor hallways, multi-tenant floor restrooms, parking areas and patios.

ARTICLE 2 - TERM AND POSSESSION

Section 2.01 . Term . The Lease Term shall commence as of the date (the "Commencement Date") that Substantial Completion (as defined in Exhibit B hereto) of the Tenant Improvements (as defined in Section 2.02 below) occurs.

Section 2.02 . Construction of Tenant Improvements . Landlord shall construct and install all leasehold improvements to the Leased Premises (collectively, the "Tenant Improvements") in accordance with Exhibit B attached hereto and made a part hereof. Landlord shall also improve the site and construct the Building, at Landlord's expense, in accordance with the base Building specifications set forth in Exhibit B-1 attached hereto and made a part hereof.

Section 2.03 . Surrender of the Leased Premises . Upon the expiration or earlier termination of this Lease, Tenant shall, at its sole cost and expense, immediately (a) surrender the Leased Premises to Landlord in broom-clean condition and in good order, condition and repair, (b) remove from the Leased Premises or where located (i) Tenant's Property (as defined in Section 8.01 below), (ii) all data and communications equipment, wiring and cabling (including above ceiling, below raised floors and behind walls) installed by or on behalf of Tenant, and (iii) any alterations required to be removed pursuant to Section 7.03 below (excluding the initial Tenant Improvements; provided, however, that any commercial

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grade kitchen must be removed), and (c) repair any damage caused by any such removal and restore the Leased Premises to the condition existing upon the Commencement Date, reasonable wear and tear, damage by casualty or condemnation, and repairs and maintenance that are the responsibility of Landlord as expressly set forth in this Lease excepted. Landlord shall notify Tenant at the time of the approval of the CD's (as defined in Exhibit B hereto) whether Landlord considers any portion of the Tenant Improvements to be a "commercial grade kitchen", and if Landlord considers such improvements to include a commercial grade kitchen, Tenant may adjust the CD's to modify the improvements. All of Tenant's Property that is not removed within ten (10) days following Landlord's written demand therefor shall be conclusively deemed to have been abandoned and Landlord shall be entitled to dispose of such property at Tenant's cost without incurring any liability to Tenant. This Section 2.03 shall survive the expiration or any earlier termination of this Lease.

Section 2.04 . Holding Over . If Tenant retains possession of the Leased Premises after the expiration or earlier termination of this Lease, Tenant shall be a tenant at sufferance at one hundred fifty percent (150%) of the Monthly Rental Installments and Annual Rental Adjustment (as hereinafter defined) for the Leased Premises in effect upon the date of such expiration or earlier termination, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of rent after such expiration or earlier termination shall not result in a renewal of this Lease, nor shall such acceptance create a month-to-month tenancy. In the event a month-to-month tenancy is created by operation of law, either party shall have the right to terminate such month-to-month tenancy upon thirty (30) days' prior written notice to the other, whether or not said notice is given on the rent paying date. This Section 2.04 shall in no way constitute a consent by Landlord to any holding over by Tenant upon the expiration or earlier termination of this Lease, nor limit Landlord's remedies in such event.

ARTICLE 3 - RENT

Section 3.01 . Base Rent . Tenant shall pay to Landlord the Minimum Annual Rent in the Monthly Rental Installments in advance, without demand, deduction or offset, on the Commencement Date and on or before the first day of each and every calendar month thereafter during the Lease Term. The Monthly Rental Installments for partial calendar months shall be prorated. Tenant shall be responsible for delivering the Monthly Rental Installments to the payment address set forth in Section 1.01(l) above in accordance with this Section 3.01 .

Section 3.02 . Annual Rental Adjustment Definitions .

(a) " Annual Rental Adjustment " shall mean the amount of Tenant's Proportionate Share of Operating Expenses for a particular calendar year.

(b) " Operating Expenses " shall mean the amount of Landlord's costs and expenses paid or incurred in operating, repairing, replacing and maintaining the Building and the Common Areas in good condition and repair for a particular calendar year (including all additional costs and expenses that Landlord reasonably determines that it would have paid or incurred during such year if the Building had been one hundred percent (100%) occupied, but in no event shall Landlord adjust Operating Expenses that remain constant regardless of occupancy levels), including by way of illustration and not limitation, the following: all Real Estate Taxes (as hereinafter defined), insurance premiums and deductibles; water, sewer, electrical and other utility charges other than the separately billed electrical and other charges paid by Tenant as provided in this Lease (or other tenants in the Building); service and other charges incurred in the repair, replacement, operation and maintenance of the elevators and the heating, ventilation and air-conditioning ("HVAC") system; costs associated with providing fitness facilities, if any; cleaning and

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other janitorial services; tools and supplies; repair costs; landscape maintenance costs; security patrols; license, permit and inspection fees; management fees (which shall not exceed 4% of the gross rents for the Building); administrative fees; supplies, costs, wages and related employee benefits payable for the management, maintenance and operation of the Building; maintenance, repair and replacement of the driveways, parking and sidewalk areas (including snow and ice removal), landscaped areas, and lighting; and maintenance and repair costs, dues, fees and assessments incurred under any covenants or charged by any owners association. The cost of any Operating Expenses that are capital in nature shall be amortized over the useful life of the improvement (as reasonably determined by Landlord in accordance with generally accepted accounting principles), and only the amortized portion shall be included in Operating Expenses. In the event Landlord changes a policy by adding a service to the Building that was not provided in the Base Year, there shall be an assumed charge added to the Base Year calculation for purposes of that service (for example, in the event Landlord adds a full time, dedicated security guard to the Building following the Base Year, there shall be an assumed cost of such security guard added to the calculation of the Base Year amount). Notwithstanding the foregoing, Operating Expenses shall not include the following:

(i) costs incurred in connection with or directly related to Landlord's initial construction and development of the Building and the Park;

(ii) legal and other fees, so-called "take over" or "buy-out" obligations, advertising expenses, and other costs incurred in connection with the original leasing of the Building or Park, or future releasing of the Building or Park or disputes with tenants;

(iii) any items not otherwise excluded to the extent Landlord is reimbursed by insurance (or would have been reimbursed by insurance if Landlord had carried the insurance required by this Lease) or otherwise compensated, including direct reimbursement by any tenant;

(iv) a bad debt loss, rent loss, or reserves for bad debts or rent loss, or any other reserve for anticipated future expenses;

(v) costs representing amounts paid to an affiliate of Landlord for services or materials that are materially in excess of the amounts that would have been paid in the absence of such relationship;

(vi) all interest or penalties incurred as a result of Landlord's failure to pay any costs as the same become due, except resulting from the failure of Tenant to pay rent in a timely manner;

(vii) the costs incurred to test, survey, cleanup, contain, abate, remove, or otherwise remedy asbestos-containing materials or other materials from the Building or Common Areas that have been classified as "Hazardous Substances" under Environmental Laws (as defined under Section 15.01(a) of the Lease) as of the date of this Lease;

(viii) all ground lease rent payable by Landlord;

(ix) rentals for items (except when needed in connection with normal repairs and maintenance of permanent systems or in the event of an emergency) that, if purchased rather than rented, would constitute a capital item that is specifically excluded (excluding, however, equipment not affixed to the Building that is used in providing janitorial or similar services);

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(x) costs, including permit, license and inspection costs, incurred with respect to the installation of tenants' or other occupants' improvements in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building;

(xi) depreciation, amortization and interest payments, except as provided herein and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied, and when depreciation or amortization is permitted or required, the items shall be amortized over its reasonably anticipated useful life;

(xii) marketing costs including, without limitation, leasing commissions, attorneys’ fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Building;

(xiii) expenses in connection with services or other benefits that are not offered to Tenant or for which Tenant is charged for directly but that are provided to another tenant or occupant of the Building free of charge;

(xiv) costs incurred by Landlord due to the violation by Landlord or any tenant other than Tenant of the terms and conditions of any lease of space in the Building;

(xv) interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Building;

(xvi) Landlord's general corporate overhead and general corporate administrative expenses;

(xvii) the cost of any electric power used by any tenant in the Building for which any tenant directly contracts with the local public service company or of which any tenant is separately metered or submetered and pays Landlord directly; provided, however, that if any tenant in the Building contracts directly for electric power service or is separately metered or submetered during any portion of the relevant period, the total electric power costs for the Building shall be "grossed up" to reflect what those costs would have been had each tenant in the Building used the Building-standard amount of electric power;

(xviii) services and utilities provided and costs incurred in connection with the operation of any retail and restaurant operations in the Building (if any), except to the extent the square footage of such operations are included in the rentable square feet of the Building and do not exceed the services and utility costs which would have been incurred had the retail and/or restaurant space been used for general office purposes;

(xix) tax penalties incurred as a result of Landlord’s negligence, inability or unwillingness to make payments and/or to file any tax or informational returns when due;

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(xx) costs arising from Landlord's charitable or political contributions;

(xxi) costs arising from defects in the base, shell or core of the Building or improvements installed by Landlord or repair thereof that are discovered within one (1) year of the Commencement Date;

(xxii) costs for sculpture, paintings or other objects of art;

(xxiii) costs (including in connection therewith all attorneys' fees and costs of settlement judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitrations pertaining to Landlord and/or the Building that are not associated with Landlord’s reasonable, good faith attempts to reduce a component of Operating Expenses; and

(xxiv) costs associated with the operation of the business of the partnership or entity that constitutes Landlord as the same are distinguished from the costs of operation of the Building including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be in issue), and costs of syndicating.

(c) " Tenant's Proportionate Share of Operating Expenses " shall mean an amount equal to the remainder of (i) the product of Tenant's Proportionate Share times the Operating Expenses less (ii) Tenant's Proportionate Share times the Operating Expenses for the Base Year, provided that such amount shall not be less than zero.

(d) " Real Estate Taxes " shall mean any form of real estate tax or assessment or service payments in lieu thereof, and any license fee, commercial rental tax, improvement bond or other similar charge or tax (other than inheritance, personal income or estate taxes) imposed upon the Building or Common Areas, or against Landlord's business of leasing the Building (e.g., a sales tax on rental payments), by any authority having the power to so charge or tax, together with costs and expenses of contesting the validity or amount of the Real Estate Taxes.

Section 3.03 . Payment of Additional Rent .

(a) Any amount required to be paid by Tenant hereunder (in addition to Minimum Annual Rent) and any charges or expenses incurred by Landlord on behalf of Tenant under the terms of this Lease shall be considered "Additional Rent" payable in the same manner and upon the same terms and conditions as the Minimum Annual Rent reserved hereunder, except as set forth herein to the contrary. Any failure on the part of Tenant to pay such Additional Rent when and as the same shall become due shall entitle Landlord to the remedies available to it for non-payment of Minimum Annual Rent.

(b) In addition to the Minimum Annual Rent specified in this Lease, commencing as of January 1, 2017, Tenant shall pay to Landlord as Additional Rent for the Leased Premises, in each calendar year or partial calendar year during the Lease Term, an amount equal to the Annual Rental Adjustment for such calendar year. Landlord shall estimate the Annual Rental Adjustment annually, and written notice thereof shall be given to Tenant prior to the beginning of each calendar year. Tenant shall pay to Landlord each month, at the same time the Monthly Rental Installment is due, an amount equal to one-twelfth (1/12) of the estimated Annual Rental Adjustment. Tenant shall be responsible for delivering the Additional Rent to the payment address set forth in Section 1.01(l) above in accordance with this Section 3.03 . If Operating Expenses increase during a calendar year, Landlord may increase the

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estimated Annual Rental Adjustment during such year by giving Tenant written notice to that effect, together with documentation evidencing the reason for the increase, and thereafter Tenant shall pay to Landlord, in each of the remaining months of such year, an amount equal to the amount of such increase in the estimated Annual Rental Adjustment divided by the number of months remaining in such year. Within a reasonable time after the end of each calendar year, Landlord shall prepare and deliver to Tenant a statement showing the actual Annual Rental Adjustment. Within thirty (30) days after receipt of the aforementioned statement, Tenant shall pay to Landlord, or Landlord shall credit against the next rent payment or payments due from Tenant, as the case may be, the difference between the actual Annual Rental Adjustment for the preceding calendar year and the estimated amount paid by Tenant during such year. This Section 3.03 shall survive the expiration or any earlier termination of this Lease.

Section 3.04 . Late Charges . Tenant acknowledges that Landlord shall incur certain additional unanticipated administrative and legal costs and expenses if Tenant fails to pay timely any payment required hereunder. Therefore, in addition to the other remedies available to Landlord hereunder, if any payment required to be paid by Tenant to Landlord hereunder shall become overdue, such unpaid amount shall bear interest from the due date thereof to the date of payment at the prime rate of interest, as reported in the Wall Street Journal (the "Prime Rate") plus six percent (6%) per annum; provided, however, such interest rate shall not be less than twelve percent (12%) per annum.

Section 3.05 . Maximum Increase in Operating Expenses . Notwithstanding anything in this Lease to the contrary, Tenant will be responsible for Tenant's Proportionate Share of Real Estate Taxes, insurance premiums, utilities, janitorial services, snow removal, landscaping, management fees (subject to the cap set forth in Section 3.02(b) above), and charges assessed against the Building pursuant to any covenants or owner's association ("Uncontrollable Expenses"), without regard to the level of increase in any or all of the above in any year or other period of time. Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses that are not Uncontrollable Expenses (herein "Controllable Expenses") shall be limited to a six percent (6%) per annum increase over the amount the Controllable Expenses per rentable square foot for the immediately preceding calendar year would have been had the Controllable Expenses per rentable square foot increased at the rate of six percent (6%) in all previous calendar years beginning with the actual Controllable Expenses per rentable square foot for the calendar year ending December 31, 2017.

Section 3.06 . Inspection and Audit Rights .

(a) Tenant shall have the right to inspect, at reasonable times and in a reasonable manner, during the one hundred eighty (180) day period following the delivery of Landlord's statement of the actual amount of the Annual Rental Adjustment (the "Inspection Period"), such of Landlord's books of account and records as pertain to and contain information concerning the Annual Rental Adjustment for the prior calendar year in order to verify the amounts thereof. Such inspection shall take place at Landlord's North Carolina office upon at least fifteen (15) days prior written notice from Tenant to Landlord. Only Tenant or a certified public accountant that is not being compensated for its services on a contingency fee basis shall conduct such inspection. Tenant shall also agree to follow Landlord's reasonable procedures for auditing such books and records. Landlord and Tenant shall act reasonably in assessing the other party's calculation of the Annual Rental Adjustment. Tenant shall provide Landlord with a copy of its findings within thirty (30) days after completion of the audit. Tenant's failure to exercise its rights hereunder within the Inspection Period shall be deemed a waiver of its right to inspect or contest the method, accuracy or amount of such Annual Rental Adjustment.

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(b) If the audit referenced in Section 3.06(a) above demonstrates that Landlord's calculation of the Annual Rental Adjustment for the inspected calendar year was incorrect, or if Landlord and Tenant otherwise agree that Landlord's calculation of the Annual Rental Adjustment for the inspected calendar year was incorrect, the parties shall enter into a written agreement confirming such audit confirmation or undisputed error and then Landlord shall make a correcting payment in full to Tenant within thirty (30) days after the determination of the amount of such error or credit such amount against future Additional Rent if Tenant overpaid such amount, and Tenant shall pay Landlord within thirty (30) days after the determination of such error if Tenant underpaid such amount. In the event of any errors on the part of Landlord that were errors costing Tenant in excess of five percent (5%) of Tenant's actual Operating Expense liability for any calendar year, Landlord will also reimburse Tenant for the costs of an audit reasonably incurred by Tenant in an amount not to exceed $5,000.00 within the above thirty (30) day period. If Tenant provides Landlord with written notice disputing the correctness of Landlord's statement, and if such dispute shall have not been settled by agreement within thirty (30) days after Tenant provides Landlord with such written notice, Tenant may submit the dispute to a reputable firm of independent certified public accountants selected by Tenant and approved by Landlord, and the decision of such accountants shall be conclusive and binding upon the parties. If such accountant decides that there was an error, Landlord will make correcting payment if Tenant overpaid such amount, and Tenant shall pay Landlord if Tenant underpaid such amount. The fees and expenses involved in such decision shall be borne by the party required to pay for the audit.

(c) All of the information obtained through Tenant's inspection with respect to financial matters (including, without limitation, costs, expenses and income) and any other matters pertaining to Landlord, the Leased Premises, the Building and/or the Park as well as any compromise, settlement or adjustment reached between Landlord and Tenant relative to the results of the inspection shall be held in strict confidence by Tenant and its officers, agents, and employees; and Tenant shall cause its independent professionals to be similarly bound. The obligations within the preceding sentence shall survive the expiration or earlier termination of this Lease.

ARTICLE 4 - SECURITY DEPOSIT

Section 4.01 . Security Deposit . Upon Tenant's execution of this Lease, Tenant will deliver to Landlord an Irrevocable Letter of Credit (the "Letter of Credit") in the amount of the Security Deposit, in substantially the form attached hereto as Exhibit E and made a part hereof from a financial institution acceptable to Landlord. Tenant shall cause the Letter of Credit to be maintained in full force and effect throughout the Lease Term and during the sixty (60) day period after the later of (a) the expiration of the Lease Term or (b) the date that Tenant delivers possession of the Leased Premises to Landlord, as security for the performance by Tenant of all of Tenant’s obligations contained in this Lease. In the event that, during the Lease Term, Tenant fails to deliver to Landlord a renewal or replacement to the Letter of Credit by a date no later than forty-five (45) days prior to its expiration date, Landlord shall have the right to demand and receive payment in full under the letter of credit and to hold the cash proceeds as the Security Deposit under this Lease. In the event of a default by Tenant, Landlord may apply all or any part of the Security Deposit to cure all or any part of such default; provided, however, that any such application by Landlord shall not be or be deemed to be an election of remedies by Landlord or considered or deemed to be liquidated damages. Tenant agrees promptly, upon demand, to deposit such additional sum with Landlord as may be required to maintain the full amount of the Security Deposit. All sums held by Landlord pursuant to this Article 4 shall be without interest and may be commingled by Landlord. At the end of the Lease Term, provided that there is then no uncured default or any repairs required to be made by Tenant pursuant to Section 2.03 above or Section 7.03 below, Landlord shall return the Security Deposit to Tenant.

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Section 4.02 . Reduction of Security Deposit ,

(a) Commencing as of the third (3 ^rd ) anniversary of the Commencement Date, the Security Deposit may be reduced to $2,406,482.25, provided that (i) the Letter of Credit is then in full force and effect (i.e. it has not been converted to cash), (ii) Tenant is not in default hereunder and no facts or circumstances exist which with the giving of notice or the passage of time or both would constitute a default hereunder. Following such reduction in the Letter of Credit, and provided the conditions set forth in clauses (i) and (ii) are satisfied, Landlord shall (at no cost to Landlord) (A) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit reducing the Letter of Credit by $802,160.75, but which does not otherwise amend or modify the same, and (B) execute and deliver to the issuer of the Letter of Credit such instruments as may be reasonably required by such issuer to effectuate such reduction.

(b) Commencing as of the fourth (4 ^th ) anniversary of the Commencement Date, the Security Deposit may be reduced to $1,604,321.50, provided that (i) the Letter of Credit is then in full force and effect (i.e. it has not been converted to cash), (ii) Tenant is not in default hereunder and no facts or circumstances exist which with the giving of notice or the passage of time or both would constitute a default hereunder. Following such reduction in the Letter of Credit, and provided the conditions set forth in clauses (i) and (ii) are satisfied, Landlord shall (at no cost to Landlord) (A) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit reducing the Letter of Credit by $802,160.75, but which does not otherwise amend or modify the same, and (B) execute and deliver to the issuer of the Letter of Credit such instruments as may be reasonably required by such issuer to effectuate such reduction.

(c) Commencing as of the fifth (5 ^th ) anniversary of the Commencement Date, the Security Deposit may be reduced to $802,160.75, provided that (i) the Letter of Credit is then in full force and effect (i.e. it has not been converted to cash), (ii) Tenant is not in default hereunder and no facts or circumstances exist which with the giving of notice or the passage of time or both would constitute a default hereunder. Following such reduction in the Letter of Credit, and provided the conditions set forth in clauses (i) and (ii) are satisfied, Landlord shall (at no cost to Landlord) (A) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit reducing the Letter of Credit by $802,160.75, but which does not otherwise amend or modify the same, and (B) execute and deliver to the issuer of the Letter of Credit such instruments as may be reasonably required by such issuer to effectuate such reduction.

(d) In the event Tenant exercises its option to extend the Lease Term as set forth in Section 17.02 below, then commencing as of the first (1 ^st ) day of the first Extension Term (as defined in Section 17.02 ), the Security Deposit may be reduced to $314,652.41, provided that (i) the Letter of Credit is then in full force and effect (i.e. it has not been converted to cash), (ii) Tenant is not in default hereunder and no facts or circumstances exist which with the giving of notice or the passage of time or both would constitute a default hereunder. Following such reduction in the Letter of Credit, and provided the conditions set forth in clauses (i) and (ii) are satisfied, Landlord shall (at no cost to Landlord) (A) accept from the issuer of the Letter of Credit an amendment to the Letter of Credit reducing the Letter of Credit by $487,508.34, but which does not otherwise amend or modify the same, and (B) execute and deliver to the issuer of the Letter of Credit such instruments as may be reasonably required by such issuer to effectuate such reduction.

ARTICLE 5 - OCCUPANCY AND USE

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Section 5.01 . Use . Tenant shall use the Leased Premises for the Permitted Use and for no other purpose without the prior written consent of Landlord. Without limiting anything herein, Tenant shall be entitled to arrange for food trucks to operate outside of the Building during typical lunch and break periods provided that Tenant executes Landlord's typical form of tenant event agreement allowing such activity, which form is attached hereto as Exhibit H and made a part hereof.

Section 5.02 . Covenants of Tenant Regarding Use .

(a) Tenant shall (i) use and maintain the Leased Premises and conduct its business thereon in a safe, careful, reputable and lawful manner, (ii) comply with all covenants that encumber the Building contained in the certain Declaration of Protective Covenants recorded in Book 14001, Page 2041, Wake County Registry, as may be amended, and all laws, rules, regulations, orders, ordinances, directions and requirements of any governmental authority or agency, now in force or which may hereafter be in force, including, without limitation, those which shall impose upon Landlord or Tenant any duty with respect to or triggered by a change in the use or occupation of, or any improvement or alteration to, the Leased Premises, and (iii) comply with and obey all reasonable and customary directions, rules and regulations of Landlord, including the Building Rules and Regulations attached hereto as Exhibit D and made a part hereof, as may be modified from time to time by Landlord on reasonable notice to Tenant.

(b) Tenant shall not do or permit anything to be done in or about the Leased Premises that will in any way cause a nuisance, obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Building of any of Landlord's directions, rules and regulations, but agrees that any enforcement thereof shall be done uniformly. Tenant shall not knowingly use the Leased Premises, nor allow the Leased Premises to be used, for any purpose or in any manner that would (i) invalidate any policy of insurance now or hereafter carried by Landlord on the Building, or (ii) increase the rate of premiums payable on any such insurance policy unless Tenant reimburses Landlord for any increase in premium charged.

Section 5.03 . Landlord's Rights Regarding Use . Without limiting any of Landlord's rights specified elsewhere in this Lease (a) Landlord shall have the right at any time, without notice to Tenant, to control, change or otherwise alter the Common Areas in such manner as it deems necessary or proper so long as any such control, change or alteration does not materially and adversely affect Tenant's use of the Leased Premises for the Permitted Use, and (b) Landlord, its agents, employees and contractors and any mortgagee of the Building shall have the right to enter any part of the Leased Premises at reasonable times upon twenty-four (24) hours' prior notice (except in the event of an emergency where no notice shall be required) for the purposes of examining or inspecting the same (including, without limitation, testing to confirm Tenant's compliance with this Lease), showing the same to prospective purchasers, mortgagees or tenants, and making such repairs, alterations or improvements to the Leased Premises or the Building as Landlord may deem necessary or desirable. Landlord shall incur no liability to Tenant for such entry, nor shall such entry constitute an eviction of Tenant or a termination of this Lease, or entitle Tenant to any abatement of rent therefor. Notwithstanding anything to the contrary contained herein, in the event Landlord has scheduled a major repair that may cause disruption to Tenant’s normal business operations in the Leased Premises, Landlord shall give Tenant at least twenty-four (24) hours advance notice of such repair (except in the event of an emergency).

ARTICLE 6 - UTILITIES AND OTHER BUILDING SERVICES

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Section 6.01 . Services to be Provided . Landlord shall at all times operate the Building in a manner consistent with other comparable suburban office buildings. Landlord shall furnish to Tenant, except as noted below, the following utilities and other services to the extent reasonably necessary for Tenant's use of the Leased Premises for the Permitted Use, or as may be required by law or directed by governmental authority:

(a) HVAC between the hours of 8:00 a.m. and 6:00 p.m. Monday through Friday and 9:00 a.m. to 1:00 p.m. on Saturday of each week except on Legal Holidays. For Saturday service, Tenant shall endeavor to provide forty-eight (48) hour prior notice to Landlord (which request may be verbal or by means of email) in which case the system will be engaged by Landlord, and failing such notice Tenant shall be entitled to engage the HVAC system from within the Leased Premises. For purposes of this Lease, "Legal Holidays" shall mean New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas Day; provided if any such Legal Holiday is observed on a weekend day, Landlord may observe such Legal Holiday on the business day either immediately preceding or immediately after such weekend. As of the date of this Lease, the charge for after-hours HVAC is $45.00 per hour per zone (for purposes of clarification, Tenant shall not pay the after-hours charge for Saturday hours between 9:00 a.m. and 1:00 p.m. provided it has given Landlord the notice required above), which charge is subject to change from time to time in Landlord's discretion; provided, however, that any increase in said charge will be uniformly applied to all tenants of the Building;

(b) Electrical current not to exceed an average of four (4) watts per square foot at 120/208 volts for general power of which one (1) watt can be used for lighting in accordance with local code;

(d) Automatic elevator service;

(e) Cleaning and janitorial service in the Leased Premises and Common Areas on Monday through Friday of each week except legal holidays; provided, however, Tenant shall be responsible for carpet cleaning other than routine vacuuming;

(f) Washing of windows at intervals reasonably established by Landlord;

(g) Replacement of all lamps, bulbs, starters and ballasts in Building standard lighting as required from time to time as a result of normal usage. Tenant shall be entitled to install LED lighting within the Leased Premises, but the repair and replacement of LED fixtures and the replacement of LED bulbs shall be Tenant's responsibility. In the event that Tenant does not extend the original Lease Term for at least five (5) years, Tenant acknowledges and agrees that it must replace any LED fixtures so that all LED fixtures remaining in the Leased Premises are covered by a warranty for a period of not less than five (5) years following the expiration date of the Lease;

(h) Maintenance of the Common Areas, including the removal of rubbish, ice and snow;

(i) Access to the Building twenty-four (24) hours per day, seven (7) days per week, and three hundred sixty-five (365) days a year; and

(j) "Drive-by" surveillance security Monday through Friday between 6:00 p.m. and 6:00 a.m. and on weekends; provided, however, that Landlord shall have the right, in Landlord's reasonable

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discretion, to alter the times such surveillance security is provided, based on the needs in the Park. Tenant acknowledges and agrees that Landlord shall not provide guards or other security protection for the Leased Premises and that any and all other security protection shall be the sole responsibility of Tenant.

Section 6.02 . Additional Services .

(a) If Tenant requests utilities or building services in addition to those identified above, or if Tenant uses any of the above utilities or services in frequency, scope, quality or quantity substantially greater than that which Landlord determines is reasonable and normally required by other tenants in the Building, then Landlord shall use reasonable efforts to attempt to furnish Tenant with such additional utilities or services. In the event Landlord is able to and does furnish such additional utilities or services, the costs thereof (which shall be deemed to mean the cost that Tenant would have incurred had Tenant contracted directly with the utility company or service provider) shall be borne by Tenant, who shall reimburse Landlord monthly for the same as Additional Rent. In the event that Landlord provides such additional utilities or services as requested by Tenant, Landlord shall also have the right to submeter or separately meter the Leased Premises at Tenant's sole cost, and Tenant shall pay such utilities based on the submeter or separate meter and Tenant's responsibility for Operating Expenses shall be reduced accordingly.

(b) If any lights, density of staff, machines or equipment used by Tenant in the Leased Premises materially affect the temperature otherwise maintained by the Building's air-conditioning system or generate substantially more heat in the Leased Premises than that which would normally be generated by other tenants in the Building or by tenants in comparable office buildings, then Landlord shall provide written notice to Tenant, with documentation that evidences that Tenant is responsible for the issue, in which case Tenant shall be afforded a reasonable opportunity to remedy such matter. If Tenant does not remedy such matter, Landlord shall have the right to install any machinery or equipment that Landlord considers reasonably necessary in order to restore the temperature balance between the Leased Premises and the rest of the Building, including, without limitation, equipment that modifies the Building's air-conditioning system. All costs expended by Landlord to install any such machinery and equipment and any additional costs of operation and maintenance in connection therewith shall be borne by Tenant, who shall reimburse Landlord for the same as provided in this Section 6.02 .

Section 6.03 . Interruption of Services . Tenant acknowledges and agrees that any one or more of the utilities or other services identified in Sections 6.01 or 6.02 or otherwise hereunder may be interrupted by reason of accident, emergency or other causes beyond Landlord's control, or may be discontinued or diminished temporarily by Landlord or other persons until certain repairs, alterations or improvements can be made. Landlord shall make diligent efforts to repair such interruption in services in a timely manner. In the event Landlord temporarily discontinues or diminishes any such services, it shall provide twenty-four (24) hours' prior notice of such intended action to Tenant. Except as provided below, Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility or service and no such failure or interruption shall entitle Tenant to terminate this Lease or withhold sums due hereunder. Notwithstanding the foregoing, in the event that (a) an interruption of utility service to the Leased Premises is due to Landlord’s negligence or intentional wrongful acts, (b) the restoration of such utility service is reasonably within Landlord's control, and (c) such interruption renders all or a portion of the Leased Premises untenantable (meaning that Tenant is unable to use, and does not use, such space in the normal course of its business for the Permitted Use) for more than five (5) consecutive business days, then Minimum Annual Rent shall abate proportionately with respect to the portion of the Leased Premises rendered untenantable on a per diem basis for each day after such five (5) business-day period during which such portion of the Leased Premises remains untenantable. Such abatement shall be Tenant's sole

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remedy for Landlord's failure to restore service as set forth above, and Tenant shall not be entitled to damages (consequential or otherwise) as a result thereof.

ARTICLE 7 - REPAIRS, MAINTENANCE AND ALTERATIONS

Section 7.01 . Repair and Maintenance of Building . Landlord shall make all necessary repairs and replacements to the roof, exterior walls, exterior doors, windows, corridors and other Common Areas, and Landlord shall keep the Building in a clean and neat condition and use reasonable efforts to keep all equipment used in common with other tenants in good condition and repair. The cost of such repairs, replacements and maintenance shall be included in Operating Expenses to the extent provided in Section 3.02 ; provided however, to the extent any such repairs, replacements or maintenance are required because of the negligence, misuse or default of Tenant, its employees, agents, contractors, customers or invitees, Landlord shall make such repairs at Tenant's sole expense.

Section 7.02 . Repair and Maintenance of Leased Premises . Landlord shall keep and maintain the Leased Premises in good condition and repair. The cost of such repairs and maintenance to the Leased Premises shall be included in Operating Expenses; provided however, to the extent any repairs or maintenance are required in the Leased Premises because of the negligence, misuse or default of Tenant, its employees, agents, contractors, customers or invitees (other than routine maintenance as part of the day-to-day operations) or are made at the specific request of Tenant, Landlord shall make such repairs or perform such maintenance at Tenant's sole expense. Notwithstanding the above, Tenant shall be solely responsible for any repair or replacement with respect to Tenant's Property (as defined in Section 8.01 below) located in the Leased Premises, the Building or the Common Areas. Nothing in this Article 7 shall obligate Landlord or Tenant to repair normal wear and tear to any paint, wall covering or carpet in the Leased Premises.

Section 7.03 . Alterations . Tenant shall not permit alterations in or to the Leased Premises unless and until Landlord has approved the plans therefor in writing; provided, however, that Tenant shall have the right to make alterations to the Leased Premises, without obtaining Landlord's prior written consent provided that (a) such alterations do not exceed One Hundred Thousand and No/100 Dollars ($100,000.00) in cost in any one instance; (b) such alterations are non-structural and non-mechanical in nature; (c) such alterations do not require a permit; (d) Tenant provides Landlord with prior written notice of its intention to make such alterations, stating in reasonable detail the nature, extent and estimated cost of such alterations, together with the plans and specifications for the same (if the alterations are of a type for which plans and specifications are generated), to the extent applicable, and (e) at Landlord's option, if communicated to Tenant at the time Tenant notifies Landlord that Tenant wishes to make the alterations, Tenant must remove such alterations and restore the Leased Premises upon termination of this Lease. As a condition of such approval, Landlord may require Tenant to remove the alterations and restore the Leased Premises upon termination of this Lease; otherwise, all such alterations shall at Landlord's option become a part of the realty and the property of Landlord, and shall not be removed by Tenant. Notwithstanding anything contained herein to the contrary, Tenant shall have no obligation hereunder to remove the Tenant Improvements (except for the removal of any commercial grade kitchen) or any other alterations or improvements that have been made by Tenant with the express written consent of Landlord, unless, at the time of granting such consent, Landlord has expressly required the removal of any such proposed alterations or improvements as a condition to granting such consent. Tenant shall ensure that all alterations shall be made in accordance with all applicable laws, regulations and building codes, in a good and workmanlike manner and of quality equal to or better than the original construction of the Building. No person shall be entitled to any lien derived through or under Tenant for any labor or material furnished to the Leased Premises, and nothing in this Lease shall be construed to constitute Landlord's consent to

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the creation of any lien. If any lien is filed against the Leased Premises for work claimed to have been done for or material claimed to have been furnished to Tenant, Tenant shall cause such lien to be discharged of record within thirty (30) days after filing. Tenant shall indemnify Landlord from all costs, losses, expenses and attorneys' fees in connection with any construction or alteration and any related lien. Tenant agrees that at Landlord's option, Duke Construction Limited Partnership or a subsidiary or affiliate of Landlord shall have the right to bid to perform all work on any alterations to the Leased Premises. Tenant shall have the right to select its own general contractor, with Landlord's approval, to perform all work on any future alterations to the Leased Premises, except for the Tenant Improvements.

Section 7.04 . Supplemental HVAC . Notwithstanding anything to the contrary contained herein, in the event Tenant elects to install and use a supplemental HVAC system and related equipment to serve the Leased Premises in addition to the HVAC provided by Landlord under Section 6.01 above (the "Supplemental HVAC"), Tenant shall be responsible for all non-base Building costs related to any Supplemental HVAC or non-base building fire suppression systems for the Leased Premises. Tenant shall have the right to operate the Supplemental HVAC twenty-four (24) hours a day, seven (7) days a week. Tenant shall be solely responsible, at its cost and expense, for the maintenance, repair and replacement (if necessary) of any Supplemental HVAC. Tenant shall operate and maintain any Supplemental HVAC in accordance with all applicable federal, state and local laws and regulations. In no event shall any Supplemental HVAC exhaust into the Building plenum. Tenant shall also be responsible for the actual cost incurred by Landlord for the electricity and the water, if applicable, to operate any Supplemental HVAC. Upon expiration or earlier termination of the Lease, Tenant shall remove any Supplemental HVAC and repair any and all damage to the Leased Premises and/or the Building caused by such removal. It is expressly understood and agreed by Landlord and Tenant that (a) Tenant shall be entitled to install the Supplemental HVAC on the roof of the Building, (b) the plans for any such installation shall be approved by Landlord in writing prior to installation, (c) Tenant shall be solely responsible for the cost of any such installation, and (d) the installation of any Supplemental HVAC on the roof of the Building shall be further subject to the conditions contained in Section 17.06 below relating to the roof of the Building.

Section 7.05 . Compliance with Law .

(a) Existing Governmental Regulations . If any federal, state or local laws, ordinances, orders, rules, regulations or requirements (collectively, "Governmental Requirements") in existence as of the date of the Lease require an alteration or modification of the Leased Premises (a "Code Modification") and such Code Modification (i) is not made necessary as a result of the specific use being made by Tenant of the Leased Premises (as distinguished from an alteration or improvement which would be required to be made by the owner of any office building comparable to the Building irrespective of the use thereof by any particular occupant), and (ii) is not made necessary as a result of any alteration of the Leased Premises by Tenant, such Code Modification shall be performed by Landlord, at Landlord's sole cost and expense.

(b) Governmental Regulations – Landlord Responsibility . If, as a result of one or more Governmental Requirements that are not in existence as of the date of this Lease, it is necessary from time to time during the Lease Term, to perform a Code Modification to the Building or the Common Areas that (i) is not made necessary as a result of the specific use being made by Tenant of Leased Premises (as distinguished from an alteration or improvement which would be required to be made by the owner of any office building comparable to the Building irrespective of the use thereof by any particular occupant), and (ii) is not made necessary as a result of any alteration of the Leased Premises by Tenant, such Code Modification shall be performed by Landlord and the amortized cost thereof shall be included in

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Operating Expenses to the extent permitted under Section 3.02 , without being subject to Section 3.05 above.

(c) Governmental Regulations – Tenant Responsibility . If, as a result of one or more Governmental Requirements, it is necessary from time to time during the Lease Term to perform a Code Modification to the Building or the Common Areas that is made necessary as a result of the specific use being made by Tenant of the Leased Premises or as a result of any alteration of the Leased Premises by Tenant, such Code Modification shall be the sole and exclusive responsibility of Tenant in all respects; provided, however, that Tenant shall have the right to retract its request to perform a proposed alteration in the event that the performance of such alteration would trigger the requirement for a Code Modification.

ARTICLE 8 - INDEMNITY AND INSURANCE

Section 8.01 . Release . All of Tenant's trade fixtures, merchandise, inventory, special fire protection equipment, telecommunication and computer equipment, supplemental air conditioning equipment, kitchen equipment and all other personal property in or about the Leased Premises, the Building or the Common Areas, which is deemed to include the trade fixtures, merchandise, inventory and personal property (including, without limitation, animals) of others located in or about the Leased Premises or Common Areas at the invitation, direction or acquiescence (express or implied) of Tenant (all of which property shall be referred to herein, collectively, as "Tenant's Property"), shall be and remain at Tenant's sole risk. Landlord shall not be liable to Tenant or to any other person for, and Tenant hereby releases Landlord (and its affiliates, property managers and mortgagees) from (a) any and all liability for theft or damage to Tenant's Property, and (b) any and all liability for any injury to Tenant or its employees, agents, contractors, guests and invitees in or about the Leased Premises, the Building or the Common Areas, except to the extent caused directly by the negligence or willful misconduct of Landlord, its agents, employees or contractors. Nothing contained in this Section 8.01 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.01 , the provisions of Section 8.06 shall prevail. This Section 8.01 shall survive the expiration or earlier termination of this Lease.

Section 8.02 . Indemnification by Tenant . Tenant shall protect, defend, indemnify and hold Landlord, its agents, employees and contractors of all tiers harmless from and against any and all claims, damages, demands, penalties, costs, liabilities, losses, and expenses (including reasonable attorneys' fees and expenses at the trial and appellate levels) to the extent (a) arising out of or relating to any act, omission, negligence, or willful misconduct of Tenant or Tenant's agents, employees, contractors, customers or invitees in or about the Leased Premises, the Building or the Common Areas, (b) arising out of or relating to any of Tenant's Property, or (c) arising out of any other act or occurrence within the Leased Premises, in all such cases except to the extent caused directly by the negligence or willful misconduct of Landlord, its agents, employees or contractors. Nothing contained in this Section 8.02 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.02 , the provisions of Section 8.06 shall prevail. This Section 8.02 shall survive the expiration or earlier termination of this Lease.

Section 8.03 . Indemnification by Landlord . Landlord shall protect, defend, indemnify and hold Tenant, its agents, employees and contractors of all tiers harmless from and against any and all claims, damages, demands, penalties, costs, liabilities, losses and expenses (including reasonable attorneys' fees and expenses at the trial and appellate levels) to the extent arising out of or relating to any act, omission, negligence or willful misconduct of Landlord or Landlord's agents, employees or contractors. Nothing

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contained in this Section 8.03 shall limit (or be deemed to limit) the waivers contained in Section 8.06 below. In the event of any conflict between the provisions of Section 8.06 below and this Section 8.03 , the provisions of Section 8.06 shall prevail. This Section 8.03 shall survive the expiration or earlier termination of this Lease.

Section 8.04 . Tenant's Insurance .

(a) During the Lease Term (and any period of early entry or occupancy or holding over by Tenant, if applicable), Tenant shall maintain the following types of insurance, in the amounts specified below:

(i) Liability Insurance . Commercial General Liability Insurance, ISO Form CG 00 01, or its equivalent, covering Tenant's use of the Leased Premises against claims for bodily injury or death or property damage, which insurance shall be primary and non-contributory and shall provide coverage on an occurrence basis with a per occurrence limit of not less than $6,000,000 for each policy year, which limit may be satisfied by any combination of primary and excess or umbrella per occurrence policies.

(ii) Property Insurance . Special Form Insurance in the amount of the full replacement cost of Tenant's Property (including, without limitation, alterations or additions performed by Tenant pursuant hereto, but excluding those improvements, if any, made pursuant to Section 2.02 above), which insurance shall waive coinsurance limitations.

(iii) Worker's Compensation Insurance . Worker's Compensation insurance in amounts required by applicable law; provided, if there is no statutory requirement for Tenant, Tenant shall still obtain Worker's Compensation insurance coverage.

(iv) Business Interruption Insurance . Business Interruption Insurance with limits not less than an amount equal to one (1) year of rent hereunder. Notwithstanding the foregoing, Tenant may elect not to carry Business Interruption Insurance; provided, however, that in such event Tenant shall release Landlord from any and all liability arising during the Lease Term that would have been covered by such Business Interruption Insurance had Tenant elected to carry such coverage.

(v) Automobile Insurance . Comprehensive Automobile Liability Insurance insuring bodily injury and property damage arising from all owned, non-owned and hired vehicles, if any, with minimum limits of liability of $1,000,000 combined single limit, per accident.

(b) All insurance required to be carried by Tenant hereunder shall be issued by one or more insurance companies reasonably acceptable to Landlord, licensed to do business in the State in which the Leased Premises is located and having an AM Best's rating of A IX or better. Tenant shall endeavor to provide that said insurance shall not be canceled on less than thirty (30) days' prior written notice to Landlord. In addition, Tenant shall name Landlord, Landlord's managing agent, and any mortgagee requested by Landlord, as additional insureds under its commercial general liability, excess and umbrella policies (but only to the extent of the limits required hereunder). On or before the Commencement Date (or the date of any earlier entry or occupancy by Tenant), and thereafter, within thirty (30) days prior to the expiration of each such policy, Tenant shall furnish Landlord with certificates of insurance in the form of ACORD 25 (or other evidence of insurance reasonably acceptable to Landlord), evidencing all required coverages, and that with the exception of Worker's Compensation insurance, such insurance is primary and non-contributory. Upon Tenant's receipt of a request from Landlord, Tenant shall provide Landlord

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with copies of all insurance policies, including all endorsements, evidencing the coverages required hereunder. If Tenant fails to carry such insurance and furnish Landlord with such certificates of insurance or copies of insurance policies (if applicable), Landlord may obtain such insurance on Tenant's behalf and Tenant shall reimburse Landlord upon demand for the cost thereof as Additional Rent. Landlord reserves the right following the initial Lease Term or in the event of any expansion of the Leased Premises to require Tenant to obtain higher minimum amounts or different types of insurance if it becomes customary for other landlords of similar buildings in the area to require similar sized tenants in similar industries to carry insurance of such higher minimum amounts or of such different types.

(c) Notwithstanding anything to the contrary contained herein, Tenant may self-insure with respect to the policies of insurance provided for in this Section 8.04 , with the exception of Commercial General Liability Insurance, provided that (i) Tenant has in effect a program of "self-insurance" insuring Tenant as a named insured against such risk, which program complies with any and all applicable laws regarding self-insurance in the State of North Carolina, (ii) Landlord shall be reasonably satisfied as to the financial strength of Tenant as determined by the "tangible net worth" of Tenant, (iii) Tenant agrees upon Landlord's reasonable request to provide Landlord with financial information reasonably sufficient to allow Landlord to evaluate Tenant's tangible net worth and ability to meet the insurance criteria set forth in this Section 8.04 of the Lease, (iv) Tenant agrees to indemnify and hold harmless Landlord from and against any loss, cost, damage, expense (including reasonable attorneys' fees and court costs), claim, cause of action or liability that Landlord may incur that would have been covered by the insurance policies replaced by the self-insurance, (v) such self-insurance shall not affect the non-liability of Landlord described in this Lease, and (vi) Landlord, Landlord’s managing agent and any mortgagee appears as additional covered parties on the Certificate of Coverage for liability under the self-insurance program for an amount consistent with the requirements set forth in this Section 8.04 . For purposes hereof, "tangible net worth" is defined as the excess of the value of tangible assets (i.e. assets excluding those which are intangible such as goodwill, patents and trademarks) over liabilities. Tenant shall deliver to Landlord notice in writing of the required coverages which it is self-insuring setting forth the amount, limits and scope of the self-insurance with respect to each type of coverage self-insured. This provision is personal to ChannelAdvisor Corporation ("ChannelAdvisor") and shall automatically terminate if all or any portion of this Lease is assigned by ChannelAdvisor unless such assignment is to a Permitted Transferee and ChannelAdvisor guarantees any insurance obligations that are self-insured by Tenant hereunder.

Section 8.05 . Landlord's Insurance . During the Lease Term, Landlord shall maintain the following types of insurance, in the amounts specified below (the cost of which shall be included in Operating Expenses):

(a) Liability Insurance . Commercial General Liability Insurance, ISO Form CG 00 01, or its equivalent, covering the Common Areas against claims for bodily injury or death and property damage, which insurance shall be primary and non-contributory and shall provide coverage on an occurrence basis with a per occurrence limit of not less than $6,000,000 for each policy year, which limit may be satisfied by any combination of primary and excess or umbrella per occurrence policies.

(b) Property Insurance . Special Form Insurance in the amount of the full replacement cost of the Building, including, without limitation, any improvements, if any, made pursuant to Section 2.02 above, but excluding Tenant's Property and any other items required to be insured by Tenant pursuant to Section 8.04 above.

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Section 8.06 . Waiver of Subrogation . Notwithstanding anything contained in this Lease to the contrary, Landlord (and its affiliates, property managers and mortgagees) and Tenant (and its affiliates) hereby waive any rights each may have against the other on account of any loss of or damage to their respective property, the Leased Premises, its contents, or other portions of the Building or Common Areas arising from any risk which is required to be insured against by Sections 8.04(a)(ii), 8.04(a)(iii), and 8.05(b) above. The special form property insurance policies and worker's compensation insurance policies maintained by Landlord and Tenant as provided in this Lease shall include an endorsement containing an express waiver of any rights of subrogation by the insurance company against Landlord and Tenant, as applicable.

ARTICLE 9 - CASUALTY

In the event of total or partial destruction of the Building or the Leased Premises by fire or other casualty, Landlord agrees promptly to restore and repair same; provided, however, Landlord's obligation hereunder with respect to the Leased Premises shall be limited to the reconstruction of such of the leasehold improvements as were originally required to be made by Landlord pursuant to Section 2.02 above, if any. Rent shall proportionately abate during the time that the Leased Premises or part thereof are unusable because of any such damage. Notwithstanding the foregoing, if Landlord determines that the Leased Premises are (a) so destroyed that they cannot be repaired or rebuilt within two hundred ten (210) days from the casualty date (the "Target Restoration Date"); or (b) destroyed by a casualty that is not covered by the insurance required hereunder or, if covered, such insurance proceeds are not released by any mortgagee entitled thereto or are insufficient to rebuild the Building and the Leased Premises; then Landlord shall give written notice to Tenant of such determination (the "Casualty Notice") within sixty (60) days of such casualty (the "Notice Period"). In case of a clause (a) casualty, either Landlord or Tenant may, or, in the case of a clause (b) casualty, then Landlord may, by giving written notice to the other party within thirty (30) days after Landlord's delivery of the Casualty Notice, terminate this Lease with respect to matters thereafter accruing. If Landlord reasonably and in good faith determines that the Leased Premises can be repaired or rebuilt within the Target Restoration Date, then Landlord shall notify Tenant of the same within the Notice Period (which notice shall include a preliminary construction schedule), and diligently commence and pursue such repairs. In the event that neither Landlord nor Tenant terminates this Lease pursuant to clauses (a) or (b) above, but Landlord fails to substantially complete the restoration and repair of the Leased Premises within one hundred twenty (120) days following the Target Restoration Date, as such date may be extended as a result of Force Majeure or Tenant Delay (the "End Date"), then Tenant shall have the further right, as its sole remedy, to terminate this Lease by written notice to Landlord given within thirty (30) days following End Date (provided that substantial completion has not occurred prior to Landlord's receipt of said termination notice). Tenant waives any right under applicable laws inconsistent with the terms of this paragraph.

ARTICLE 10 - EMINENT DOMAIN

If all or any substantial part of the Building or Common Areas shall be acquired by the exercise of eminent domain, Landlord may terminate this Lease by giving written notice to Tenant on or before the date possession thereof is so taken. If all or any part of the Leased Premises shall be acquired by the exercise of eminent domain so that the Leased Premises shall become impractical for Tenant to use for the Permitted Use, Tenant may terminate this Lease by giving written notice to Landlord as of the date possession thereof is so taken. All damages awarded shall belong to Landlord; provided, however, that Tenant may claim dislocation damages if such amount is not subtracted from Landlord's award.

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ARTICLE 11 - ASSIGNMENT AND SUBLEASE

Section 11.01 . Assignment and Sublease .

(a) Tenant shall not assign this Lease or sublet the Leased Premises in whole or in part without Landlord's prior written consent. If Landlord does not object to any assignment or subletting within fifteen (15) days after the date Tenant submits to Landlord a copy of the proposed assignment or sublease instrument (which shall include the name, address and contact information for the assignee or subtenant), and a copy of the current financial statements for the assignee or subtenant, then the assignment or sublease on the terms of the proposed assignment, sublease or other instrument submitted to Landlord shall be deemed approved. In the event of any permitted assignment or subletting, Tenant shall remain primarily liable hereunder, and (except as to any Permitted Transferee) any extension, expansion, rights of first offer, rights of first refusal or other options granted to Tenant under this Lease shall be rendered void and of no further force or effect. The acceptance of rent from any other person shall not be deemed to be a waiver of any of the provisions of this Lease or to be a consent to the assignment of this Lease or the subletting of the Leased Premises. Any assignment or sublease consented to by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's consent to any subsequent assignment or sublease.

(b) By way of example and not limitation, Landlord shall be deemed to have reasonably withheld consent to a proposed assignment or sublease if in Landlord's opinion (i) the Leased Premises are or may be in any way adversely affected; (ii) the business reputation of the proposed assignee or subtenant is unacceptable; (iii) the financial worth of the proposed assignee or subtenant is insufficient to meet the obligations hereunder, or (iv) the prospective assignee or subtenant is a current tenant at the Park or is a bona-fide third-party prospective tenant and Landlord has received a proposal from or submitted a proposal to such tenant or prospective tenant within ninety (90) days of the date of Tenant's request to assign or sublease. Landlord further expressly reserves the right to refuse to give its consent to any subletting if the proposed rent is publicly advertised to be less than the then current rent for similar premises in the Building, excluding typical commercial brokerage marketing flyers, firm websites or third party listing services. If Landlord refuses to give its consent to any proposed assignment or subletting, Landlord may, at its option, within thirty (30) days after receiving a request to consent, terminate this Lease by giving Tenant thirty (30) days prior written notice of such termination, whereupon each party shall be released from all further obligations and liability hereunder, except those which expressly survive the termination of this Lease. Notwithstanding the foregoing, in the event Landlord elects to terminate this Lease pursuant to the immediately preceding sentence, Tenant shall have the right to withdraw its assignment or sublet request within ten (10) days after receipt of Landlord's termination notice, whereupon Landlord's termination shall be ineffective and this Lease shall continue in full force and effect.

(c) If Tenant shall make any assignment or sublease, with Landlord's consent, for a rental in excess of the rent payable under this Lease, Tenant shall pay to Landlord fifty percent (50%) of any such excess rental upon receipt (less Tenant's actual and reasonable third party out of pocket expenses incurred in connection with such subletting or assignment). Tenant agrees to pay Landlord $500.00 upon demand by Landlord for reasonable accounting and attorneys' fees incurred in conjunction with the processing and documentation of any requested assignment, subletting or any other hypothecation of this Lease or Tenant's interest in and to the Leased Premises as consideration for Landlord's consent.

Section 11.02 . Permitted Transfer . Notwithstanding anything to the contrary contained in Section 11.01 above, Tenant shall have the right, without Landlord's consent, to (a) sublet all or part of the

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Leased Premises to any related corporation or other entity which controls Tenant, is controlled by Tenant or is under common control with Tenant; (b) assign all or any part of this Lease to any related corporation or other entity which controls Tenant, is controlled by Tenant, or is under common control with Tenant, or to a successor entity into which or with which Tenant is merged or consolidated or which acquires substantially all of Tenant's assets or property; or (c) effectuate any public offering of Tenant's stock on the New York Stock Exchange or in the NASDAQ over the counter market, provided that in the event of a transfer to a related corporation or other entity which controls Tenant, is controlled by Tenant or is under common control with Tenant pursuant to clause (b), the tangible net worth after any such transaction is not less than the tangible net worth of Tenant as of the date hereof and provided further that such successor entity assumes all of the obligations and liabilities of Tenant (any such entity hereinafter referred to as a "Permitted Transferee"). Tenant shall give Landlord ten (10) days prior written notice of any Permitted Transfer; provided, however, in the event of a Permitted Transfer relating to a successor entity into which or with which Tenant is merged or consolidated or which acquires substantially all of Tenant's assets or property, Tenant shall give Landlord notice of such transfer not later than thirty (30) days following the Permitted Transfer. For the purpose of this Article 11 (i) "control" shall mean ownership of not less than fifty percent (50%) of all voting stock or legal and equitable interest in such corporation or entity, and (ii) "tangible net worth" shall mean the excess of the value of tangible assets (i.e. assets excluding those which are intangible such as goodwill, patents and trademarks) over liabilities. Any such transfer shall not relieve Tenant of its obligations under this Lease. Nothing in this paragraph is intended to nor shall permit Tenant to transfer its interest under this Lease as part of a fraud or subterfuge to intentionally avoid its obligations under this Lease (for example, transferring its interest to a shell corporation that subsequently files a bankruptcy), and any such transfer shall constitute a Default hereunder. Any change in control of Tenant resulting from a merger, consolidation, or a transfer of partnership or membership interests, a stock transfer, or any sale of substantially all of the assets of Tenant that do not meet the requirements of this Section 11.02 shall be deemed an assignment or transfer that requires Landlord's prior written consent pursuant to Section 11.01 above. For purposes of clarification, Permitted Transferees shall have the same rights and options as Tenant under this Lease, including without limitation rights of extension, renewal, rights of refusal, rights of offer and other similar concessions.

ARTICLE 12 - TRANSFERS BY LANDLORD

Section 12.01 . Sale of the Building . Landlord shall have the right to sell the Building at any time during the Lease Term, subject only to the rights of Tenant hereunder; and such sale shall operate to release Landlord from liability hereunder after the date of such conveyance, so long as such purchaser expressly assumes all such liabilities under this Lease after the date of such conveyance.

Section 12.02 . Estoppel Certificate . Within ten (10) business days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost to Landlord, an estoppel certificate in such form as Landlord may reasonably request certifying (a) that this Lease is in full force and effect and unmodified or stating the nature of any modification, (b) the date to which rent has been paid, (c) that there are not, to Tenant's knowledge, any uncured defaults or specifying such defaults if any are claimed, and (d) any other matters or state of facts reasonably required respecting the Lease. Such estoppel may be relied upon by Landlord and by any purchaser or mortgagee of the Building.

Section 12.03 . Subordination . This Lease is and shall be expressly subject and subordinate at all times to the lien of any present or future mortgage or deed of trust encumbering fee title to the Leased Premises. If any such mortgage or deed of trust be foreclosed, upon request of the mortgagee or

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beneficiary, as the case may be, Tenant will attorn to the purchaser at the foreclosure sale. The foregoing provisions are declared to be self-operative and no further instruments shall be required to effect such subordination and/or attornment; provided, however, that subordination of this Lease to any present or future mortgage or trust deed shall be conditioned upon the mortgagee, beneficiary, or purchaser at foreclosure, as the case may be agreeing that Tenant's occupancy of the Leased Premises and other rights under this Lease shall not be disturbed by reason of the foreclosure of such mortgage or trust deed, as the case may be, so long as Tenant is not in default under this Lease. Within ten (10) business days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost, any instrument that Landlord deems reasonably necessary or desirable to confirm the subordination of this Lease. Landlord represents that as of the date hereof, the Building is not encumbered by a Mortgage.

ARTICLE 13 - DEFAULT AND REMEDY

Section 13.01 . Default. The occurrence of any of the following shall be a "Default":

(a) Tenant fails to pay any Monthly Rental Installments or Additional Rent within five (5) days after the same is due (meaning that Tenant would not be in Default provided Landlord has received any particular Monthly Rental Installment or Additional Rent on the sixth (6th) day after such payment is due). Notwithstanding the foregoing, Landlord shall provide Tenant with a written courtesy notice of such delinquency and Tenant shall have an additional five (5) days to cure such Default; provided, however, that Landlord shall not be required to give such courtesy notice more than two (2) times in any consecutive twelve (12) month period.

(b) Tenant fails to perform or observe any other term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after written notice thereof from Landlord; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required to cure, then such default shall be deemed to have been cured if Tenant commences such performance within said thirty (30) day period and thereafter diligently completes the required action within a reasonable time.

(c) Tenant shall vacate or abandon the Leased Premises, or fail to occupy the Leased Premises or any substantial portion thereof for a period of thirty (30) days. Notwithstanding the foregoing, Tenant may vacate the Leased Premises during the term of this Lease provided (i) Tenant is not otherwise in default hereunder; (ii) Tenant adequately secures the Leased Premises to prevent damage, destruction or vandalism to the Leased Premises; (iii) Tenant continues such utilities to the Leased Premises as will prevent any damage to the Leased Premises; (iv) Tenant continues to provide insurance for the Leased Premises and Tenant pays any increased premium resulting from a lack of a tenant in the Leased Premises.

(d) Tenant shall assign or sublet all or a portion of the Leased Premises in contravention of the provisions of Article 11 of this Lease.

(e) All or substantially all of Tenant's assets in the Leased Premises or Tenant's interest in this Lease are attached or levied under execution (and Tenant does not discharge the same within sixty (60) days thereafter); a petition in bankruptcy, insolvency or for reorganization or arrangement is filed by or against Tenant (and Tenant fails to secure a stay or discharge thereof within sixty (60) days thereafter); Tenant is insolvent and unable to pay its debts as they become due; Tenant makes a general assignment for the benefit of creditors; Tenant takes the benefit of any insolvency action or law; the appointment of a receiver or trustee in bankruptcy for Tenant or its assets if such receivership has not been vacated or set

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aside within thirty (30) days thereafter; or, dissolution or other termination of Tenant's corporate charter if Tenant is a corporation.

Section 13.02 . Remedies . Upon the occurrence of any Default, Landlord shall have the following rights and remedies, in addition to those stated elsewhere in this Lease and those allowed by law or in equity, any one or more of which may be exercised without further notice to Tenant:

(a) Landlord may re-enter the Leased Premises and cure any Default of Tenant, and Tenant shall reimburse Landlord as Additional Rent for any costs and expenses that Landlord thereby incurs; and Landlord shall not be liable to Tenant for any loss or damage that Tenant may sustain by reason of Landlord's action.

(b) Landlord may terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination and all rights of Tenant under this Lease and in and to the Leased Premises shall terminate. Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination, and Tenant shall surrender the Leased Premises to Landlord on the date specified in such notice. Furthermore, Tenant shall be liable to Landlord for the unamortized balance of any leasehold improvement allowance and brokerage fees paid in connection with the Lease.

(c) Without terminating this Lease, Landlord may terminate Tenant's right to possession of the Leased Premises, and thereafter, neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises. In such event, Tenant shall immediately surrender the Leased Premises to Landlord, and Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy that Landlord may have. Upon termination of possession, Landlord may re-let all or any part thereof as the agent of Tenant for a term different from that which would otherwise have constituted the balance of the Lease Term and for rent and on terms and conditions different from those contained herein, whereupon Tenant shall be immediately obligated to pay to Landlord an amount equal to (i) the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Leased Premises, for the period which would otherwise have constituted the balance of the Lease Term had this Lease not been terminated (said period being referred to herein as the "Remaining Term"), (ii) the costs of recovering possession of the Leased Premises and all other expenses, loss or damage incurred by Landlord by reason of Tenant's Default ("Default Damages"), which shall include, without limitation, expenses of preparing the Leased Premises for re-letting, demolition, repairs, tenant finish improvements, brokers' commissions and attorneys' fees, and (iii) all unpaid Minimum Annual Rent and Additional Rent that accrued prior to the date of termination of possession, plus any interest and late fees due hereunder (the "Prior Obligations"). Neither the filing of any dispossessory proceeding nor an eviction of personalty in the Leased Premises shall be deemed to terminate the Lease.

(d) Landlord may terminate this Lease and recover from Tenant all damages Landlord may incur by reason of Tenant's default, including, without limitation, an amount which, at the date of such termination is equal to the sum of the following: (i) the value of the excess, if any, discounted at the prime rate of interest (as reported in the Wall Street Journal ), of (A) the Minimum Annual Rent, Additional Rent and all other sums that would have been payable hereunder by Tenant for the Remaining Term, less (B) the aggregate reasonable rental value of the Leased Premises for the Remaining Term, as determined by a real estate broker licensed in the State of North Carolina who has at least ten (10) years of experience, (ii) all of Landlord's Default Damages, and (iii) all Prior Obligations. Landlord and Tenant

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acknowledge and agree that the payment of the amount set forth in clause (i) above shall not be deemed a penalty, but shall merely constitute payment of liquidated damages, it being understood that actual damages to Landlord are extremely difficult, if not impossible, to ascertain. It is expressly agreed and understood that all of Tenant's liabilities and obligations set forth in this subsection (d) shall survive termination.

(e) Intentionally omitted.

(f) Landlord may sue for injunctive relief or to recover damages for any loss resulting from the Default.

(g) If Landlord has terminated this Lease or Tenant's right to possession, Landlord agrees to use commercially reasonable efforts to mitigate its damages. Landlord shall be required only to use reasonable efforts to mitigate, which shall not exceed such efforts as Landlord generally uses to lease other space in the Building. Landlord will not be deemed to have failed to mitigate if Landlord leases any other portions of the Building before reletting all or any portion of the Leased Premises. Landlord shall not be deemed to have failed to mitigate if it incurs Default Damages.

Section 13.03 . Landlord's Default and Tenant's Remedies . Landlord shall be in default if it fails to perform any term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after written notice thereof from Tenant to Landlord (except in the event of an emergency where the safety of Tenant's employees is threatened or in order to preserve Tenant's Property or the Leased Premises, when Landlord shall be expected to perform its obligations under this Lease within a reasonable time under the circumstances after receiving notice from Tenant of the need for such performance); provided, however, that if the term, condition, covenant or obligation to be performed by Landlord is such that it cannot reasonably be performed within thirty (30) days, such default shall be deemed to have been cured if Landlord commences such performance within said thirty-day period and thereafter diligently undertakes to complete the same. Upon the occurrence of any such default, Tenant may sue for injunctive relief or to recover damages for any loss directly resulting from the breach, but Tenant shall not be entitled to terminate this Lease or withhold, offset or abate any sums due hereunder, except as otherwise expressly set forth herein. As to Landlord's maintenance and repair obligations hereunder inside the Leased Premises, if Landlord has not cured or commenced to cure a maintenance or repair default set forth in said notice from Tenant within said 30-day period, or in the event of an emergency where the safety of Tenant's employees is threatened or in order to preserve Tenant's Property or the Leased Premises, when Landlord shall be expected to perform its obligations under this Lease within a reasonable time under the circumstances after receiving notice from Tenant of the need for such performance, Tenant may undertake all reasonable action to cure Landlord's failure of performance. If Tenant elects to cure said default, Tenant shall, prior to commencement of said work, provide to Landlord a specific description of the work to be performed by Tenant and the name of Tenant's contractor. Any materials used shall be of equal or better quality than currently exists in the Building and Tenant's contractor shall be adequately insured and of good reputation. Landlord agrees to reimburse Tenant on demand for all reasonable, third party out-of-pocket expenses incurred by Tenant in connection therewith, provided that Tenant delivers to Landlord adequate bills or other supporting evidence substantiating said cost. If Landlord does not reimburse Tenant or give Tenant notice of objection to such reimbursement within sixty (60) days following Tenant's demand, and if Landlord's objection to such reimbursement is resolved against Landlord by agreement of the parties or by a court of competent jurisdiction to which the dispute has been submitted by the parties, Tenant shall have the right to set off said reimbursement from the rental payable by Tenant to Landlord hereunder. In no event, however, shall Landlord be liable to Tenant for any consequential or punitive damages.

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Section 13.04 . Limitation of Landlord's Liability . If Landlord shall fail to perform any term, condition, covenant or obligation required to be performed by it under this Lease and if Tenant shall, as a consequence thereof, recover a money judgment against Landlord, Tenant agrees that it shall look solely to Landlord's right, title and interest in and to the Building for the collection of such judgment; and Tenant further agrees that no other assets of Landlord shall be subject to levy, execution or other process for the satisfaction of Tenant's judgment.

Section 13.05 . Nonwaiver of Defaults . Neither party's failure or delay in exercising any of its rights or remedies or other provisions of this Lease shall constitute a waiver thereof or affect its right thereafter to exercise or enforce such right or remedy or other provision. No waiver of any default shall be deemed to be a waiver of any other default. Landlord's receipt of less than the full rent due shall not be construed to be other than a payment on account of rent then due, nor shall any statement on Tenant's check or any letter accompanying Tenant's check be deemed an accord and satisfaction. No act or omission by Landlord or its employees or agents during the Lease Term shall be deemed an acceptance of a surrender of the Leased Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.

Section 13.06 . Attorneys' Fees . If either party defaults in the performance or observance of any of the terms, conditions, covenants or obligations contained in this Lease and the non-defaulting party obtains a judgment against the defaulting party, then the defaulting party agrees to reimburse the non-defaulting party for reasonable attorneys' fees incurred in connection therewith. In addition, if a monetary Default shall occur and Landlord engages outside counsel to exercise its remedies hereunder, and then Tenant cures such monetary Default, Tenant shall pay to Landlord, on demand, all expenses incurred by Landlord as a result thereof, including reasonable attorneys' fees, court costs and expenses actually incurred.

Section 13.07 . Waiver of Landlord's Lien . Landlord does hereby agree to waive any statutory lien on Tenant's Property granted to Landlord that is secured by Tenant’s trade fixtures, equipment, inventory or other personal property located at the Leased Premises.

ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT

Intentionally Omitted.

ARTICLE 15 - TENANT'S RESPONSIBILITY REGARDING

ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES

Section 15.01 . Environmental Definitions .

(a) "Environmental Laws" shall mean all present or future federal, state and municipal laws, ordinances, rules and regulations applicable to the environmental and ecological condition of the Leased Premises, and the rules and regulations of the Federal Environmental Protection Agency and any other federal, state or municipal agency or governmental board or entity having jurisdiction over the Leased Premises.

(b) "Hazardous Substances" shall mean those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances" "solid waste" or "infectious waste" under Environmental Laws and petroleum products.

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Section 15.02 . Restrictions on Tenant . Tenant shall not cause or permit the use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Substances on, under or about the Leased Premises, or the transportation to or from the Leased Premises of any Hazardous Substances, except as necessary and appropriate for its Permitted Use in which case the use, storage or disposal of such Hazardous Substances shall be performed in compliance with the Environmental Laws and the highest standards prevailing in the industry.

Section 15.03 . Notices, Affidavits, Etc . Tenant shall immediately (a) notify Landlord of (i) any violation by Tenant, its employees, agents, representatives, customers, invitees or contractors of any Environmental Laws on, under or about the Leased Premises, or (ii) the presence or suspected presence of any Hazardous Substances on, under or about the Leased Premises, and (b) deliver to Landlord any notice received by Tenant relating to (a)(i) and (a)(ii) above from any source. Tenant shall execute affidavits, representations and the like within five (5) days of Landlord's request therefor concerning Tenant's best knowledge and belief regarding the presence of any Hazardous Substances on, under or about the Leased Premises.

Section 15.04 . Tenant's Indemnification . Tenant shall indemnify Landlord and Landlord's managing agent from any and all claims, losses, liabilities, costs, expenses and damages, including attorneys' fees, costs of testing and remediation costs, incurred by Landlord in connection with any breach by Tenant of its obligations under this Article 15 .

Section 15.05 . Existing Conditions . Notwithstanding anything contained in this Article 15 to the contrary, Tenant shall not have any liability to Landlord under this Article 15 resulting from any conditions existing, or events occurring, or any Hazardous Substances existing or generated, at, in, on, under or in connection with the Leased Premises, Building or Park except to the extent Tenant exacerbates the same.

Section 15.06 . Landlord's Representation and Indemnity . Landlord represents that to Landlord's actual knowledge, neither Landlord nor any predecessor owner of the Building or underlying land has treated, stored or disposed of any Hazardous Substances upon or within the Building or underlying land. Landlord hereby agrees to indemnify Tenant and hold Tenant harmless from and against any clean-up costs, remedial costs, preventative costs, and/or any governmental fees, costs, expenses, charges or the like arising from any presence of any Hazardous Substances upon or within the Leased Premises which were caused by Landlord, its agents, employees or contractors. Nothing in this Section shall be interpreted as imposing any liability on Landlord for any other costs or expenses incurred by Tenant, including any lost sales or profits of Tenant resulting from any such presence. The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.

Section 15.07 . Survival . The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.

ARTICLE 16 - MISCELLANEOUS

Section 16.01 . Benefit of Landlord and Tenant . This Lease shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns.

Section 16.02 . Governing Law . This Lease shall be governed in accordance with the laws of the State where the Building is located.

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Section 16.03 . Force Majeure . Landlord and Tenant (except with respect to the payment of any monetary obligation) shall be excused for the period of any delay in the performance of any obligation hereunder when such delay is occasioned by causes beyond its control, including but not limited to work stoppages, boycotts, slowdowns or strikes; shortages of materials, equipment, labor or energy; unusual weather conditions; or acts or omissions of governmental or political bodies.

Section 16.04 . Examination of Lease . Submission of this instrument by Landlord to Tenant for examination or signature does not constitute an offer by Landlord to lease the Leased Premises. This Lease shall become effective, if at all, only upon the execution by and delivery to both Landlord and Tenant. Execution and delivery of this Lease by Tenant to Landlord constitutes an offer to lease the Leased Premises on the terms contained herein. The offer by Tenant will be irrevocable until 6:00 p.m. EST, fifteen (15) days after the date Landlord receives the Lease executed by Tenant.

Section 16.05 . Indemnification for Leasing Commissions . The parties hereby represent and warrant that the only real estate brokers involved in the negotiation and execution of this Lease are the Brokers and that no other party is entitled, as a result of the actions of the respective party, to a commission or other fee resulting from the execution of this Lease. Each party shall indemnify the other from any and all liability for the breach of this representation and warranty on its part and shall pay any compensation to any other broker or person who may be entitled thereto. Landlord shall pay any commissions due Brokers based on this Lease pursuant to separate agreements between Landlord and Brokers.

Section 16.06 . Notices . Any notice required or permitted to be given under this Lease or by law shall be deemed to have been given if it is written and delivered in person or by overnight courier or mailed by certified mail, postage prepaid, to the party who is to receive such notice at the address specified in Section 1.01(l) . If sent by overnight courier, the notice shall be deemed to have been given one (1) day after sending. If mailed, the notice shall be deemed to have been given on the date that is three (3) business days following mailing. Either party may change its address by giving written notice thereof to the other party.

Section 16.07 . Partial Invalidity; Complete Agreement . If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions shall remain in full force and effect. This Lease represents the entire agreement between Landlord and Tenant covering everything agreed upon or understood in this transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties. No change or addition shall be made to this Lease except by a written agreement executed by Landlord and Tenant.

Section 16.08 . Financial Statements . In the event that Tenant is no longer a publicly traded company, during the Lease Term and any extensions thereof, Tenant shall provide to Landlord, within sixty (60) days following Landlord's request (which request shall not be made more than annually), a copy of Tenant's most recent financial statements prepared as of the end of Tenant's fiscal year. Such financial statements shall be signed by Tenant or an officer of Tenant, if applicable, who shall attest to the truth and accuracy of the information set forth in such statements, or if the Minimum Annual Rent hereunder exceeds $100,000.00, said statements shall be certified and audited. All financial statements provided by Tenant to Landlord hereunder shall be prepared in conformity with generally accepted accounting principles, consistently applied. Landlord agrees that it shall maintain the confidentiality of such financial statements during the Lease Term; provided, however, Landlord may disclose the contents

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of the financial statements to (a) officers and employees of Landlord and those agents, attorneys and consultants of Landlord reasonably requiring access, (b) actual or prospective lenders, purchasers, investors or shareholders of Landlord, (c) any entity or agency required by law, or (d) any entity or agency which is reasonably necessary to protect Landlord's interest in any action, suit or proceeding brought by or against Landlord and relating to the subject matter of this Lease.

Section 16.09 . Representations and Warranties .

(a) Tenant hereby represents and warrants that (i) Tenant is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Tenant is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Lease on behalf of Tenant has been properly authorized to do so, and such execution and delivery shall bind Tenant to its terms.

(b) Landlord hereby represents and warrants that (i) Landlord is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Landlord is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Lease on behalf of Landlord has been properly authorized to do so, and such execution and delivery shall bind Landlord to its terms.

Section 16.10 . Signage . Landlord, at its cost and expense, shall provide Tenant with Building standard signage on the main Building directory and at the entrance to the Leased Premises, and with a placard displaying Tenant's name and/or logo on the top level of the monument sign serving the Building. Any changes requested by Tenant to the initial directory or suite signage shall be made at Tenant's sole cost and expense and shall be subject to Landlord's approval. Landlord may install such other signs, advertisements, notices or tenant identification information on the Building directory, tenant access doors or other areas of the Building, as it shall deem necessary or proper. In addition to the foregoing, Tenant, at Tenant's sole cost and expense, shall have the non-exclusive right to install a Building-mounted identification sign, which shall include Tenant's name and/or logo, on the parapet wall at the top of the Building (the "Building Sign"); provided that said Building Sign and Tenant's installation thereof comply with all laws, rules, regulations and ordinances encumbering the Building. Tenant will have the first choice of location for its Building Sign and no other tenant may choose the location of their Building-mounted sign until Tenant has chosen its location. Without limiting the foregoing, Tenant specifically acknowledges and agrees that Tenant shall be solely responsible for ensuring that the Building Sign complies with the protective covenants, if any, that encumber the Building as of the date of this Lease, and that any failure by Tenant to comply with the terms of said protective covenants (including, without limitation, obtaining any approvals therein required) shall be at Tenant's sole risk and expense. The size, location, materials, coloring, lettering, lighting and method of installation shall be subject to Landlord’s prior reasonable approval. Tenant shall, at its sole cost and expense, keep and maintain the Building Sign in good condition and repair. On or before the expiration or earlier termination of this Lease, Tenant shall be responsible for removing the Building Sign and returning the Building and the surrounding premises to their original condition, ordinary wear and tear excepted. Tenant shall not place any other exterior signs on the Leased Premises or interior signs visible from the exterior of the Leased Premises without the prior written consent of Landlord. Notwithstanding any other provision of this Lease to the contrary, Landlord may immediately remove any sign(s) placed by Tenant in violation of this Section 16.10 .

Section 16.11 . Parking . Throughout the Lease Term and any extensions thereof, Landlord shall make available to Tenant a number of automobile parking spaces (on an unassigned, non-exclusive basis) in the parking area of the Park based on a formula of four (4) parking spaces for each 1,000 square feet of

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rentable area within the Leased Premises, rounded to the nearest whole number of spaces. Such parking shall be at no additional cost to Tenant. Tenant agrees not to overburden the parking facilities and agrees to cooperate with Landlord and other tenants in the use of the parking facilities. Landlord reserves the right in its absolute discretion to determine whether parking facilities are becoming crowded and, in such event, to allocate parking spaces between Tenant and other tenants. There will be no assigned parking unless Landlord, in its sole discretion, deems such assigned parking advisable; provided that, if any other tenant in the Building is given assigned parking spaces, Tenant shall have the right to receive a proportionately equal number of reserved spaces, based on the relative square feet leased, in a convenient location reasonably acceptable to Landlord and Tenant. No vehicle may be repaired or serviced in the parking area and any vehicle brought into the parking area by Tenant, or any of Tenant's employees, contractors or invitees, and deemed abandoned by Landlord will be towed and all costs thereof shall be borne by the Tenant. All driveways, ingress and egress, and all parking spaces are for the joint use of all tenants. There shall be no parking permitted on any of the streets or roadways located within the Park. In addition, Tenant agrees that its employees will not park in the spaces designated visitor parking. Notwithstanding the foregoing, Tenant shall have the right during the Lease Term (but not prior to the completion of the Building and the Tenant Improvements), at its sole cost and expense, to construct and install additional parking (the "Additional Parking") at a mutually agreed location immediately adjacent to the Building (which plans and specifications for the Additional Parking shall be subject to Landlord's approval). Subject to Landlord's approval and Landlord's (or its affiliate's) right to bid on any such project, Tenant shall have the right to use a general contractor of its choosing for the construction and installation of the Additional Parking. In the event that Tenant chooses a general contractor other than Landlord (or its affiliate), Tenant acknowledges and agrees that such general contractor must post a bond in the amount of one hundred twenty-five percent (125%) of the total soft and hard costs of the project and that Landlord shall be entitled to a construction management fee in the amount of one and three-fourths percent (1.75%) of the total soft and hard costs of the project.

Section 16.12 . Consent or Approval . Where the consent or approval of a party is required, such consent or approval will not be unreasonably withheld, conditioned or delayed.

Section 16.13 . Time . Time is of the essence of each term and provision of this Lease.

Section 16.14 . Patriot Act . Each of Landlord and Tenant, each as to itself, hereby represents its compliance and its agreement to continue to comply with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department's Office of Foreign Assets Control, including, without limitation, Executive Order 13224 ("Executive Order"). Each of Landlord and Tenant further represents (such representation to be true throughout the Lease Term) (i) that it is not, and it is not owned or controlled directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department's Office of Foreign Assets Control and (ii) that it is not a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date hereof, a list of such designations and the text of the Executive Order are published under the internet website address www.ustreas.gov/offices/enforcement/ofac.

Section 16.15 . Memorandum of Lease . The parties agree that this Lease may not be recorded but that either party may require that the other execute a Memorandum of Lease which shall be recorded. The parties agree to remove the Memorandum of Lease of record upon the expiration or earlier termination of this Lease. In the event of an early termination as a result of Tenant’s uncured Default or following the expiration of the Lease Term, Tenant agrees that Landlord can unilaterally remove the Memorandum of Lease of record.

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Section 16.16 . Quiet Enjoyment . Landlord agrees that if Tenant is not in Default, Tenant shall at all times during the Lease Term, have the peaceable and quiet enjoyment of possession of the Leased Premises without any manner of hindrance from Landlord or any persons lawfully claiming under Landlord.

Section 16.17 . Right to Accompany Landlord . Notwithstanding any provision of this Lease to the contrary, due to the nature of Tenant’s business, for security reasons, except in the event of an emergency, in no event shall entry on behalf of Landlord for any reason under this Lease include access to non-public areas of the Leased Premises or other areas which Tenant deems private without an authorized representative of Tenant present at all times, provided that Tenant makes such representative available.

ARTICLE 17 – SPECIAL PROVISIONS

Section 17.01 . Dog . One (1) dog (not including any service animals) shall be allowed (if applicable law and codes permit) to enter into the Leased Premises with its owner; provided, however, the dog shall enter the Building only through the service corridor and shall use only the service elevator or stairs to move between floors of the Building. Tenant shall be responsible upon surrender of the Leased Premises for all wear and tear, and damage caused to the Leased Premises by pet occupation in the Building. The owner of any such dog shall take it to the "dog relief area" shown on Exhibit F attached hereto and shall promptly remove any excrement deposited by such dog. Landlord shall have the right to replace landscaping at Tenant's sole cost in the event landscaping is damaged as a result of pet traffic and/or excretion.

Section 17.02 . Options to Extend .

(a) Grant and Exercise of Option . Provided that (i) no default has occurred and is then continuing, (ii) the tangible net worth of Tenant is then not less than $50,000,000, and (iii) Tenant originally named herein or a Permitted Transferee remains in possession of the Leased Premises, Tenant shall have the option to extend the Lease Term for two (2) additional periods of five (5) years each (each an "Extension Term"). Each Extension Term shall be upon the same terms and conditions contained in the Lease except (x) this provision giving two (2) extension options shall be amended to reflect the remaining options to extend, if any, (y) any improvement allowances or other concessions applicable to the Leased Premises under the Lease shall not apply to the Extension Term, and (z) the Minimum Annual Rent shall be adjusted as set forth below (the "Rent Adjustment"). Tenant shall exercise each option by delivering to Landlord, no later than twelve (12) months prior to the expiration of the preceding term, written notice of Tenant's desire to extend the Lease Term. Tenant's failure to timely exercise such option shall be deemed a waiver of such option and any succeeding option. If Tenant properly exercises its option to extend, Landlord and Tenant shall execute an amendment to the Lease (or, at Landlord's option, a new lease on the form then in use for the Building) reflecting the terms and conditions of the Extension Term within thirty (30) days after Tenant's exercise of its option to extend.

(b) Rent Adjustment . The Minimum Annual Rent for the applicable Extension Term shall be an amount equal to one hundred two and three-fourths percent (102.75%) of the Minimum Annual Rent per square foot for the period immediately preceding the applicable Extension Term for the first twelve (12) months of the applicable Extension Term, with an increase of two and three-fourths percent (2.75%) for each successive twelve (12) month period of the applicable Extension Term. The Monthly Rental Installments shall be an amount equal to one-twelfth (1/12) of the Minimum Annual Rent for each year of

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the applicable Extension Term and shall be paid at the same time and in the same manner as provided in the Lease.

Section 17.03 . First Option to Expand .

(a) Provided that no default has occurred and is then continuing, Landlord hereby grants Tenant an option to expand the Leased Premises to include the remaining approximately 16,596 rentable square feet of space located on the first (1 ^st ) floor of the Building (the "Expansion Space"), as shown on Exhibit G attached hereto and made a part hereof. Tenant shall exercise such expansion option by providing written notice to Landlord within ninety (90) days following the full execution of this Lease. If Tenant fails to notify Landlord by the deadline set forth above, Tenant shall have waived Tenant's expansion right under this Section 17.03 for the remainder of the Lease Term and any extensions thereof.

(b) Tenant shall lease the Expansion Space on all the same terms and conditions set forth in this Lease, subject to the following changes:

(i) Tenant's Proportionate Share shall be adjusted accordingly.

(ii) The term for the Expansion Space shall be coterminous with the Lease Term.

(iii) The Minimum Annual Rent per rentable square foot payable by Tenant with respect to the Expansion Space throughout the expansion term shall be equal to the Minimum Annual Rent per rentable square foot payable by Tenant with respect to the Leased Premises, including any annual escalations.

(iv) Landlord shall provide an improvement allowance per rentable square foot for the Expansion Space equal to that provided for the original Leased Premises.

(v) If Tenant exercises its right to expand, at the election of either party, Landlord and Tenant shall enter into an amendment confirming the terms set forth in this Section 17.03 .

Section 17.04 . Second Option to Expand .

(a) Provided that no default has occurred and is then continuing, Landlord hereby grants Tenant an option beginning on the date of the full execution of this lease and thereafter until the expiration of the Lease Term to expand the Leased Premises to include any remaining space within the Building that has not been previously leased and of which Landlord is not engaged in active lease negotiations (the "Remaining Space"). Tenant shall exercise such expansion option by providing written notice to Landlord.

(b) Tenant shall lease the Remaining Space on all the same terms and conditions set forth in this Lease, subject to the following changes:

(i) Tenant's Proportionate Share shall be adjusted accordingly.

(ii) The term for the Expansion Space shall be coterminous with the Lease Term.

(iii) The Minimum Annual Rent per rentable square foot payable by Tenant with respect to the Expansion Space throughout the expansion term shall be equal to the Minimum Annual

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Rent per rentable square foot payable by Tenant with respect to the Leased Premises, including any annual escalations.

(iv) Landlord shall provide an improvement allowance per rentable square foot for the Expansion Space equal to that provided for the original Leased Premises and shall prorate it based on the expansion term.

(v) If Tenant exercises its right to expand, at the election of either party, Landlord and Tenant shall enter into an amendment confirming the terms set forth in this Section 17.04 .

Section 17.05 . Right of First Refusal .

(a) Provided that (i) no default has occurred and is then continuing, (ii) the tangible net worth of Tenant is then not less than $50,000,000, (iii) Tenant has not exercised its applicable options to expand as set forth above, and (iv) Tenant originally named herein or a Permitted Transferee remains in possession of the Leased Premises, and subject to Landlord's right to renew or extend the lease term of any other tenant with respect to the portion of the Refusal Space now or hereafter leased by such other tenant, Tenant shall have an on-going right of first refusal ("Refusal Option") to lease the Expansion Space or any other space in the Building (the "ROFR Space"). Prior to entering into any lease that includes all or any portion of the ROFR Space, Landlord shall notify Tenant in writing ("Landlord's Notice") of Landlord's receipt of an arms-length offer to lease such space that Landlord is willing to accept from a bona fide third party offeror ("Bona Fide Offer") and setting forth the material terms of the Bona Fide Offer and such other terms as are herein provided. If the Bona Fide Offer includes space in the Building in addition to the ROFR Space, then the ROFR Space shall be deemed to include, and this Refusal Option shall be deemed to apply to, all of the space included in the Bona Fide Offer. Tenant shall have seven (7) days after Tenant receives Landlord's Notice in which to notify Landlord in writing of its election to lease the ROFR Space upon the terms set forth in Landlord's Notice. If Tenant declines to exercise this Refusal Option or fails to give such written notice within the time period required, Tenant shall be deemed to have waived this Refusal Option as to that particular instance, and thereafter, except as provided in (c) below, Landlord shall be free to lease the ROFR Space to the bona fide offeror or any other third party in accordance with the terms set out in the Bona Fide Offer.

(b) In the event that Tenant exercises its Refusal Option within the first six (6) months of the Lease Term, the ROFR Space shall be offered to Tenant at the Minimum Annual Rent per rentable square foot then in effect for the Leased Premises, and any tenant improvement allowance and other concessions, if any, set forth in this Lease shall be prorated accordingly. In the event that Tenant exercises its Refusal Option after the first six (6) months of the Lease Term, the ROFR Space shall be offered to Tenant at the rental rate and upon such other terms and conditions as are set forth in the Bona Fide Offer.

(c) If Tenant shall exercise the Refusal Option, the parties shall enter into an amendment to this Lease adding the ROFR Space to the Leased Premises upon the terms and conditions set forth herein and making such other modifications to this Lease as are appropriate under the circumstances. Landlord and Tenant agree to use good faith efforts in negotiating and executing an amendment within thirty (30) days. If Landlord (i) does not enter into a lease with a third party under the terms and conditions contained in the Bona Fide Offer within one hundred eighty (180) days after Tenant declines or fails to exercise this Refusal Option, or (ii) the economics of any proposed deal with the bona fide offeror differ by more than five percent (5%) from the economics proposed in the Bona Fide Offer for the leasing of the Refusal Space, Landlord shall be required to present the altered or modified Bona Fide Offer to Tenant pursuant to this Refusal Option, in the same manner that the original Bona Fide Offer was submitted to

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Tenant. This right of first refusal shall be an ongoing right of first refusal, which shall mean that if Tenant waives its right of first refusal pursuant to subsection (a) above and all of the Refusal Space is subsequently leased to a third party ("New Tenant"), Landlord shall not lease the Refusal Space to a third party (other than the New Tenant) without notifying Tenant of the availability of the ROFR Space, in which case Tenant shall again have a right of first refusal to lease the ROFR Space in accordance with this Section 17.05 .

Section 17.06 . Roof Rights .

(a) Roof Area . "Roof Area" shall mean the surface of the roof of the Building.

(b) Dish . "Dish" shall mean two (2) satellite dishes and related equipment.

(c) License of Roof Area . Provided (i) Tenant is not in default under the Lease, (ii) Tenant complies with all zoning and other municipal and county rules and regulations, and all applicable restrictions of record, and (iii) Landlord, in its sole discretion, has space available on the Roof Area, Tenant shall have the right, at its own cost and expense and subject to the terms hereof, to install, operate and maintain the Dish on the Roof Area, so long as the Dish is used exclusively for Tenant's use and not sold to or utilized in any manner by a third party. Tenant shall be solely responsible for obtaining any necessary permits and licenses required to install and operate the Dish. Copies of such permits and licenses shall be provided to Landlord.

(d) Installation of the Dish .

(i) The size, location, design and manner of installation of the Dish and all related wiring shall be designated and approved by Landlord. Landlord, in its sole discretion, may require Tenant to install screening around the Dish. After obtaining Landlord's written approval, Tenant shall have reasonable access to the roof for installation and maintenance of the Dish and shall have the right to install all reasonable wiring related thereto. Unless otherwise approved by Landlord in writing, however, in no event shall Tenant be permitted to penetrate the roof membrane in connection with the installation or maintenance of the Dish. Tenant shall be responsible for repairing any damages caused by the installation or maintenance of the Dish.

(ii) Tenant shall use the roofing company specified by Landlord to perform any work affecting the roof, provided the costs charged by such roofer are competitive with charges for similar services within the same geographic region. All cable runs, conduit and sleeving shall be installed in a good and workmanlike manner. Cables and transmission lines shall be routed and attached in accordance with current, state of the art industry practices. The Dish shall be identified with permanently marked, weather proof tags at the following locations: (A) each dish bracket; (B) at the transmission line building entry point; (C) at the interior wall feed through or any other transmission line exit point; and (D) at any transmitter combiner, duplexer, or multifed receive port. In addition, all Tenant telephone blocks, demarcs, and cables shall be clearly identified with Tenant's name, type of line, and circuit number.

(iii) Tenant shall install, operate and maintain the Dish in accordance with all federal, state and local laws and regulations. Prior to installation of the Dish, Tenant shall confirm that its installer carries sufficient insurance coverage.

(e) Roof Work . If, during the Lease Term, as same may be extended, Landlord needs to perform maintenance work to Landlord's equipment on the roof of the Building or repair or replace the

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roof of the Building ("Roof Work"), Tenant agrees to cooperate and work with Landlord (at Tenant's sole cost and expense) to achieve said Roof Work. Landlord agrees to provide at least thirty (30) days' notice to Tenant of Landlord's intention to perform said work; except in the case of emergency Roof Work, in which case Landlord shall give as much notice as possible under the circumstances. Such Roof Work may require the relocation of any portion of the Dish at Tenant's sole cost and expense or Tenant's installation of temporary equipment. Moreover, if a temporary relocation of the Dish is required to accommodate the Roof Work, Landlord agrees to exercise commercially reasonable efforts to identify a technically feasible alternative location for the relocation portion of the Dish that will not impede the Roof Work. Notwithstanding the foregoing, Landlord does not warrant and represent that an alternative location will be available and, consequently, Landlord's obligation to provide such alternative location is subject to the availability of such space. Under no circumstances shall Landlord be liable to Tenant for any consequential damages as a result of such relocation, including, but not limited to, loss of business income or opportunity. Notwithstanding the foregoing, Tenant shall move the Dish back to its original location after the Roof Work is completed unless the parties agree to utilize the relocated area permanently.

(f) Emergencies . Notwithstanding the foregoing, if an emergency situation exists which Landlord reasonably determines, in its sole discretion, to be attributable to the Dish, Landlord shall immediately notify Tenant verbally, who shall act diligently and expediently to remedy the emergency situation. Should Tenant fail to so remedy the emergency situation or should Landlord reasonably determine that the response time by Tenant is not adequate given the nature of the emergency, Landlord may then shut down the Dish and Tenant shall have no recourse against Landlord as a result of such action.

(g) Removal of the Dish upon Termination . Following any termination or expiration of the Lease, Tenant shall remove the Dish from the Building. In performing such removal, Tenant shall restore the Roof Area and any personal property and fixtures thereon to as good a condition as existed prior to the installation or placement of the Dish, reasonable wear and tear excepted. If Tenant fails to remove the Dish within ten (10) days after expiration or earlier termination of the Lease, Landlord may remove and dispose of the Dish and Tenant shall reimburse Landlord for the costs of such removal and restoration of the Roof Area. Moreover, Landlord may deem the Dish abandoned, in which event the Dish shall become Landlord's property. This subsection (g) shall survive the expiration or earlier termination of the Lease.

(h) Utilities . Tenant shall be responsible for obtaining and paying for all utilities to operate the Dish.

(i) Indemnification . Any language in the Lease notwithstanding, Landlord shall not be liable and Tenant shall indemnify, defend and hold Landlord harmless from and against any and all liability, damages (including but not limited to personal injury, death, or property damages), costs and expenses (including, without limitation, attorneys' fees actually incurred, without regard to statutory interpretation) incurred by Landlord arising from any Dish related cause whatsoever, including those arising from the installation, use, maintenance and removal thereof.

(SIGNATURES CONTAINED ON FOLLOWING PAGE)

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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.



Date of Execution: August 15, 2014	LANDLORD: DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership doing business in North Carolina as Duke Realty of Indiana Limited Partnership By: Duke Realty Corporation, its General Partner By: /s/ Jeffrey B. Sheehan Jeffrey B. Sheehan Senior Vice President Raleigh



Date of Execution: August 14, 2014	TENANT: CHANNELADVISOR CORPORATION, a Delaware corporation By: /s/ David J. Spitz Name: David J. Spitz Title: President and COO

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EXHIBIT A

LEASED PREMISES

EXHIBIT B

TENANT IMPROVEMENTS

1. Landlord's Obligations . Landlord shall construct and install within the Leased Premises, in a good and workmanlike manner and in compliance with all governmental laws, rules, ordinances and regulations, the Tenant Improvements, in accordance with this Exhibit B and deliver the base Building specifications in accordance with Exhibit B-1 hereto and in compliance with all governmental laws, rules, ordinances and regulations. All Building systems (HVAC, plumbing, electric, fire and safety, mechanical, structural, etc.) will be delivered in good working order as of the Commencement Date. Landlord shall order the steel to be used to construct and install the base Building specifications within (30) days following the full execution of this Lease.

2. Construction Drawings, Cost Statement, and Allowance .

(a) On or before the sixtieth (60 ^th ) day following the date hereof, Tenant, working through its architect Alliance Architecture, shall prepare and submit to Landlord a set of permittable construction drawings (the "CD's") covering all work to be performed by Landlord in constructing the Tenant Improvements in accordance with the preliminary plans attached hereto as Exhibit B-2 . Landlord and Tenant acknowledge and agree that (i) the CD's may include reference to an internal commuting stair system with floor openings (one opening per floor) linking the third (3 ^rd ) and fourth (4 ^th ) floor and the fourth (4 ^th ) and fifth (5 ^th ) floor to be constructed and installed within the Leased Premises ("Internal Stairways"), and (ii) in the event that Tenant chooses to employ Internal Stairways, Tenant shall (A) use Morrison Engineers to design (the "Design Drawings") the Internal Stairways (which Design Drawings shall show the location of the Internal Stairways and be subject to Landlord's approval), and (B) provide Landlord notice on or before the thirtieth (30 ^th ) day following the date hereof of such Internal Stairways, which notice shall include the Design Drawings. Tenant will hold the design contract with Alliance Architecture. The CD's may also include a mezzanine space on the fifth (5 ^th ) floor that would require a connecting stairway. Tenant shall have no right to request any changes to the CD's that would materially alter the exterior appearance or basic nature of the Building or the Building systems. Landlord shall have ten (10) days after receipt of the CD's in which to review the CD's and in which to give Tenant written notice of its approval of the CD's or its requested changes thereto. If Landlord requests any changes to the CD's, Tenant shall make those changes which are reasonably requested by Landlord and shall within ten (10) days of its receipt of such request submit the revised portion of the CD's to Landlord. Landlord shall have ten (10) days after receipt of the revised CD's in which to review said revised CD's and in which to give to Tenant written notice of its approval of the revised CD's or its requested changes thereto. This process shall continue until such time, if at all, that Landlord approves the CD's in accordance with this paragraph. Tenant shall at all times in its preparation and review of the CD's, and of any revisions thereto, act reasonably and in good faith. Landlord shall at all times in its review of the CD's, and any revisions thereto, act reasonably and in good faith. Landlord agrees to confirm Landlord's consent to the CD's in writing within five (5) days following Tenant's written request therefor.

(b) Following Landlord's approval of the CD's, Landlord shall solicit competitive bids from at least three (3) subcontractors for each major trade. Tenant shall have the right to provide Landlord with a proposed subcontractor for each major trade (other than HVAC and electrical), and provided such subcontractor meets with Landlord's reasonable approval, such subcontractor shall have the right to enter a bid. Landlord and Tenant shall review the bids jointly and Tenant shall select one sub-contractor for each item bid. Promptly following the selection of a subcontractor for each major trade, Landlord shall deliver to Tenant a statement of the cost to construct and install all of the Tenant Improvements (the "Cost

Exhibit B

Page 1 of 5

Statement"). Tenant acknowledges and agrees that (i) the Cost Statement shall include a fee in the amount of five and one-half percent (5.5%) of the total soft and hard construction costs of the Tenant Improvements (excluding architect and engineer fees) payable to the project's construction manager or general contractor, and that such construction manager or general contractor may be comprised of a subsidiary, affiliate or employees of Landlord. Tenant agrees to acknowledge the Cost Statement in writing within five (5) days following Landlord's written request therefor.

(c) Tenant shall be responsible for the cost to construct and install the Tenant Improvements only to the extent that the Cost Statement, taking into account any increases or decreases resulting from any Change Orders (as hereinafter defined), exceeds Forty-Five and No/100 Dollars ($45.00) per rentable square foot of the Rentable Area of the Leased Premises (the "Allowance"). If, following Tenant's approval (or deemed approval) of the CD's, the Cost Statement shows that the cost to construct and install the Tenant Improvements will exceed the Allowance, Tenant shall deliver to Landlord, within ten (10) days following Landlord's written request, an amount equal to one-half (1/2) of such excess. Following Substantial Completion of the Tenant Improvements, Tenant shall pay to Landlord the remaining difference between the Cost Statement (taking into account any increases or decreases resulting from any Change Orders) and the Allowance within ten (10) days of Landlord's request therefor. Tenant's failure to deliver the payments required in this paragraph shall entitle Landlord to stop the construction and installation of the Tenant Improvements until such payment is received, and any resulting delay shall constitute a Tenant Delay (as hereinafter defined) hereunder. In addition, all delinquent payments shall accrue interest at 12% per annum. If the Allowance exceeds the Cost Statement (taking into account any increases or decreases resulting from any Change Orders), such savings shall be paid to Tenant within thirty (30) days of Tenant's request to be used in any manner that Tenant reasonably requires (including, without limitation, moving expenses, early termination penalties or other existing obligations, furniture, fixtures, equipment, information technology, data cabling and/or the next Monthly Rental Installment(s) due under the Lease); provided, however, that in the event that Tenant has not requested any such savings on or before the third (3 ^rd ) anniversary of the Commencement Date, such savings shall be the property of Landlord. Notwithstanding the foregoing, Tenant shall have the option, which option shall be exercised, if at all, by written notice to Landlord within five (5) days following Landlord's delivery of its request for payment to amortize up to Five and No/100 Dollars ($5.00) per rentable square foot of the Rentable Area of the Leased Premises of such excess (the "Amortized Amount") over the initial Lease Term at a rate of ten percent (10%), which amortization payments shall commence on the Commencement Date and shall be paid monthly in the same manner as Monthly Rental Installments. To the extent that such excess exceeds $5.00 per rentable square foot of the Rentable Area of the Leased Premises, Tenant shall pay such amount to Landlord within thirty (30) days following Landlord's written request therefor. At the request of either party, Landlord and Tenant shall enter into an amendment to this Lease confirming such amortization. Notwithstanding anything to the contrary contained herein, upon an early termination of the Lease for any reason (including, but not limited to, casualty or condemnation) other than for a Landlord default, Tenant shall immediately pay to Landlord all accrued and unpaid interest, together with the unamortized portion of the Amortized Amount, if any.

3. Schedule and Early Occupancy . Landlord shall provide Tenant with a proposed schedule for the construction and installation of the Tenant Improvements and shall notify Tenant of any material changes to said schedule. The schedule will include delivery dates or space plan, construction documents, deadlines for shell modifications for inclusion in shell construction packages, durations and dates for overhead cabling, equipment and furniture installation. Tenant agrees to coordinate with Landlord regarding the installation of Tenant's phone and data wiring and any other trade related fixtures that will need to be installed in the Leased Premises prior to Substantial Completion. In addition, if and to the

Exhibit B

Page 2 of 5

extent permitted by applicable laws, rules and ordinances, Tenant shall have the right to enter the Leased Premises for thirty (30) days prior to the scheduled date for Substantial Completion (as may be modified from time to time) in order to install fixtures, furniture and equipment and otherwise prepare the Leased Premises for occupancy, which right shall expressly exclude making any structural modifications. During any entry prior to the Commencement Date (a) Tenant shall comply with all terms and conditions of this Lease other than the obligation to pay rent, (b) Tenant shall not interfere with Landlord's completion of the Tenant Improvements, (c) Tenant shall cause its personnel and contractors to comply with the terms and conditions of Landlord's rules of conduct (which Landlord agrees to furnish to Tenant upon request), and (d) Tenant shall not begin operation of its business. Tenant acknowledges that Tenant shall be responsible for obtaining all applicable permits and inspections relating to any such entry by Tenant.

4. Change Orders . Tenant shall have the right to request changes to the CD's at any time following the date hereof by way of written change order (each, a "Change Order", and collectively, "Change Orders"). Provided such Change Order is reasonably acceptable to Landlord, Landlord shall prepare and submit promptly to Tenant a memorandum setting forth the impact on cost and schedule resulting from said Change Order (the "Change Order Memorandum of Agreement"). Tenant shall, within three (3) days following Tenant's receipt of the Change Order Memorandum of Agreement, either (a) execute and return the Change Order Memorandum of Agreement to Landlord, or (b) retract its request for the Change Order. Landlord and Tenant acknowledge and agree that the amounts set forth in the executed Cost Statement shall not be subject to adjustment unless agreed upon in a Change Order Memorandum of Agreement. The cost of Change Orders shall be subject to the same mark-up by Landlord as set forth in Section 2(b) above. At Landlord's option, Tenant shall pay to Landlord (or Landlord's designee), within ten (10) days following Landlord's request, any increase in the cost to construct the Tenant Improvements resulting from the Change Order, as set forth in the Change Order Memorandum of Agreement. Landlord shall not be obligated to commence any work set forth in a Change Order until such time as Tenant has delivered to Landlord the Change Order Memorandum of Agreement executed by Tenant and, if applicable, Tenant has paid Landlord in full for said Change Order.

5. Tenant Delay . Notwithstanding anything to the contrary contained in the Lease, if Substantial Completion of the Tenant Improvements is delayed as a result of Tenant Delay (as hereinafter defined), then, for purposes of determining the Commencement Date, Substantial Completion of the Tenant Improvements shall be deemed to have occurred on the date that Substantial Completion of the Tenant Improvements would have occurred but for such Tenant Delay. Without limiting the foregoing, Landlord shall use commercially reasonable speed and diligence to Substantially Complete the Tenant Improvements on or before the Target Commencement Date.

6. Letter of Understanding . Promptly following the Commencement Date, Tenant shall execute Landlord's Letter of Understanding in substantially the form attached hereto as Exhibit C and made a part hereof, acknowledging (a) the Commencement Date of this Lease, and (b) except for any Punchlist (as hereinafter defined) items, that Tenant has accepted the Leased Premises. If Tenant takes possession of and occupies the Leased Premises, Tenant shall be deemed to have accepted the Leased Premises and that the condition of the Leased Premises and the Building was at the time satisfactory and in conformity with the provisions of this Lease in all respects, subject to any punchlist items.

7. Definitions . For purposes of this Lease (a) "Substantial Completion" (or any grammatical variation thereof) shall mean completion of construction of the Tenant Improvements in a manner suitable for Tenant to use the Leased Premises for the Permitted Use, subject only to Punchlist items, as established by a temporary certificate of occupancy or a certificate of occupancy for the Leased Premises or other similar authorization issued by the appropriate governmental authority, if required

Exhibit B

Page 3 of 5

(provided, in the event Landlord originally receives a temporary certificate of occupancy at the time of Substantial Completion, Landlord shall promptly, diligently and using commercially reasonable efforts satisfy any and all requirements needed to obtain a permanent certificate of occupancy for the Leased Premises), and (b) "Tenant Delay" shall mean any delay in the completion of the Tenant Improvements to the extent attributable to Tenant by reason of (i) Tenant's failure to meet any time deadlines specified herein, (ii) Change Orders, (iii) the performance of any other work in the Leased Premises by any person, firm or corporation employed by or on behalf of Tenant, or any failure to complete or delay in completion of such work, (iv) Landlord's inability to obtain an occupancy permit for the Leased Premises because of the need for completion of all or a portion of improvements being installed in the Leased Premises directly by Tenant, and (v) any other act or omission of Tenant that actually results in a delay in the Substantial Completion of the Tenant Improvements.

8. Punchlist . Promptly following Substantial Completion of the Tenant Improvements, Landlord and Tenant shall prepare a punchlist of incomplete or defective work (the "Punchlist"). Landlord shall, within thirty (30) days after the Punchlist is prepared and agreed upon by Landlord and Tenant, complete such incomplete items and remedy such defective work as are set forth on the Punchlist; provided however, that to the extent that completion of any items on the Punchlist may be affected by weather or seasonal conditions, or require unusually long lead times, such 30-day period shall be extended as reasonably necessary. The Punchlist shall not be determinative of whether or not the Tenant Improvements are Substantially Complete.

9. Penalties .

(a) Landlord agrees that if Substantial Completion of the Tenant Improvements is delayed beyond the thirtieth (30 ^th ) day following the Target Commencement Date, as such date may be extended as a result of Tenant Delay or Force Majeure (such date, as may be so extended, being referred to herein as the "First Outside Date"), Tenant shall receive one (1) day of free Minimum Annual Rent and Annual Rental Adjustment for each day after the First Outside Date that the Tenant Improvements are not Substantially Complete. Without limiting the foregoing, Landlord further agrees that if Substantial Completion of the Tenant Improvements is delayed beyond the sixtieth (60 ^th ) day following the Target Commencement Date, as such date may be extended as a result of Tenant Delay or Force Majeure (such date, as may be so extended, being referred to herein as the "Second Outside Date"), Tenant shall receive two (2) days of free Minimum Annual Rent and Annual Rental Adjustment for each day after the Second Outside Date that the Tenant Improvements are not Substantially Complete. In no event shall Minimum Annual Rent or Additional Rent be due during the period of such delay. The free rent credits shall accrue and Tenant shall receive the benefit of such credits upon the Commencement Date.

(b) Without limiting the foregoing, if Substantial Completion of the Tenant Improvements is delayed beyond the one hundred fiftieth (150 ^th ) day following the Target Commencement Date, as such date may be extended as a result of Tenant Delay or Force Majeure (the "Third Outside Date"), Landlord shall provide Tenant with written notice of the revised Target Commencement Date (the "Revised Date") within ten (10) days following the Third Outside Date. If Landlord fails to provide such notice or the Revised Date is more than two hundred forty (240) days following the Target Commencement Date, Tenant may, at its option, terminate this Lease by written notice to Landlord given within ten (10) days following the Third Outside Date (provided that Substantial Completion has not occurred prior to Landlord’s receipt of said termination notice), and thereafter neither Landlord nor Tenant shall have any further obligations hereunder. Without limiting the foregoing, if Landlord delivers such notice (and the Revised Date is stated to be less than two hundred forty (240) days following the Target Commencement Date) and Substantial Completion of the Tenant Improvements is delayed beyond the two hundred fortieth

Exhibit B

Page 4 of 5

(240 ^th ) day following the Target Commencement Date, as such date may be extended as a result of Tenant Delay or Force Majeure (the "Fourth Outside Date"), Tenant may, at its option, terminate this Lease by written notice to Landlord given within ten (10) days following the Fourth Outside Date (provided that Substantial Completion has not occurred prior to Landlord’s receipt of said termination notice), in which event Landlord shall reimburse Tenant for its actual and reasonable third party out of pocket expenses incurred in connection with the Lease within thirty (30) days following Tenant's exercise of such termination right (which exercise shall be accompanied by reasonable evidence of such expenses), not to exceed an amount equal to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), and thereafter neither Landlord nor Tenant shall have any further obligations hereunder. Except as set forth in this Section 9, no liability whatsoever shall arise or accrue against Landlord by reason of its failure to Substantially Complete the Tenant Improvements on or before the Target Commencement Date.

Exhibit B

Page 5 of 5

PERIMETER 4

Office Building

Site Development, Building Core and Shell Description

July 29, 2014



Table of Contents

Project Summary	2
General Outline	3
General Conditions	4
Sitework	6
Concrete	7
Structural Steel and Miscellaneous Metals	8
Carpentry	8
Thermal and Moisture Protection	9
Doors and Windows	9
Interior Construction	10
Interior Finishes	10
Specialties	12
Elevator	12
Fire Protection	12
Heating, Ventilation and Air Conditioning	13
Building Automation System	13
Plumbing	14
Electrical	14

Project Summary


·	Location: Perimeter Park, Morrisville, North Carolina


·	Project Duration: 12 months (Shell Construction)


·	Site Acreage: 13.54 gross acres


·	Square Footage: 196,831 sf (Gross)

192 , 225 sf (Rentable)


·	Number of Stories: Five


·	Building Dimensions: 122’ -0” x 333’-0”


·	Bay Sizes: Exterior bays - 30’ x 44’ -0”

Interior bays - 3 0 ’ x 30’ typical


·	Floor to Floor Height: 14’-6” first floor; 13’ - 6” upper floors.


·	Parking Ratio: 4 per 1,000


·	Exterior Walls: Steel Frame, Curtainwall and Architectural Precast


·	Structural Steel: Wide flange columns and beams


·	Floor Load: 80 psf


·	Roof Load: 20 psf


·	Roofing: Mechanically attached .45 mil TPO with R-30 insulation


·	Ceiling Height: 10’ first floor; 9’ upper floors


·	Perimeter Drywall: Included as part of Shell Building


·	Window Treatments: 1” horizontal mini-blinds


·	HVAC: Water cooled, self-contained DX units


·	Electrical Service: One (1), 4,000 amp service

General Outline

Architectural and Engineering Services

Duke Realty shall employ the services of architectural and engineering firms licensed in the State of North Carolina for the design and engineering of all civil, landscaping, structural, and architectural drawings and specifications. Duke Realty will oversee and coordinate all aspects of the building design. Architectural and engineering fees for the design of the project are included in this proposal. The Shell building designers are LS3P (Architecture), Morrison Engineers (Structural) and Apogee Consulting Engineers (MEP).

The building will be designed to meet or exceed all local code requirements. The building mechanical and electrical systems are designed to meet North Carolina Building Code, state, and local code requirements, as well as the requirements defined in Duke Realty's 2008 Master Mechanical and Electrical Specifications. Copies of these specifications are available upon request.

All fire protection systems comply with the requirements of the National Fire Protection Association (NFPA) and local fire department and building code requirements.

The building structure is designed to meet the following requirements:


·	Floor live load capacity: 80 psf


·	Roof load: 20 psf


·	Wind load: 100 mph

It has been assumed that the Tenant Finish Allowance will provide funding for the costs for space planning and tenant finish construction documents and specifications for future interior build-out.

Schedule

The total duration of the project from start of construction to availability for occupancy is approximately 12 months. This duration is subject to change depending on the final building/site design.

No increases to shell general conditions shall be passed on to Tenant for any delays caused by Landlord.

Permit and Impact Fees

This proposal includes all permitting, tap and impact fees required for the project. Duke Realty shall make application for, secure and pay for all permit fees and impact fees required by the authorities having jurisdiction over the project. All taxes required for the building construction are included.

Geotechnical Engineering

Soil borings and geotechnical engineering has been included for the final design of the building foundations and exterior pavements.

Warranty

A one (1) year labor and material warranty from the date of substantial completion will be provided. Please refer to the Thermal and Moisture Protection section of this proposal for additional roof and caulking warranties.

General Qualifications

Items that are excluded from this proposal include fees for consultants engaged directly by the Tenant.

General Conditions

General Conditions consist of all administrative costs necessary for the construction of the building, as further described below.

Insurance

We will maintain the following insurance coverage for the project:


·	Workman’s Compensation Insurance


·	Comprehensive Public Liability Insurance


·	Auto Liability Insurance for Duke Realty’s operations


·	Builders Risk Insurance


·	Professional Liability Insurance (Errors and Omissions)

Preconstruction

We will assign a Preconstruction Manager to hire the design team, lead and manage the design process, work with our in-house Development Services Manager during the due diligence investigation process, apply for permits and manage the permitting process, assemble bid packages, solicit subcontractor pricing, and manage the subcontractor bidding process. As part of this process Duke will provide all meeting minutes and records of decisions and events for tenant improvement scope.

Project Management

We will assign a Project Manager to manage the construction of the building. The Project Manager will be responsible for negotiating and awarding subcontracts, all Owner coordination and correspondence, material procurement, scheduling, and contract administration. The Project Manager shall be the Owner’s single point representative for all construction matters.

Superintendent

An experienced full-time on-site Superintendent will be assigned to the project that has performed work of a similar size and nature. The Superintendent will be responsible for all day-to-day field operation and coordination issues, quality control, safety, inspections and punchlist completion. The Superintendent will hold mandatory weekly Subcontractor Coordination Meetings to review safety, job progress, planning, schedule, and quality issues.

Submittals and Shop Drawings

The Construction Drawings and Specifications shall specify the materials and equipment to be used in the construction of the project. Subcontractors and material suppliers will be required to submit manufacturer literature and fabrication/installation drawings, as specified, prior to incorporating the materials and/or equipment into the project. Appropriate Design consultants shall review the manufacturer’s literature and fabrication/installation drawings to verify compliance with the requirements of the Construction Drawings

and Specifications after they have been reviewed by the general contractor. A record copy of the reviewed submittal data will be provided to the Owner.

Quality Control

In addition to quality control monitoring and inspections to be performed by the Superintendent, Duke Realty shall retain an Independent Testing Agency to perform various field and laboratory tests to verify compliance with project requirements. These tests will include soil compaction testing, concrete material strength testing, concrete placement, inspection of structural steel connections, window leakage testing and periodic roof inspections during roof system installation. Laboratory reports prepared by the Independent Testing Agency shall be submitted to the Subcontractors performing the work, all pertinent government agencies, Duke Realty, and the Owner’s representative. Any materials that are not in compliance with the project requirements shall be corrected or removed from the project. Design intent shall be dictated by the construction drawings and specifications.

Temporary Construction Facilities

Duke Realty shall establish and construct temporary construction facilities as necessary to manage and coordinate the work. The facilities shall consist of, but are not necessarily limited to, the following:


·	Construction office trailer


·	Temporary construction communications


·	Temporary power and water


·	Sanitary facilities


·	Facsimile and reprographic machines


·	Temporary safety and public protection barricades/enclosures


·	Trash dumpster for construction debris


·	Temporary enclosures for weather protection


·	Construction material storage areas


·	Project identification signs

Clean Up

Excessive accumulation of waste materials and debris will be avoided by periodic clean up of the building and construction site. When the building is substantially completed, we will remove all debris, tools, scaffolding, equipment, and surplus materials, and leave the building in a “wiped clean” condition. We will clean all of the exterior windows, vacuum all carpeting, damp mop all ceramic and vinyl composition tile flooring, clean all bathroom mirrors, fixtures and toilet partitions.

Progress Photos

Aerial photos will be taken each month to record the progress of construction. Copies of aerial progress photos of the shell building will be provided to the Tenant.

Construction Layout

Duke Realty will retain the services of a land surveyor to establish the building control for construction of the building.

Operations and Maintenance Manuals

Upon project completion, Duke Realty will provide the Owner three (3) binders containing complete copies of the operating and maintenance instructions for all the building equipment and systems. Copies of material and equipment warranties and guarantees will be included. As-built documentation will be provided to the Owner in both hard copy and electronic format.

Sitework

Earthwork

Site clearing and preparation will be provided to accommodate all paving areas, building pad, and landscape areas. All grading will be provided to 0.1 of a foot and all fill material will be compacted to 95% standard proctor under all paving and slab areas. All excavation for foundations, site concrete, and site utilities will be provided.

CABC shall be placed under slab-on-grade and used as interior backfill at the continuous footings. The fill depth shall be 4”.

The building elevation will be established to allow for drainage, which may be handled by means of catch basins, storm sewers, swales and surface runoff as specific site conditions dictate.

Sedimentation and erosion control measures will be provided per code.

Duke Realty will employ a certified testing agency to provide testing and field inspection during earthwork procedures to confirm that compaction is completed in accordance with plans and specifications.

Site Utilities

All utilities shall extend to the building and final connections made for electric, water and sanitary service.

All storm water removal shall be provided via a combination of sheet drainage, underground pipe and drainage swales.

Underground fire main and hydrants are included per municipal requirements.

Pavement

“Heavy duty” pavement will be provided in the fire lanes. The heavy-duty pavement section consists of:


·	1” of surface course


·	2” of binder course


·	8” of aggregate base course

“Light duty” pavement sections will be provided in parking areas and vehicle drive lanes within parking areas. The light-duty pavement section consists of:


·	2” of surface course


·	8” of aggregate base course

All paving will be striped to indicate parking stalls, handicapped parking locations, fire lanes and traffic control features in accordance with the site design. Traffic control and handicapped parking signage will be provided in accordance with the site design and code requirements.

Seven Hundred Seventy-Two (772) parking spaces will be provided to achieve a parking ratio of 4 per 1,000 SF.

Parking shall be provided as follows:

15 ADA Spaces; 4 of which are van accessible. Sizes are 8’x 18’ with a 5’ wide ADA access aisle (8’ wide for van accessible)

637 Normal Parking Spaces; 9’ x 18’ or 9’ x 20’ when abutting another space

120 Compact Spaces; 8’ x 15’ or 8’ x 17’ when abutting another space

Sidewalks

Sidewalks will be provided around the perimeter of the building and at the entries. A patio of dimensions 38’ x 20’ has been provided for building tenants. Sidewalks are generally 6’ wide around building and 5’ connecting to the public right of way.

Landscaping and Irrigation

Landscaping and irrigation including trees, plants, grass, mulch, and soil preparation as needed to meet city minimum zoning requirements and park covenants.

The fully operational irrigation system shall be complete with piping, sleeves, fittings, heads, valves, valve boxes, wiring, controllers and other required appurtenances. Irrigation is included for plant materials adjacent to the building.

Site Improvements

The installation of an exterior monument sign has been included complete with foundations and accent lighting (one fixture each side of sign).

Concrete

Foundations

The building foundation system is a combination of shallow spread foundations for interior columns and a continuous perimeter foundation for the exterior load bearing walls. Foundations will be constructed with 3,000 psi concrete to depths are assumed to be a minimum of 1'-6" below finished floor. Assuming an allowable bearing capacity of 3,000 psf and typical column loads ranging from 225 kips to 450 kips.

Floor Slabs

The 1st floor shall be a four (4”) thick reinforced concrete slab-on-grade over a 6-mil vapor barrier. This concrete will achieve a 28-day compressive strength of 4,000 psi. Floor flatness and levelness tolerances shall meet overall values of FF=25 and FL=20.

The elevated slabs will be cast with a six and one half (6 ½”) inch thick (3 ½” concrete and 3” metal deck) normal weight concrete fill, reinforced with mesh fibers and will achieve a 28-day compressive strength of 3,000 psi.

Architectural Precast

The architectural precast is based upon a face mix panel and accent/reveals on face of panel. The building shall include three color /texture schemes.


¤	Gray with exposed aggregate


¤	Buff with a light sand blast


¤	White with a light sand blast

Structural Steel and Miscellaneous Metals

Building Frame

A braced structural steel and wide flange column frame will be designed and erected to meet code requirements. Floors will be designed with a steel joist and joist girder framing system, with floor loads designed to accommodate an 80 p.s.f. live load. All roof loads will be based upon local code requirements and reducible where allowed by code.

Pan-filled metal stairs will be installed to meet all applicable codes. A total of three (3) stairs have been included.

Floor-to-floor heights are as follows:


·	First floor: 14’-6” to allow for a 10’-0” ceiling height.


·	Upper Floors: 13’-6” to allow for a 9’-0” ceiling height.

Bay spacing for the building are as follows:


·	Exterior bays - 30’-0” x 44’-0”


·	Interior bays 30’-0” x 30’-0”

No allowances have been provided for concentrated loads, exercise rooms, fitness centers, major penetrations, or other structural modifications required to accommodate tenant related needs. It has been assumed that if such requirements are defined in such a timely manner that the design and fabrication schedule is not interrupted, these requirements will be incorporated into the design and the tenant shall fund the additional cost.

Floors shall be designed following the AISC Steel Guidance Series 11 for floor vibrations due to human activities limiting the acceleration to 0.5%G, ground acceleration for walking excitation.

Carpentry

Plywood backboards will be provided for all telephone systems as required. Rough blocking will be provided as required.

Thermal and Moisture Protection

Roofing

The roof system shall be a single-ply 45 mil mechanically fastened TPO membrane roof over R-30 rigid cell polyisocyanurate roof insulation mechanically attached to the roof decking. The roof shall carry the manufacturer’s standard twenty (20) year prorated membrane warranty and a ten (10) year labor and material watertight warranty. The roof shall also have the contractor’s two (2) year warranty covering all other roof related items.

Roof flashings at all known roof penetrations are included. No allowances have been made for additional roof penetrations required for undefined Tenant requirements not specifically identified in this proposal.

Fireproofing

Sprayed on fireproofing will be included as required to meet code requirements.

Caulking and Sealants

Joint sealants shall consist of polyurethane at the interior and exterior of the tilt-wall panel joints. A 5-year warranty is included for all exterior caulking. A hot-poured rubber sealant shall be utilized at the joints of the concrete paving.

Doors and Windows

Doors, Frames and Hardware

3'-0" x 8'-0" hollow metal door frames and rift cut, plain sliced solid core wood veneer doors will be installed in the core areas including restrooms, janitor's closets, and electrical rooms. Wood doors shall be birch, ash or similar “tight” grain wood, stained with a cherry or mahogany finish.

Doors will receive cylindrical locksets with interchangeable cores. Door hardware finish shall be satin chrome. Hardware for all doors shall meet ADA requirements.

Aluminum Storefront and Entrances

The facades shall receive an anodized aluminum punched window system and curtain wall system.

Medium stile glass entry doors are included for the main entry lobby and for two (2) alternate entry/exit locations as required by local codes.

All windows shall be 1" insulated, low-E glass. The framing shall include an anodized finish from a factory standard selection chart. The window systems shall then be tested upon completion to meet industry standard specifications.

Interior Construction

Walls

All walls will be constructed to achieve the fire resistance rating required by applicable codes. Typical interior wall construction shall be 3 5/8” metal studs at 16” on center with 1/2” thick drywall on each side. Stud gauge will be determined by the height of the wall. The number of layers of fire rated drywall will be determined by the required fire rating of the wall.

Walls of mechanical and elevator shafts will utilize shaft wall studs with shaft wall liner panels. Walls around common corridors, restrooms, mechanical rooms and communication rooms will have insulation for sound attenuation and will extend to the underside of the structure above.

The tenant side of non-rated walls will not receive drywall as part of the core and shell work.

Ceilings

The typical ceiling system within the core spaces shall be a standard 15/16” wide, 2’x2’ ceiling grid with 2’x2’ tegular edge acoustical tile. Tenant ceiling grid and tile shall be funded from the Tenant Improvements allowance. The standard ceiling height within the tenant space will be 10’-0” on the first floor and 9’-0” above finished floor on upper floors.

Interior Finishes

Entrance Vestibule:

Flooring: Tile Flooring

Base: Tile Base


Walls:	Combination of Drywall and Paint


Ceiling:	Drywall Ceiling

Ground Floor Lobby:

Flooring: Tile Flooring

Base: Tile Base

Walls: Combination of Drywall, Wood Paneling, Wall Covering and Paint


Ceiling:	Drywall Ceiling

Elevator Lobbies:

Flooring: Tile Flooring

Base: Tile Base

Walls: Combination of Drywall, Wood Paneling, Wall Covering and Paint


Ceiling:	Drywall Ceiling

Egress Corridors:

Flooring: Carpet

Base: Vinyl

Walls: Paint

Ceilings: 2’x2’ acoustical ceiling tile

Restrooms:

Flooring: Porcelain tile

Base: 6” high sanitary coved porcelain tile

Walls: Full height ceramic tile for walls behind urinals with vinyl wall covering elsewhere

Ceilings: 2’x2’ acoustical ceiling tile

Lavatories: Solid surface countertops with stainless steel bowls

Mechanical and Electrical Rooms:

Flooring: Sealed concrete

Base: Vinyl

Walls: Paint

Ceilings: None

Janitor’s Closet:

Flooring: Sealed concrete

Base: Vinyl

Walls: Paint with FRP to 4’ around the mop sink

Ceilings: None

Exit Stairs:

Flooring: Sealed concrete

Base: Vinyl at landings, steel stringers will be painted

Walls: Paint

Ceilings: None

Tenant Spaces:

Flooring: Unfinished (shall be part of tenant finish work)

Base: Unfinished (shall be part of tenant finish work)

Perimeter Walls: Insulated, furred, drywall and sanded ready for finishes


Ceiling:	Unfinished (shall be part of tenant finish work)

Specialties

Window Treatments

Exterior windows in tenant areas will be equipped with 1” horizontal blinds. Blinds will be provided in a color selected from the manufacturer’s standard color chart. All blinds will be inside mount installation.

Toilet Partitions and Accessories

The following stainless steel accessories have been included:


·	Toilet tissue dispensers


·	Paper towel dispensers and Waste Receptacle - fully recessed


·	Urinal Screens


·	Soap dispenser - under counter mount


·	Grab bars for handicapped stalls


·	Unframed mirrors over the vanity tops


·	Feminine napkin disposal units (women’s)

Miscellaneous

Signage for the shell building consists of labels for the core areas including men’s and women’s restrooms, electrical and mechanical rooms, and the janitor’s closet.

One (1) free standing postal mailbox shall be provided exterior of the building.

Elevator

Three (3) passenger elevators will be provided and one (1) freight elevator will be provided. The passenger elevator shall have a capacity of 3,500 lbs., a cab ceiling height of 9’-0” and speeds appropriate for a Class A office. The freight elevator will have a capacity of 4,000 pounds and cab ceiling height of 10’-0”.

Fire Protection

A complete wet pipe fire protection sprinkler/standpipe system will be installed in accordance with all local governing authorities, including a double-detector check valve assembly. Sprinkler design is based upon

light hazard occupancies throughout the building. Density shall be 0.10 gpm over the most remote 1,500 sq. ft.

Stand pipes to be provided in the stairwells with 2 ½” fire dept valves at each floor landing for fire department use (hoses and cabinets not provided). Individual sprinkler system control valves to be provided for each floor level with a 2” common drain for easy maintenance and tenant finish of each floor independently.

Finished core and lobby areas will receive semi-recessed type sprinklers with white escutcheons (Architect shall review head locations for symmetry within the ceiling area). Each sprinkler to be provided on a 1” outlet with appropriate reducing fitting to allow for future economical relocation drops to tenant finishes as they are determined. Head spacing in future finished areas to be limited to approximately 225 sq. ft per head and shall be turned upward until areas are finished.

Heating, Ventilation and Air Conditioning

Conditioned air will be supplied to the occupied spaces via a self-contained DX Variable Air Volume (VAV) Air Conditioning System located on each floor and thermostatically controlled from individual zones. A cooling tower located on the roof shall discharge heat from water that is piped to each DX unit. The HVAC system has been designed with an “open office” plan. Each zone will have a thermostat and a maximum interior zone of 1,500 SF and maximum exterior zone of 800 SF. All exterior exposures will constitute a zone and will have a sensor. Other areas requiring special zoning consideration will be considered above and beyond shell scope and will be addressed prior to fit-up .

Two self-contained units per each half of the building are provided. The self-contained units can be activated independently depending on which zones are demanding heating/cooling. The cooling tower and associated pumps will stage on based on total demand. Each self-contained unit will provide airflow that varies per floor ranging from approximately 16,000cfm per unit, per floor to 19,500cfm per unit, per floor. The self-contained units can be activated independently depending on which zones are demanding heating/cooling. The cooling tower and associated pumps will turn on based on total demand.

Total outdoor air required meets 2012 North Carolina Mechanical Code Section 403.

The air conditioning system will be designed per requirements set forth in the Duke Realty Master MEP Specifications and local building codes.

Exhaust fans for the shell building restrooms shall be provided.

An energy recovery ventilator (ERV) shall be provided to control building pressurization and pretreat incoming, outside air.

Building Automation System

HVAC controls shall consist of a fully integrated Building Automation System (BAS) incorporating direct digital control (DDC) for energy management, equipment monitoring and control. All shall include open licenses with access to both station and platform provided to Duke Realty at the highest administrative levels. Workbench and any other configuration/programming tools shall be embedded and licensed to Duke Realty.

All application specific controllers (ASCs) shall be LonMark certified with all necessary configuration/programming tools or software provided and licensed to Duke Realty. All graphics, alarms, histories, passwords, etc shall comply with published standards that shall be provided by Duke Realty. The completed system shall be configured to communicate via the NACs to the Duke Realty Enterprise level Web Supervisor via a high speed internet connection.

Plumbing

Plumbing will include a complete sanitary sewer system with waste and vent piping in the building connected to the site sanitary system outside the building. Water closets and urinals will be wall-hung with an adjustable carrier system, and allow for one handicapped water closet per toilet room. Automatic battery operated flush valves are to be provided on water closets. Automatic battery operated flush valves are to be provided on urinals.

Stainless steel water coolers, one standard and handicapped on at each pair of restrooms, will be installed. Mop sinks will be provided in each janitor's closet.

An electric water heater will be located on each floor. Hot water piping will be insulated where exposed. All hot and cold-water piping will be copper. Floor drains will be provided in each toilet room. Internal roof drains will be installed as required. Overflow scuppers shall be provided per code requirements. Shut off valves for the water supply shall be installed at supplies to each user. A backflow preventer and booster pump will be installed as required.

One sanitary sewer line shall be run the length of the first floor with a 4” cleanout as required per code. Two (2) sanitary and domestic lines shall be run vertically from the first floor to the fifth floor. These lines shall run up two separate columns.

Frost-free hose bibs are to be provided at each exposure of the building.

Electrical

Service and Distribution

Electric service will consist of one (1) 4,000 amp 480V/277V, three phase four wire primary services. The transformers shall be installed by the Utility Company within 50’ of the building. Empty conduits from the pad mounted transformer to the termination point will be provided for the primary service feed as directed by the Utility Company. Conductors will be installed by the Utility Company. Secondary electrical service including conduit and conductors shall be provided by the electrician. Main switchgears will be located in the electric room on the first floor. Increases in service size due to specialized uses shall be funded through the tenant improvement allowances of the tenants.

Power distribution shall be provided via conduit and wire or bus duct to each floor, allowing electrical load flexibility throughout the entire building. Distribution will be 480V/277V for lighting panel boards and 120/208V for receptacle panel boards provided at each floor. Capacities to the floor level electrical rooms will be per Duke Master Specifications.

Site Lighting

Parking lot lighting will be provided with 30’ high pole lights provided by Duke Energy. An average maintained lighting level of 2.0 foot-candles shall be provided. The exterior lighting system will be controlled by photocell for automated operation.

Architectural lighting of the facility shall be provided at approximately 30’-0” centers around the perimeter. Soffit lights shall be provided at the entries to the facility.

Interior Lighting

Interior lighting will be furnished and installed in all finished core areas such as Restrooms, Corridors and Service areas.

Telephone and Data

Four (4) 4” conduits shall be provided from utility source to the main telephone/telecommunications room for use by the Tenant’s telephone and data provider. A 4’x8’ sheet of plywood shall be secured to the framing of the main telephone/telecommunications room to accommodate equipment, cabling and hardware.

Two (2) 4” riser sleeves (one each for tenant and landlord) shall be provided at each floor to allow connectivity between floors.

Two (2) 4” spare conduits shall be provided from the main telephone/telecommunications room to a location outside the building to allow for connectivity with future buildings within the development.

Power Requirements

General power receptacles will be provided in all core areas as required by code.

Systems

A complete code compliant fire alarm system shall be installed to accommodate the entire building (including future Tenant Improvements). Only devices (horns, strobes, pull stations, duct smoke detectors, etc.) for the building’s core and shell shall be provided. All devices for the tenant areas shall be designed, furnished, installed and funded through the tenant improvement work. The fire alarm enunciator panel will include a graphic zone plan.

EXHIBIT B-2

PRELIMINARY PLANS

Exhibit B-2

Page 1 of 1

EXHIBIT C

LETTER OF UNDERSTANDING

Duke Realty Limited Partnership

Attention: ______________________, Property Manager

RE: Office Lease between Duke Realty Limited Partnership, an Indiana limited partnership doing business in North Carolina as Duke Realty of Indiana Limited Partnership ("Landlord") and ChannelAdvisor Corporation, a Delaware corporation ("Tenant") for the Leased Premises located at 3025 Carrington Mill Boulevard, Suites 100, 300, 400 and 500, Morrisville, North Carolina 27560 (the "Leased Premises"), within Perimeter Park, dated ________________ (the "Lease").

Dear _________________________:

The undersigned, on behalf of Tenant, certifies to Landlord as follows:


1.	The Commencement Date under the Lease is ____________________________.


2.	The rent commencement date is ___________________.


3.	The expiration date of the Lease is ___________________.


4.	The Lease (including amendments or guaranty, if any) is the entire agreement between Landlord and Tenant as to the leasing of the Leased Premises and is in full force and effect.


5.	Landlord has completed the improvements designated as Landlord's obligation under the Lease (excluding Punchlist items as agreed upon by Landlord and Tenant), if any, and Tenant has accepted the Leased Premises as of the Commencement Date.


6.	To the best of the undersigned's knowledge, there are no uncured events of default by either Tenant or Landlord under the Lease.

IN WITNESS WHEREOF, the undersigned has caused this Letter of Understanding to be executed this ____ day of _________________, 20____.

[Exhibit - Not to be executed]

CHANNELADVISOR CORPORATION, a Delaware corporation

By: _________________________________

Name: ______________________________

Title: ________________________________

Exhibit C

Page 1 of 1

EXHIBIT D

RULES AND REGULATIONS

In the event of an inconsistency between the following rules and regulations and the terms contained in the body of the Lease, the terms contained in the body of the Lease shall control.

1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or used for any purpose other than ingress and egress. Landlord shall control the Common Areas.

2. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Leased Premises other than Landlord standard window coverings without Landlord's prior written approval, except as part of the Tenant Improvements and approved Alterations. All electric ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent or LED, of a quality, type, design and tube color reasonably approved by Landlord. Neither the interior nor the exterior of any windows shall be coated or otherwise sunscreened without written consent of Landlord.

3. No sign, advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by any tenant on, about or from any part of the Leased Premises, the Building or in the Common Areas including the parking area without the prior written consent of Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove or stop same without any liability, and may charge the expense incurred in such removal or stopping to tenant. The lobby directory will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom. Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord's standard lettering.

4. The sashes, sash doors, windows, and doors that reflect or admit light and air into halls, passageways or other public places in the Building shall not be covered or obstructed by tenant.

5. The sinks and toilets and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose subtenants, assignees or any of their servants, employees, agents, visitors or licensees shall have caused the same.

6. No tenant shall in any way deface any part of the Leased Premises or the Building (except for nails for the display of artwork). No boring, cutting or stringing of wires or laying of any floor coverings shall be permitted, except with the prior written consent of the Landlord and as the Landlord may direct, except as part of the Tenant Improvements and approved Alterations. Tenant shall direct electricians as to where and how telephone or data cabling are to be introduced, subject to Landlord's reasonable approval. No boring or cutting for wires or stringing of wires will be allowed without written consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Leased Premises shall be subject to the approval of Landlord, except as part of the Tenant Improvements and approved Alterations.

Exhibit D

Page 1 of 4

7. No bicycles, vehicles, birds or animals of any kind (except service animals and as otherwise provided in the Lease) shall be brought into or kept in or about the Leased Premises (except as otherwise expressly set forth in the Lease), and except with respect to Tenant's food service area as described in Exhibit B-1 or otherwise as reasonably permitted by Landlord, no cooking shall be done or permitted by any tenant on the Leased Premises, except microwave cooking, and the preparation of coffee, tea, hot chocolate and similar items for tenants and their employees. No tenant shall cause or permit any unusual or objectionable odors to be produced in or permeate from the Leased Premises.

8. The Leased Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the permitted use of the Leased Premises. No tenant shall occupy or permit any portion of the Leased Premises to be occupied as an office for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office, or as a barber or manicure shop, or a dance, exercise or music studio, or any type of school or daycare or copy, photographic or print shop or an employment bureau without the express written consent of Landlord. Tenant may have a fitness center as described in Exhibit B-1 or otherwise as reasonably permitted by Landlord. The Leased Premises shall not be used for lodging or sleeping or for any immoral or illegal purpose.

9. No tenant shall make, or permit to be made any unseemly, excessive or disturbing noises or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them, whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. No tenant shall throw anything out of doors, windows or down the passageways.

10. No tenant, subtenant or assignee nor any of its servants, employees, agents, visitors or licensees, shall at any time bring or keep upon the Leased Premises any flammable, combustible or explosive fluid, chemical or substance or firearm.

11. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made to existing locks or the mechanism thereof. Each tenant must upon the termination of his tenancy, restore to the Landlord all keys of doors, offices, and toilet rooms, either furnished to, or otherwise procured by, such tenant and in the event of the loss of keys so furnished, such tenant shall pay to the Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such changes. Tenant shall be entitled to install a badging system to allow employees to access the Leased Premises.

12. No tenant shall overload the floors of the Leased Premises. All damage to the floor, structure or foundation of the Building due to improper positioning or storage items or materials shall be repaired by Landlord at the sole cost and expense of tenant, who shall reimburse Landlord immediately therefor upon demand. All removals or the carrying in or out of any safes, freight, furniture, or bulky matter of any description must take place during the hours that Landlord shall reasonably determine from time to time. The moving of safes or other fixtures or bulky matter of any kind must be done upon previous notice to Landlord and under Landlord's supervision, and the persons employed by any tenant for such work must be acceptable to Landlord. Landlord reserves the right to inspect all safes, freight or other bulky articles to be brought into the Building and to exclude from the Building all safes, freight or other bulky articles which violate any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. The Landlord reserves the right to prescribe the weight and position of all safes, which must be placed upon supports approved by Landlord to distribute the weight.

Exhibit D

Page 2 of 4

13. Landlord shall have the right to prohibit any advertising by any tenant that, in Landlord's opinion tends to impair the reputation of the Building or its desirability as an office location, and upon written notice from Landlord any tenant shall refrain from or discontinue such advertising.

14. Tenant shall have the right to access the Leased Premises twenty-four (24) hours per day, seven (7) days per week. The business hours for the Building shall be 8:00 a.m. to 6:00 p.m. Monday through Friday and 9:00 a.m. to 1:00 p.m. on Saturday (upon forty-eight (48) hours prior request from Tenant), excluding legal holidays. Landlord reserves the right to require all persons entering the Building between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturday, Sunday and legal holidays to register with Landlord's security personnel at the Building. Each tenant shall be responsible for all persons entering the Building at tenant's invitation, express or implied. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of an invasion, mob riot, public excitement or other circumstances rendering such action advisable in Landlord's opinion, Landlord reserves the right without any abatement of rent to require all persons to vacate the Building and to prevent access to the Building during the continuance of the same for the safety of the tenants and the protection of the Building and the property in the Building.

15. No tenant shall purchase janitorial or maintenance or other like services, from any person or persons not approved by Landlord. Any persons employed by any tenant to do janitorial work or other work in the Leased Premises shall, while in the Building and outside of the Leased Premises, be subject to and under the control and direction of Landlord (but not as an agent or servant of Landlord), and tenant shall be responsible for all acts of such persons.

16. Canvassing, soliciting and peddling in the Building are prohibited, and each tenant shall report and otherwise cooperate to prevent the same.

17. All office equipment of any electrical or mechanical nature shall be placed by tenant in the Leased Premises in settings that will, to the maximum extent possible, absorb or prevent any vibration, noise and annoyance.

18. Intentionally omitted.

19. There shall not be used in any space, or in the public halls of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and rubber side guards.

20. The scheduling of tenant move-ins shall be before or after normal business hours and on weekends, subject to the reasonable discretion of Landlord.

21. The Building is a smoke-free Building. Smoking is strictly prohibited within the Building. Smoking shall only be allowed in areas designated as a smoking area by Landlord. Tenant and its employees, representatives, contractors or invitees shall not smoke within the Building or throw cigar or cigarette butts or other substances or litter of any kind in or about the Building, except in receptacles for that purpose. Landlord may, at its sole discretion, impose a charge against monthly rent of $50.00 per violation by tenant or any of its employees, representatives, contractors or invitees, of this smoking policy.

22. Tenants will insure that all doors to the Leased Premises are securely locked, and water faucets are turned off before leaving the Building.

Exhibit D

Page 3 of 4

23. Parking spaces associated with the Building are intended for the exclusive use of passenger automobiles. Except for intermittent deliveries, no vehicles other than passenger automobiles may be parked in a parking space without the express written permission of Landlord. Tenant, its employees, customers, invitees and guests shall, when using the parking facilities in and around the Building, observe and obey all signs regarding fire lanes and no-parking and driving speed zones and designated handicapped and visitor spaces, and when parking always park between the designated lines. Landlord reserves the right to tow away, at the expense of the owner, any vehicle which is improperly parked or parked in a no-parking zone or in a designated handicapped area, and any vehicle which is left in any parking lot in violation of the foregoing regulation. All vehicles shall be parked at the sole risk of the owner, and Landlord assumes no responsibility for any damage to or loss of vehicles except to the extent arising out of the negligence or willful misconduct of Landlord, the managing agent or any of their respective partners, directors, officers, agents or employees. Tenant's employees shall be allowed to park their automobiles in the Building's parking areas overnight.

24. Tenant shall be responsible for and cause the proper disposal of medical waste, including hypodermic needles, created by its employees.

It is Landlord's desire to maintain in the Building and Common Areas the highest standard of dignity and good taste consistent with comfort and convenience for tenants. Any action or condition not meeting this high standard should be reported directly to Landlord. The Landlord reserves the right to make such other and further rules and regulations as in its judgment may from time to time be necessary for the safety, care and cleanliness of the Building and Common Areas, and for the preservation of good order therein.

Exhibit D

Page 4 of 4

EXHIBIT E

FORM OF IRREVOCABLE LETTER OF CREDIT

IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF_______

DATE: _______, 2014

BENEFICIARY:

DUKE REALTY LIMITED PARTNERSHIP

C/O DUKE REALTY CORPORATION

3715 DAVINCI COURT, SUITE 300

PEACHTREE CORNERS, GA 30092

ATTN: RALEIGH MARKET ATTORNEY

APPLICANT:

CHANNELADVISOR CORPORATION

2701 AERIAL CENTER PARKWAY

MORRISVILLE NC 27560

AMOUNT: US$______________ ( U.S. DOLLARS ______________________________________)

EXPIRATION DATE: JUNE 30, 2015

LOCATION: SANTA CLARA, CALIFORNIA

DEAR SIR/MADAM:

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF_______ IN YOUR FAVOR AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT IN THE FORM OF EXHIBIT "A" ATTACHED AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:


1.	THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.

2. A DATED DRAWING CERTIFICATE IN THE FORM OF EXHIBIT “B” ATTACHED SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE BENEFICIARY.

PARTIAL DRAWS ARE ALLOWED. THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST FORTY-FIVE (45) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE SEND YOU A NOTICE BY REGISTERED MAIL OR

Exhibit E

Page 1 of 6

OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. A COPY OF ANY SUCH NOTICE SHALL ALSO BE SENT, IN THE SAME MANNER, TO DUKE REALTY LIMITED PARTNERSHIP, 600 EAST 96 ^TH STREET, SUITE 100, INDIANAPOLIS, INDIANA 46240, ATTN: GENERAL COUNSEL FOR INFORMATION ONLY. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND ________________ (INSERT FINAL EXPIRATION DATE) WHICH SHALL BE THE FINAL EXPIRATION DATE OF THIS LETTER OF CREDIT.

THIS LETTER OF CREDIT IS TRANSFERABLE BY THE ISSUING BANK ONE OR MORE TIMES BUT IN EACH INSTANCE TO A SINGLE BENEFICIARY AND ONLY IN ITS ENTIRETY UP TO THE THEN AVAILABLE AMOUNT IN FAVOR OF ANY NOMINATED TRANSFEREE ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN APPLICABLE LAW AND REGULATIONS, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U.S. DEPARTMENT OF TREASURY AND U.S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT AND ORIGINAL AMENDMENT(S), IF ANY, MUST BE SURRENDERED TO US TOGETHER WITH OUR LETTER OF TRANSFER DOCUMENTATION (IN THE FORM OF EXHIBIT “C” ATTACHED HERETO). APPLICANT SHALL PAY OUR TRANSFER FEE OF ¼ OF 1% OF THE TRANSFER AMOUNT (MINIMUM $250.00). ANY REQUEST FOR TRANSFER WILL BE EFFECTED BY US SUBJECT TO THE ABOVE CONDITIONS. HOWEVER, ANY REQUEST FOR TRANSFER IS NOT CONTINGENT UPON APPLICANT’S ABILITY TO PAY OUR TRANSFER FEE. ANY TRANSFER OF THIS LETTER OF CREDIT MAY NOT CHANGE THE PLACE OF EXPIRATION OF THE LETTER OF CREDIT FROM OUR ABOVE-SPECIFIED OFFICE. EACH TRANSFER SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE ORIGINAL LETTER OF CREDIT AND WE SHALL FORWARD THE ORIGINAL LETTER OF CREDIT TO THE TRANSFEREE.

ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF THE ORIGINAL APPROPRIATE DOCUMENTS ON A BUSINESS DAY AT OUR OFFICE (THE “BANK’S OFFICE”) AT: SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA, CA 95054, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION OR BY FACSIMILE TRANSMISSION AT: (408) 496-2418 OR (408) 969-6510 ; AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: (408) 654-6274 OR (408) 654-7716 OR (408) 654-3035, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION WITH ORIGINALS TO FOLLOW BY OVERNIGHT COURIER SERVICE; PROVIDED, HOWEVER, THE BANK WILL DETERMINE TO HONOR OR DISHONOR ON THE BASIS OF PRESENTATION BY FACSIMILE ALONE, AND WILL NOT EXAMINE THE ORIGINALS.

IF A SIGHT DRAFT AND DRAWING CERTIFICATE ARE PRESENTED HEREUNDER BY SIGHT OR BY FACSIMILE TRANSMISSION AS PERMITTED HEREUNDER, BY 10:00 A.M., PACIFIC TIME, AND PROVIDED THAT SUCH SIGHT DRAFT AND DRAWING CERTIFICATE CONFORM TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, PAYMENT SHALL BE MADE TO YOU, OR TO YOUR DESIGNEE, OF THE AMOUNT SPECIFIED, IN IMMEDIATELY AVAILABLE FUNDS, NOT LATER THAN 2:00 P.M., PACIFIC TIME, ON THE NEXT BUSINESS DAY. IF A SIGHT DRAFT AND A DRAWING CERTIFICATE ARE PRESENTED BY YOU HEREUNDER AFTER THE TIME SPECIFIED ABOVE, AND PROVIDED THAT SUCH SIGHT DRAFT AND DRAWING CERTIFICATE CONFORM TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, PAYMENT SHALL BE MADE TO YOU, OR TO YOUR DESIGNEE, OF THE

Exhibit E

Page 2 of 6

AMOUNT SPECIFIED, IN IMMEDIATELY AVAILABLE FUNDS, NOT LATER THAN 2:00 P.M., PACIFIC TIME, ON THE SECOND FOLLOWING BUSINESS DAY. IF A DEMAND FOR PAYMENT MADE BY YOU HEREUNDER DOES NOT, IN ANY INSTANCE, CONFORM TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, WE SHALL GIVE YOU NOTICE WITHIN ONE (1) BUSINESS DAY THAT THE DEMAND FOR PAYMENT WAS NOT EFFECTED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, STATING THE REASONS THEREFOR AND THAT WE WILL UPON YOUR INSTRUCTIONS HOLD ANY DOCUMENTS AT YOUR DISPOSAL OR RETURN THE SAME TO YOU. UPON BEING NOTIFIED THAT THE DEMAND FOR PAYMENT WAS NOT EFFECTED IN CONFORMITY WITH THIS LETTER OF CREDIT, YOU MAY ATTEMPT TO CORRECT ANY SUCH NON-CONFORMING DEMAND FOR PAYMENT TO THE EXTENT THAT YOU ARE ENTITLED TO DO SO AND WITHIN THE VALIDITY OF THIS LETTER OF CREDIT.

WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS AND BONA FIDE HOLDERS THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO THE DRAWEE, IF NEGOTIATED ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.

IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO BE MADE BY TRANSFER TO YOUR ACCOUNT WITH ANOTHER BANK, WE WILL ONLY EFFECT SUCH PAYMENT BY FED WIRE TO A U.S. REGULATED BANK, AND WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED PAYEE.

THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES ISP98, INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590 (“ISP98”).

SILICON VALLEY BANK

_____[BANK USE]____________ ___[BANK USE]_____________

AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE

Exhibit E

Page 3 of 6

EXHIBIT "A"

DATE: _______________ REF. NO. ___________________

A T SIGHT OF THIS DRAFT

P AY TO THE ORDER OF US$_________________

USDOLLARS _____________________________________________________________________

_________________________________________________________________________________

DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, STANDBY

LETTER OF CREDIT NUMBER NO. _______________________ DATED ___________________

T O: SILICON VALLEY BANK

3003 TASMAN DRIVE _______________________________

SANTA CLARA, CA 95054 (BENEFICIARY'S NAME)

...............................................................

Authorized Signature

GUIDELINES TO PREPARE THE DRAFT


1.	DATE: ISSUANCE DATE OF DRAFT.


2.	REF. NO.: BENEFICIARY'S REFERENCE NUMBER, IF ANY.


3.	PAY TO THE ORDER OF: NAME OF BENEFICIARY AS INDICATED IN THE L/C (MAKE

SURE BENEFICIARY ENDORSES IT ON THE REVERSE SIDE).


4.	US$: AMOUNT OF DRAWING IN FIGURES.


5.	USDOLLARS: AMOUNT OF DRAWING IN WORDS.


6.	LETTER OF CREDIT NUMBER: SILICON VALLEY BANK'S STANDBY L/C NUMBER THAT PERTAINS TO THE DRAWING.


7.	DATED: ISSUANCE DATE OF THE STANDBY L/C.


8.	BENEFICIARY'S NAME: NAME OF BENEFICIARY AS INDICATED IN THE L/C.


9.	AUTHORIZED SIGNATURE: SIGNED BY AN AUTHORIZED SIGNER OF BENEFICIARY.

IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS DRAFT, PLEASE CALL OUR L/C PAYMENT SECTION AT 408-654-6274 OR 408-654-7716 OR 408-654-3035 OR 408-654-7127 OR 408-654- 5545.

Exhibit E

Page 4 of 6

EXHIBIT "B"

DRAWING CERTIFICATE

DATE:

TO: SILICON VALLEY BANK

3003 TASMAN DRIVE RE: IRREVOCABLE STANDBY LETTER OF CREDIT

SANTA CLARA, CA 95054 NO. SVBSF00___ DATED _______ ISSUED BY

ATTN: STANDBY LETTERS OF CREDIT SILICON VALLEY BANK, SANTA CLARA

[INSERT DATE OF CERTIFICATE]

DRAWN UNDER LETTER OF CREDIT NO: [LETTER OF CREDIT NUMBER] (THE "LETTER OF CREDIT")

DATED: [LETTER OF CREDIT ISSUE DATE]

THE UNDERSIGNED, DUKE REALTY LIMITED PARTNERSHIP (THE “BENEFICIARY”) HEREBY CERTIFIES THAT:


1)	THE BENEFICIARY IS THE LESSOR UNDER THAT CERTAIN _______LEASE DATED __________, 20__[INSERT DATE], AS AMENDED, BETWEEN THE BENEFICIARY, AS LESSOR, AND THE APPLICANT, AS LESSEE (THE “LEASE”).


2)	THE BENEFICIARY IS ENTITLED TO PAYMENT UNDER THE LETTER OF CREDIT IN THE AMOUNT OF $ _____[INSERT DRAW AMOUNT] BY REASON OF THE FOLLOWING CONDITION (MARK ONLY ONE):

___ THE APPLICANT HAS DEFAULTED UNDER THE LEASE.

___ THE EXPIRATION DATE OF THE LETTER OF CREDIT IS LESS THAN 45 DAYS FROM THE DATE OF THIS CERTIFICATE.


3)	PLEASE DIRECT PAYMENT UNDER THE LETTER OF CREDIT BY WIRE TRANSFER TO:

[DEPOSITORY BANK]

[DEPOSITORY BANK ADDRESS]

[ABA NO.]

[ACCOUNT NO.]

IN WITNESS WHEREOF, THE UNDERSIGNED HAS DULY EXECUTED AND DELIVERED THIS CERTIFICATE.

DUKE REALTY LIMITED PARTNERSHIP


BY:	DUKE REALTY CORPORATION, ITS GENERAL PARTNER

BY:

NAME:

TITLE:

Exhibit E

Page 5 of 6

EXHIBIT “C”

DATE:

TO: SILICON VALLEY BANK

3003 TASMAN DRIVE RE: IRREVOCABLE STANDBY LETTER OF CREDIT

SANTA CLARA, CA 95054 NO. ISSUED BY

ATTN:INTERNATIONAL DIVISION. SILICON VALLEY BANK, SANTA CLARA

STANDBY LETTERS OF CREDIT L/C AMOUNT:

GENTLEMEN:

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:

(NAME OF TRANSFEREE)

(ADDRESS)

ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

SINCERELY,

_____________________________

(BENEFICIARY’S NAME)

_____________________________

(SIGNATURE OF BENEFICIARY)

_____________________________

(NAME AND TITLE)

Exhibit E

Page 6 of 6

Exhibit E

Page 7 of 6

EXHIBIT F

DOG RELIEF AREA

EXHIBIT G

EXPANSION SPACE

EXHIBIT H

FORM OF TENANT EVENT AGREEMENT

This Tenant Event Agreement (this "Agreement") is executed as of this ______ day of ___________, 20____, by and between Duke Realty Limited Partnership, Indiana limited partnership doing business in North Carolina as Duke Realty of Indiana Limited Partnership ("Landlord") and ChannelAdvisor Corporation, a Delaware corporation ("Tenant").

WHEREAS, Landlord and Tenant entered into that certain lease dated August ____, 2014 (the "Lease"), whereby Tenant leases from Landlord certain premises commonly known as Suites 100, 300, 400 and 500 (the "Leased Premises") in the building located at 3025 Carrington Mill Boulevard, Morrisville, North Carolina 27560 (the "Building");

WHEREAS, Tenant desires to use a mutually agreeable location in the parking area serving the Building (collectively, the "Designated Areas") to host a food truck during the business hours for the Building (the "Event"); and

WHEREAS, Landlord has agreed to permit Tenant to use the Designated Areas for the Event, subject to the terms and conditions described below, and Tenant has agreed to release, indemnify and hold harmless Landlord from all injuries and damages arising from Tenant’s use of the Designated Areas for such purpose.

NOW THEREFORE, in consideration of the agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Recitals . The foregoing recitals are hereby affirmed by the parties as true and correct and each such recital is incorporated herein by this reference. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings ascribed to such terms in the Lease.

2. Grant of Use of Designated Areas . Landlord hereby grants to Tenant permission to use the Designated Areas for the Event.

3. Fee . Upon execution and delivery of this Agreement, Tenant shall pay to Landlord the sum of $0.00 Dollars for the Event.

4. Covenants of Tenant Regarding Event . In connection with the Event, Tenant understands and agrees to the following:


A.	The Event shall be limited to the business hours for the Building, and Tenant's right to conduct the Event shall extend for a period of six (6) months from the date of this Agreement (and shall be subject to renewal under the same terms and conditions contained herein).

Tenant shall not place, attach, affix or otherwise install any signage or decorations in, on or about the Designated Areas, except as expressly consented to in writing by Landlord. In the event Landlord consents to such signage or decorations, Tenant shall be obligated to remove such decorations promptly upon completion of the Event and to otherwise repair and restore the Designated Areas to its condition existing prior to the Event.

Exhibit H

Page 1 of 4


C.	Tenant shall comply with all reasonable directions of Landlord with respect to Tenant's use of the Designated Areas and with all applicable Building rules and regulations.


D.	Tenant shall use and occupy the Designated Areas in a safe, careful, reputable and lawful manner for the Event and shall not use the Designated Areas for any other purposes whatsoever.


E.	Tenant shall not be permitted to sell or provide to anyone any alcoholic beverages within the Designated Areas.


F.	Except with respect to the food trucks, Tenant shall not engage in any cooking or food preparation in the Designated Areas, except as otherwise expressly consented to in writing by Landlord.


G.	Tenant shall not do or permit anything to be done on or about the Designated Areas which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them.

5. Tenant's Cleaning Obligation . Upon completion of the Event, Tenant shall remove all of its personal property, decorations, waste materials and rubbish from in, on or about the Designated Areas and restore the Designated Areas to the condition existing prior to the Event. The disposal of all waste materials or rubbish by Tenant shall be done in compliance with all laws, rules and regulations. Should Tenant fail to comply with the obligations set forth herein, Landlord may, at the sole cost and expense of Tenant, perform such cleaning services which Tenant shall reimburse Landlord for said costs as Additional Rent pursuant to the Lease.

6. Insurance . Tenant shall maintain insurance as required in the Lease. In addition, Tenant shall cause the third-party contractor to secure and maintain commercial general liability insurance in the amount of Two Million Dollars ($2,000,000.00) issued by an insurance company reasonably acceptable to Landlord, naming Landlord as an additional insured. Prior to the Event, Tenant shall furnish Landlord with a certificate of insurance evidencing such third-party contractor coverage required herein.

7. Tenant's Release and Indemnification of Landlord . Tenant shall assume the risk of, be responsible for, and, to the fullest extent permitted under applicable laws, release, indemnify, defend and hold Landlord, and its officers, members, managers, agents, contractors, employees and invitees, harmless from any and all claims, actions, suits, damages, liabilities, costs, and expenses, including but not limited to reasonable attorneys’ fees and disbursements, relating to or arising out of: (i) the Event, including, without limitation, the serving and consumption of food and alcoholic beverages; (ii) any default or failure of Tenant to perform its obligations under this Agreement; (iii) the condition of the Designated Areas; or (iv) the acts or omissions of Tenant or Tenant’s employees, contractors or agents on or about the Designated Areas or the Property. Tenant shall bear the risk of any loss or damage to Tenant’s personal property in, on or about the Designated Areas. Tenant’s indemnification as described herein shall survive the termination of this Agreement and with respect to claims brought in connection with the Event.

8. Condition of Designated Areas . Tenant has personally inspected the Designated Areas and accepts the same "AS IS" , and it is understood and agreed that Landlord is not making and has not at any time made any representations or warranties of any kind or character, express or implied, with respect to the Designated Areas. Landlord assumes no obligation to make any improvements to, or to provide any security for, the Designated Areas, or to ensure that the Designated Areas complies with applicable zoning ordinances

Exhibit H

Page 2 of 4

or other laws and regulations. Tenant agrees that all of Tenant's personal property of every kind or description which may at any time be on the Designated Areas shall be on the Designated Areas at Tenant's sole risk or at the risk of those claiming through or under Tenant, and in no event shall Landlord be liable for the same.

9. Notices . All notices required or permitted to be given pursuant to this Agreement shall be made via U.S. Mail or express courier to such party’s address as provided in the Lease.

10. General . The terms and provisions of this Agreement shall be governed and construed in accordance with the laws of the State in which the Designated Areas are located. The captions and section numbers shall not be considered in any way to effect the interpretation of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors, assigns, heirs and personal representatives. This Agreement shall not be construed with resort to any presumption against the preparer or maker hereof. This Agreement may not be amended except in writing, signed by both parties hereto.

11. Authority . Each party hereto hereby certifies that (a) the individual signing on behalf of said party is fully empowered and duly authorized by any and all necessary action or consent required under any articles of incorporation, bylaws, operating agreement or other agreement to execute and deliver this Agreement for and on behalf of said party; (b) said party has full capacity, power and authority to enter into and carry out its obligations under this Agreement; and (c) this Agreement has been duly authorized, executed and delivered and constitutes a legal, valid and binding obligation of such party.

12. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of such counterparts shall constitute one and the same instrument. Delivery of this Agreement may be accomplished by electronic facsimile or PDF reproduction ("Electronic Delivery"); if Electronic Delivery is utilized, the original document shall be promptly executed and/or delivered, if requested.

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

Exhibit H

Page 3 of 4

IN WITNESS WHEREOF, this Agreement is executed as of the day and year first set forth above.

TENANT :

ChannelAdvisor Corporation, a Delaware corporation

By:

Printed:

Title:

LANDLORD :

Duke Realty Limited Partnership, Indiana limited partnership doing business in North Carolina as Duke Realty of Indiana Limited Partnership

By: Duke Realty Corporation,

its General Partner

By:

Printed: Amy K. Mayer

Title: VP Asset Management & Customer Service

Exhibit H

Page 4 of 4

Exhibit 10.3

ELEVENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT

This Eleventh Amendment to Loan and Security Agreement (this “ Amendment ”) is entered into this 17 ^th day of September, 2014 by and among (i) SILICON VALLEY BANK , a California corporation (“ Bank ”) and (ii) CHANNELADVISOR CORPORATION , a Delaware corporation (“ CAC ”), MERCHANDISINGADVISOR CORPORATION , a Delaware corporation (“ MAC ”), CA MARKETPLACES, INC. , a Delaware corporation (“ CAM ”), CHANNELADVISOR UK LIMITED ., a private limited company incorporated and registered in England and Wales (“ CA UK ”) and CA WASHINGTON, LLC , a Delaware limited liability company (“ CAW ”, and together with CAC, MAC, CAM and CA UK, each a “ Borrower ” and collectively, the “ Borrowers ”).

RECITALS

A . Bank and Borrowers have entered into that certain Loan and Security Agreement dated as of December 23, 2009, as amended by a First Amendment to and Assumption of Loan and Security Agreement dated April 19, 2010, as amended by a Second Amendment to Loan and Security Agreement dated June 11, 2010, as further amended by a Third Amendment to Loan and Security Agreement dated December 23, 2010, as further amended by a Fourth Amendment to Loan and Security Agreement dated March 22, 2011, as further amended by a Fifth Amendment to Loan and Security Agreement, dated as of May 26, 2011, as further amended by a Joinder and Sixth Amendment to Loan and Security Agreement, dated as of June 15, 2011 as further amended by a Seventh Amendment to Loan and Security Agreement, dated as of July 26, 2012 as further amended by an Eighth Amendment to Loan and Security Agreement, dated as of June 17, 2013, as further amended by a certain Ninth Amendment to Loan and Security Agreement, dated as of July 16, 2013, and as further amended by a certain Tenth Amendment to Loan and Security Agreement, dated as of September 13, 2013 (as the same may from time to time be further amended, modified, supplemented or restated, the “ Loan Agreement ”). Bank has extended credit to the Borrowers for the purposes permitted in the Loan Agreement.

B. Borrower has requested that Bank amend the Loan Agreement to (i) extend the maturity date of the revolving line of credit and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

C . Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

Now, THEREFORE , in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions . Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement .

2.1 Section 2.1.1(c) of the Loan Agreement is amended in its entirety and is replaced with the following:

“(c) Termination Prior to Revolving Line Maturity Date . The Revolving Line may be terminated prior to the Revolving Line Maturity by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. If such termination is at Borrowers’ election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrowers shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a termination fee equal to Fifty Thousand Dollars ($50,000) (i.e. 0.50% of $10,000,000) (the “ Early Termination Fee ”); provided that no Early Termination Fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Bank.”

2.2 Section 2.3(a)(i) of the Loan Agreement is amended in its entirety and is replaced with the following:

“(i) Advances . Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate plus one-quarter of one percent (0.25%), which interest shall be payable monthly, in arrears, in accordance with Section 2.3(f) below.”

2.3 The Loan Agreement shall be amended by inserting the following new Section 2.4(e) immediately after Section 2.4(d) thereof:

“(e) Unused Revolving Line Facility Fee . Payable monthly in arrears on the last day of the month in which the Eleventh Amendment Effective Date occurs, on the last day of each month occurring thereafter prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the “ Unused Revolving Line Facility Fee ”) in an amount equal to 0.15% per annum of the average unused portion of the Revolving Line, as determined by Bank. The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding.”

2.4 Sections 6.2(a), 6.2(b) and 6.2(c) of the Loan Agreement are amended in their entirety and is replaced with the following:

“(a) within thirty (30) days after the end of fiscal quarter, and with each request for a Credit extension (i) a Transaction Report, (ii) monthly accounts receivable agings, aged by invoice date, (iii) an accounts payable check payment list for the last week of the applicable month, (iv) monthly reconciliations of accounts receivable

agings (aged by invoice date), transaction reports and general ledger and (v) a schedule of Deferred Revenue;

(b) as soon as available, but no later than thirty (30) days after the end of each fiscal quarter of Borrower, a company prepared consolidated balance sheet and income statement covering Parent’s consolidated operations for the trailing three (3) month period certified by a Responsible Officer and in a form acceptable to Bank;

(c) within thirty (30) days after the last day of each fiscal quarter and together with the financial statements required in Section 6.2(b), a duly completed Compliance Certificate signed by a Responsible Officer of Parent, certifying that as of the end of such fiscal quarter, Borrowers were in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such fiscal quarter there were no held checks;”

2.5 Section 6.6 of the Loan Agreement is amended in its entirety and is replaced with the following:

“ 6.6 Access to Collateral; Books and Records . At reasonable times, on three (3) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books. Such inspections and audits shall be conducted at Borrower’s expense and no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing. The foregoing inspections and audits shall be at Borrower’s expense, and the charge therefor shall be $850 per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses, which expenses shall be capped at $15,000 per annum, unless an Event of Default has occurred and is continuing. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to or reschedules the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies) Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.”

2.6 Section 6.9 of the Loan Agreement is amended in its entirety and is replaced with the following:

“ 6.9 Financial Covenants .

(a) Adjusted Quick Ratio . Maintain at all times, reported as of the last day of each fiscal quarter, on a consolidated basis with respect to Parent and its Subsidiaries, an Adjusted Quick Ratio of at least 1.10 to 1.00.”

2.7 Section 13.1 of the Loan Agreement shall be amended by inserting the following new terms, each in its applicable alphabetical order:

“ Eleventh Amendment Effective Date ” is September 17, 2014.

“ Unused Revolving Line Facility Fee ” is defined in Section 2.4(e).

2.8 The following term and its respective definition set forth in Section 13.1 is amended in its entirety and is replaced with the following:

“ Adjusted Quick Ratio ” is the ratio of (a) the sum of (i) Borrower’s unrestricted cash and unrestricted Cash Equivalents plus (ii) net billed accounts receivable; divided by (b) (i) Current Liabilities plus (ii) without duplication, all Obligations and liabilities of Borrower owed to Bank, including, without limitation, all issued and outstanding Letters of Credit and Bank Services, minus (iii) the current portion of Deferred Revenue.

“ Revolving Line ” is an Advance or Advances in an amount not to exceed Ten Million Dollars ($10,000,000) outstanding at any time.

“ Revolving Line Maturity Date ” is September 17, 2016.”

2.9 The Compliance Certificate attached as Exhibit B to the Loan Agreement is hereby deleted in its entirety and is replaced with Exhibit B attached hereto.

3. Limitation of Amendment .

3.1 The amendment set forth in Section 2 , above, is effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties . To induce Bank to enter into this Amendment, each Borrower hereby represents and warrants, jointly and severally, to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2 Each Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3 The organizational documents of the Borrowers previously delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized by all necessary action on the part of Borrowers;

4.5 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any material law or regulation binding on or affecting Borrowers, (b) any material contractual restriction with a Person binding on Borrowers, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrowers, or (d) the organizational documents of Borrowers;

4.6 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on any Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrowers and is the binding obligation of Borrowers, enforceable against Borrowers in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5. No Defenses of Borrower . Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

6. Integration . This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

7. Counterparts . This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

8. Effectiveness . This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto and (b) Borrowers’ payment of a Ten Thousand Dollar ($10,000.00) commitment and extension fee, which fee shall be deemed fully earned as of the date hereof, and all Bank Expenses incurred in connection with the existing Loan Documents and the modifications herein.

9. Governing Law . This Amendment and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of North Carolina.

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

BORROWERS:

CHANNELADVISOR CORPORATION

By: /s/ M. Scot Wingo
Name: M. Scot Wingo
Title: Chairman and Chief Executive Officer

MERCHANDISING ADVISOR CORPORATION

By: /s/ M. Scot Wingo

Name: M. Scot Wingo

Title: President and Chief Executive Officer

CA MARKETPLACES, INC.

By: /s/ M. Scot Wingo
Name: M. Scot Wingo

Title: President and Chief Executive Officer

CHANNELADVISOR UK LIMITED

By: /s/ M. Scot Wingo
Name: M. Scot Wingo

Title: Director

CA WASHINGTON, LLC

By: /s/ M. Scot Wingo
Name: M. Scot Wingo
Title: President and Chief Executive Officer

BANK:

SILICON VALLEY BANK

By: /s/ Andrew J. Kirk

Name: Andrew J. Kirk
Title: Director

EXHIBIT B

COMPLIANCE CERTIFICATE

TO: SILICON VALLEY BANK Date:

FROM: CHANNELADVISOR CORPORATION

The undersigned authorized officer of ChannelAdvisor Corporation (“ Parent ”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrowers and Bank (as amended from time to time, the “ Agreement ”), (1) each Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided , however , that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided , further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) each Borrower, and each of its respective Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against any Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which any Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that any Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.



Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenant	Required	Complies

Quarterly Financial Statements	Quarterly within 30 days	Yes No
Compliance Certificate	Quarterly within 30 days	Yes No
Annual financial statement (CPA Audited) + CC	FYE within180 days	Yes No
A/R & A/P Agings, Deferred Revenue Reports	Quarterly within 30 days and with each request for a Credit Extension	Yes No
Transaction Reports	Quarterly within 30 days and with each request for a Credit Extension	Yes No
Projections	FYE within 30 days	Yes No
Field Exam	Annually	Yes No



Financial Covenant	Required	Actual	Complies

Maintain as indicated:
Adjusted Quick Ratio	1.10 to 1.00	: 1.00	Yes No

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ChannelAdvisors Corporation By: Name: Title:	BANK USE ONLY Received by: _____________________ AUTHORIZED SIGNER Date: _________________________ Verified: ________________________ AUTHORIZED SIGNER Date: _________________________ Compliance Status: Yes No

Exhibit 31.1

CERTIFICATION

I, M. Scot Wingo, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of ChannelAdvisor Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 6, 2014	By:	/s/ M. Scot Wingo
			M. Scot Wingo
			Chairman and Chief Executive Officer
			(principal executive officer)

Exhibit 31.2

CERTIFICATION

I, John F. Baule, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of ChannelAdvisor Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 6, 2014	By:	/s/ John F. Baule
			John F. Baule
			Chief Financial Officer
			(principal financial officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of ChannelAdvisor Corporation (the "Company”) for the quarterly period ended September 30, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers hereby certifies, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.



/s/ M. Scot Wingo		/s/ John F. Baule
M. Scot Wingo		John F. Baule
Chairman and Chief Executive Officer		Chief Financial Officer
November 6, 2014		November 6, 2014

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, is not being “filed” by the Company as part of the Report or as a separate disclosure document and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.