VARONIS SYSTEMS INC (Form: 10-Q, Received: 08/06/2014 06:42:03)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 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: 001-36324

VARONIS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware		57-1222280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1250 Broadway, 31st Floor New York, NY 10001		10001
(Address of principal executive offices)		(Zip Code)

(877) 292-8767

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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). x Yes ¨ No

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

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

At August 4, 2014, there were 24,496,389 shares of Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS


PART 1. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013		1

Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013		2

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2014 and 2013		3

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficiency)		4

Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013		5

Notes to Unaudited Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION		25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 6.	Exhibits	41

SIGNATURES		42

EXHIBIT INDEX		43

PART 1.

FINANCIAL INFORMATION

Item 1.

Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2014			December 31, 2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	120,128		$	9,633
Short-term deposits		102			4,344
Restricted cash		—			171
Trade receivables (net of allowance for doubtful accounts of $ 178 at June 30, 2014 and $ 139 at December 31, 2013)		18,854			28,268
Prepaid expenses and other current assets		1,355			1,357

Total current assets		140,439			43,773


Long-term assets:
Other assets		295			1,625
Property and equipment, net		2,610			1,856

Total long-term assets		2,905			3,481

Total assets	$	143,344		$	47,254


Liabilities, convertible preferred stock and stockholders’ equity (deficiency)
Current liabilities:
Trade payables	$	2,300		$	2,163
Accrued expenses and other liabilities		12,883			11,643
Deferred revenues		25,868			26,591

Total current liabilities		41,051			40,397


Long-term liabilities:
Deferred revenues		2,146			2,109
Warrants to purchase convertible preferred stock		—			2,866
Severance pay		1,440			1,101
Other liabilities		15			14

Total long-term liabilities		3,601			6,090


Convertible preferred stock:
Preferred A, B, C, D and E stock of $ 0.001 par value - Authorized: no shares at June 30, 2014 and 16,986,384 shares at December 31, 2013; Issued and outstanding: no shares at June 30, 2014 and 15,082,141 shares at December 31, 2013		—			43,775


Stockholders’ equity (deficiency):
Share capital
Common stock of $ 0.001 par value - Authorized: 200,000,000 shares at June 30, 2014 and 26,000,000 at December 31, 2013; Issued and outstanding: 24,456,389 shares at June 30, 2014 and 3,953,314 shares at December 31, 2013		24			4
Accumulated other comprehensive income		47			—
Additional paid-in capital		159,087			4,741
Accumulated deficit		(60,466	)		(47,753	)

Total stockholders’ equity (deficiency)		98,692			(43,008	)

Total liabilities, convertible preferred stock and stockholders’ equity (deficiency)	$	143,344		$	47,254

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues:
Licenses	$	14,422		$	10,498		$	22,475		$	16,377
Maintenance and services		10,194			7,339			19,596			14,040

Total revenues		24,616			17,837			42,071			30,417


Cost of revenues		2,491			1,507			4,533			2,856


Gross profit		22,125			16,330			37,538			27,561


Operating costs and expenses:
Research and development		6,832			4,875			13,271			9,394
Sales and marketing		17,186			10,500			31,427			19,708
General and administrative		2,665			2,220			5,330			3,759

Total operating expenses		26,683			17,595			50,028			32,861


Operating loss		(4,558	)		(1,265	)		(12,490	)		(5,300	)
Financial income (expenses) and other, net		74			(324	)		36			(1,003	)


Loss before income taxes		(4,484	)		(1,589	)		(12,454	)		(6,303	)
Income taxes		(155	)		(47	)		(259	)		(124	)


Net loss	$	(4,639	)	$	(1,636	)	$	(12,713	)	$	(6,427	)


Net loss per share of common stock, basic and diluted	$	(0.19	)	$	(0.42	)	$	(0.71	)	$	(1.66	)


Weighted average number of shares used in computing net loss per share of common stock, basic and diluted		24,455,259			3,876,073			17,843,306			3,863,960

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Net loss	$	(4,639	)	$	(1,636	)	$	(12,713	)	$	(6,427	)


Other comprehensive income:
Unrealized gains on derivative instruments		69			—			47			—


Total other comprehensive income		69			—			47			—


Comprehensive loss	$	(4,570	)	$	(1,636	)	$	(12,666	)	$	(6,427	)

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIENCY)


	Preferred stock						Common stock					Additional paid-in		Accumulated other comprehensive		Accumulated			Total stockholders’ equity
	Number			Amount			Number		Amount			capital		income		deficit			(deficiency)
	(in thousands, except share data)

Balance as of January 1, 2013		14,856,481		$	37,959			3,848,293	$	4		$	2,826	$	—	$	(40,278	)	$	(37,448	)

Exercise of warrants to purchase Series D convertible preferred stock		225,660			5,816			—		—			—		—		—			—
Stock-based compensation expense		—			—			—		—			1,788		—		—			1,788
Exercise of stock options		—			—			105,021			*)		127		—		—			127
Net loss		—			—			—		—			—		—		(7,475	)		(7,475	)


Balance as of December 31, 2013		15,082,141			43,775			3,953,314		4			4,741		—		(47,753	)		(43,008	)

Conversion of warrants to purchase common stock		—			—			—		—			2,866		—		—			2,866
Exercise of warrants to purchase common stock		—			—			107,217			*)		—		—		—			—
Conversion of preferred stock to common stock upon initial public offering		(15,082,141	)		(43,775	)		15,082,141		15			43,760		—		—			43,775
Stock-based compensation expense													1,624		—		—			1,624
Exercise of stock options		—			—			13,281			*)		30		—		—			30
Issuance of common stock upon initial public offering (net of issuance costs of $2,376)		—			—			5,300,436		5			106,066		—		—			106,071
Unrealized gains on derivative instruments															47		—			47
Net loss		—			—			—		—			—		—		(12,713	)		(12,713	)


Balance as of June 30, 2014 (unaudited)		—		$	—			24,456,389	$	24		$	159,087	$	47	$	(60,466	)	$	98,692

*)	Represents an amount lower than $ 1.

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30,
	2014			2013

Cash flows from operating activities :
Net loss	$	(12,713	)	$	(6,427	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		534			353
Stock-based compensation		1,624			616
Capital loss from disposal of fixed assets		—			5
Amortization of deferred charges related to long-term loan		31			131
Revaluation of fair value of warrants to convertible preferred stock		—			604

Changes in assets and liabilities :
Trade receivables		9,414			5,701
Prepaid expenses and other current assets		18			407
Trade payables		137			(619	)
Accrued expenses and other liabilities		721			(60	)
Increase in severance pay, net		339			18
Deferred revenues		(686	)		(650	)
Other long term liabilities		1			(52	)


Net cash provided by (used in) operating activities		(580	)		27


Cash flows from investing activities :
Decrease (increase) in short-term deposit		4,242			(1	)
Decrease (increase) in long-term deposits		46			(17	)
Decrease (increase) in restricted cash		260			(53	)
Purchase of property and equipment		(1,288	)		(629	)


Net cash provided by (used in) investing activities		3,260			(700	)


Cash flows from financing activities :
Exercise of employee stock options		30			48
Payment of deferred equity offering cost		(662	)		—
Net proceeds from initial public offering		108,447			—


Net cash provided by financing activities		107,815			48


Increase (decrease) in cash and cash equivalents		110,495			(625	)
Cash and cash equivalents at beginning of period		9,633			14,470


Cash and cash equivalents at end of period	$	120,128		$	13,845


Supplemental disclosure of non-cash flow information :
Conversion of preferred stock to common stock		43,775			—
Conversion of liability warrants to equity		2,866			—
Deferred offering costs not yet paid		519			—
Deferred charges related to warrants granted to credit facilitator		—		$	263


	$	47,160		$	263


Supplemental disclosures of cash flow information :

Cash paid for income taxes	$	46		$	140

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:-

GENERAL

Varonis Systems, Inc. (“VSI” and together with its subsidiaries, collectively, the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2004 and commenced operations on January 1, 2005.

VSI has five wholly-owned subsidiaries: Varonis Systems Ltd. (“VSL”) incorporated under the laws of Israel on November 24, 2004; Varonis UK (“VSUK”) incorporated under the laws of England on March 14, 2007; Varonis Systems (Deutschland) GmbH (“VSG”) incorporated under the laws of Germany on July 6, 2011; Varonis France SAS (“VSF”) incorporated under the laws of France on February 22, 2012; and Varonis Systems Corp. (“VSC”) incorporated under the laws of British Columbia, Canada on February 19, 2013.

The Company’s software products and services allow enterprises to map, analyze, manage and migrate their unstructured data. The Company specializes in human-generated data, a type of unstructured data that includes an enterprise’s word processing documents, spreadsheets, presentations, audio files, video files, emails, text messages, and any other data created by employees. Through its products the DatAdvantage platform, DataPrivilege, IDU Classification Framework, DatAnywhere and Data Transport Engine (collectively, the “Products”), the software platform allows enterprises to realize the value of their human-generated data in ways that are not resource-intensive and easy to implement.

VSI markets and sells products and services mainly in the United States. VSUK, VSG, VSF and VSC resell the Company’s products and services mainly in the UK, Germany, rest of Europe and Canada, respectively. The Company primarily sells its products and services to a global network of distributors and Value Added Resellers (VARs), which sell the products to end users customers.

The Company had a stockholders’ equity (deficiency) of $98,692 (unaudited) and ($43,008) as of June 30, 2014 and December 31, 2013, respectively. The stockholders’ deficiency as of December 31, 2013, resulted from its preferred stock not being classified as equity. The preferred stock was only redeemable upon contingent events that were not probable. On March 5, 2014, the preferred stock was converted into common stock and therefore classified as equity (See Note 1b).

Initial Public Offering:

On March 5, 2014, the Company closed its initial public offering (“IPO”) whereby 5,300,436 shares of common stock were sold by the Company to the public (inclusive of 500,436 shares of common stock pursuant to the full exercise of an overallotment option granted to the underwriters). The aggregate net proceeds received by the Company from the offering were approximately $106,071, net of underwriting discounts and commissions and offering expenses payable by the Company. Upon the closing of the IPO, all shares of the Company’s outstanding convertible preferred stock automatically converted into 15,082,141 shares of common stock, and outstanding warrants to purchase convertible preferred stock automatically converted into warrants to purchase 122,572 shares of common stock. On March 13, 2014, all such warrants were exercised, in a net share settlement, resulting in the issuance of 107,217 shares of common stock.

The significant accounting policies applied in the Company’s audited annual consolidated financial statements as of December 31, 2013 are applied consistently in these financial statements.

Basis of Presentation:

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with Article 10 of Regulation S-X, “Interim Financial Statements” and the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosure it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its consolidated financial position, results of operations and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the 2013 consolidated financial statements and notes thereto included in the prospectus filed with the SEC on March 3, 2014 (the “Prospectus”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”). There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2013 included in the Prospectus.

Derivative Instruments:

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than U.S. dollars. A majority of the Company’s revenues and a majority of its operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the New Israeli Shekel (“NIS”).

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within 12 months. The Company does not enter into derivative financial instruments for trading purposes.

Derivative instruments measured at fair value and their classification on the consolidated balance sheets are presented in the following tables (in thousands):


	Assets as of June 30, 2014(*)
	Notional Amount		Fair Value

Foreign Exchange Forward Contract Derivatives in cash flow hedging relationships - included in other current assets	$	14,798	$	47

(*)	The Company had no derivative instruments as of December 31, 2013.

Recently Issued Accounting Pronouncement:

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using IFRS and US GAAP. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. ASU 2014-09 will be effective for the Company in the first quarter of fiscal 2017 and may be applied on a full retrospective or modified retrospective approach. The Company is still evaluating the impact of implementation of this standard on its financial statements.

NOTE 2:-

FAIR VALUE MEASUREMENTS

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurements levels during the six months ended June 30, 2014.

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

•

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2014 by level within the fair value hierarchy (in thousands):


	As of June 30, 2014 (unaudited)
	Level I		Level II		Level III		Fair Value

Financial Assets:
Forward foreign exchange contracts		—		47		—		47


Total financial assets	$	—	$	47	$	—	$	47

NOTE 3:-

COMMITMENTS AND CONTINGENT LIABILITIES

Liens:

The Company has several liens granted to financial institutions mainly to secure various operating lease agreements in connection with its office space.

Lease Commitments:

The Company rents its facilities in all locations under operating leases with lease periods expiring from 2014 - 2026. VSL leases cars for its employees under operating lease agreements expiring at various dates from 2014 – 2017.

Aggregate minimum rental commitments under non-cancelable leases as of June 30, 2014 for the upcoming years were as follows:


	Unaudited

2014	$	1,313
2015		1,962
2016		3,396
2017		2,649
2018		2,675
Thereafter		20,168


	$	32,163

Total rent expenses for the period ended June 30, 2014 and the year ended December 31, 2013 were approximately $ 1,007 and $ 1,636, respectively.

On June 18, 2014, the Company entered into an amendment of the existing lease for its New York headquarters. Pursuant to the lease amendment, the Company is leasing two more floors in addition to the floor that it already leased in such building. The lease began on June 18, 2014 for one of the additional floors and will begin for the other floor upon the completion of construction work on such floor. The initial term of the lease was extended until February 26, 2026, and the Company has an option to extend the lease for an additional five years.

On March 31, 2014, the Company entered into a promissory note and related security documents with Bank Leumi USA allowing the Company to borrow up to $7,000 against certain of its accounts receivable outstanding amount, based on several conditions, at an annual interest rate of the Wall Street Journal Prime Rate less 0.15%. As of June 30, 2014 that rate amounted to 3.1%. This promissory note enables the Company to engage in foreign currency hedging transactions with Bank Leumi USA to manage the Company’s exposure to foreign currency risk without restricted cash requirements. Amounts may be borrowed under the promissory note until March 31, 2015 at which time the principal sum of each such loan, together with accrued and unpaid interest payable, will become due and payable. As of June 30, 2014, the Company did not borrow any amounts under the promissory note, and, as such, no interest expense has been recorded.

NOTE 4:–

STOCKHOLDERS’ EQUITY (DEFICIENCY)

On December 30, 2005, the Company’s board of directors adopted the Varonis Systems, Inc. 2005 Stock Plan (the “2005 Stock Plan”). As of December 31, 2013, the Company had reserved 4,713,319 shares of common stock available for issuance to employees, directors, officers and consultants of the Company and its subsidiaries. As of December 31, 2013, the Company granted options with respect to 4,656,855 shares of common stock under the 2005 Stock Plan. The options generally vest over four years. No awards were granted under the 2005 Stock Plan subsequent to December 31, 2013, and no further awards will be granted under the 2005 Stock Plan.

On November 14, 2013, the Company’s board of directors adopted the Varonis Systems, Inc. 2013 Omnibus Equity Incentive Plan (the “2013 Plan”). As of June 30, 2014, the Company had reserved 1,904,633 shares of common stock available for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2013 Plan will be increased on January 1, 2016 and on each January 1 thereafter by four percent (4%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase (rounded down to the nearest whole share), but the amount of each increase will be limited to the number of shares of common stock necessary to bring the total number of shares of Common Stock available for grant and issuance

under the 2013 Plan to five percent (5%) of the number of shares of common stock issued and outstanding on each December 31. Options granted under the 2013 Plan generally vest over four years. Any award that is forfeited or canceled before expiration becomes available for future grants under the 2013 Plan.

A summary of employees’ stock options activities during the six months ended June 30, 2014 is as follows:


	Six Months Ended June 30, 2014 (unaudited)
	Number			Average exercise price		Aggregate intrinsic value (in thousands)		Average remaining contractual life (years)

Options outstanding at the beginning of the year		3,233,235		$	4.033	$	65,723		5.700
Granted		516,940		$	29.422
Exercised		(12,594	)	$	1.985
Forfeited		(21,929	)	$	17.290


Options outstanding at the end of the period		3,715,652		$	7.493	$	82,249		5.824


Vested and expected to vest		3,634,396		$	7.148	$	81,560		5.745


Options exercisable at the end of the period		2,682,549		$	1.948	$	72,596		4.508

The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders exercised their options on the last date of the exercise period. Total intrinsic value of options exercised for the six month period ended June 30, 2014 was $282. As of June 30, 2014 there was $13,229 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2005 Stock Plan and 2013 Plan. This cost is expected to be recognized over a period of approximately 3.3 years.

The options outstanding as of June 30, 2014 (unaudited) have been separated into ranges of exercise price as follows:


Range of exercise price	Options outstanding as of June 30, 2014		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of June 30, 2014		Weighted average remaining contractual life (years)		Weighted average exercise price of options exercisable

$ 0.070 - 0.901		758,047		2.871	$	0.744		758,047		2.871	$	0.744
$ 1.039 - 1.576		1,671,942		4.710	$	1.260		1,663,059		4.702	$	1.258
$ 6.230 - 8.800		180,773		7.382	$	6.713		121,081		7.303	$	6.758
$12.470		433,950		8.677	$	12.470		140,362		8.644	$	12.470
$21.14 - 24.23		459,090		9.640	$	22.000		—		—	$	—
$39.86		211,850		9.732	$	39.860		—		—	$	—


		3,715,652		5.824	$	7.493		2,682,549		4.508	$	1.948

The fair value of stock option grants for the period ended June 30, 2014 was estimated using the following weighted average assumptions:


	Period Ended June 30, 2014
	Unaudited

Expected dividend yield		0	%
Expected volatility		60	%
Risk-free interest rate		2.21	%
Expected term (years)		6.25

Options issued to consultants:

The Company’s outstanding options granted to consultants for sales and pre-marketing services as of June 30, 2014 (unaudited) were as follows:


	Options for shares of common stock		Exercise price per share		Options exercisable		Exercisable through
	(number)				(number)

December 2006		40,090	$	0.901		40,090	December 2016
February 2013		4,000	$	12.470		1,333	February 2023
August 2013		5,000	$	21.140		—	August 2023
October 2013		1,250	$	24.230		—	October 2023
March 2014		18,350	$	39.860		—	March 2024
May 2014		8,700	$	22.010		—	May 2024


		77,390				41,423

Stock-based compensation expense for employees and consultants:

The Company recognized non-cash stock-based compensation expense in the consolidated statements of operations as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(unaudited) (In thousands)				(unaudited) (In thousands)

Cost of revenues	$	46	$	5	$	66	$	11
Research and development		272		126		471		185
Sales and marketing		519		199		859		265
General and administrative		141		92		228		155


Total	$	978	$	422	$	1,624	$	616

NOTE 5:-

GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA

Summary information about geographic areas:

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment and derives revenues from licensing of software, sale of professional services, maintenance and technical support (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013

Revenues based on customer’s location:
United States	$	14,814	$	10,766	$	23,884	$	17,293
EMEA		7,605		5,382		14,548		10,287
Rest of the World		2,197		1,689		3,639		2,837


Total revenues	$	24,616	$	17,837	$	42,071	$	30,417


	June 30,		December 31,
	2014		2013
	Unaudited		Audited
	(In thousands)
Long-lived assets by geographic region:
United States	$	918	$	777
Israel		1,606		956
Other		86		123


	$	2,610	$	1,856

NOTE 6:-

SUBSEQUENT EVENTS

The Company evaluates events or transactions that occur after the balance sheet date but prior to the issuance of financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For its consolidated financial statements as of June 30, 2014, the Company evaluated subsequent events through August 6, 2014, which is the date the financial statements were issued.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Prospectus filed pursuant to Rule 424(b) under the Securities Act, with the SEC on March 3, 2014.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We provide an innovative software platform that allows enterprises to map, analyze, manage and migrate their unstructured data. We specialize in human-generated data, a type of unstructured data that includes an enterprise’s word processing documents, spreadsheets, presentations, audio files, video files, emails, text messages and any other data created by employees. This data contains an enterprise’s financial information, product plans, strategic initiatives, intellectual property and other forms of vital information. Our proprietary Metadata Framework technology enables enterprises to gain actionable insights from their human-generated data by intelligently extracting critical metadata, or data about data, from an organization’s IT infrastructure and constructing a map of functional relationships among employees, data objects, content and usage through this contextual information.

We have been a pioneer in developing a software platform that allows enterprises to realize the value of their human-generated data in ways that are not resource-intensive and are easy to implement. The revolution in internet search occurred when search engines began to mine internet metadata, such as the links between pages, in addition to page content, thereby making the internet’s content more usable and subsequently valuable. Similarly, our Metadata Framework creates advanced searchable data structures and provides real-time intelligence about an enterprise’s massive volumes of human-generated content, making human-generated data more valuable to the organization. IT and business personnel deploy our software for a variety of use cases, including data governance, data security, archiving, file synchronization, enhanced mobile data accessibility and information collaboration.

We started operations in 2005 with a vision to make enterprise human-generated data more accessible, manageable, secure and actionable. We began offering our flagship product, DatAdvantage, which provides centralized visibility for all of an enterprise’s human-generated data, in 2006. Since then we have continued to invest in innovation and have consistently introduced new products to our customers, including DataPrivilege, which was introduced in 2006, as our self-service web portal for business users. In 2009, we introduced the IDU Classification Framework for sensitive data classification and DatAdvantage for SharePoint. We further enhanced our DatAdvantage offering by releasing DatAdvantage for Exchange governance in 2010 which enabled our customers to exercise control over the information being transferred through corporate e-mails. In 2011, we introduced DatAdvantage for Directory Services for increased visibility into Active Directory. More recently in 2012, we released the Data Transport Engine for intelligent data migration and archiving and DatAnywhere for secure hybrid cloud collaboration. In May 2014, we introduced DatAnswers, a secure enterprise search solution for human generated data that delivers highly relevant search results to enterprise employees, greatly improving their productivity.

At the core of our technology is our ability to intelligently extract and analyze metadata from an enterprise’s vast, distributed data stores. The broad applicability of our technology has resulted in our customers deploying our platform for numerous use cases for both IT and business personnel. We currently have six products (including DatAnswers), and as of June 30, 2014, approximately 40% of our customers had purchased two or more products, one of which was DatAdvantage for all of these customers. We believe our existing customer base serves as a strong source of incremental revenues given the broad platform of products we have and the growing volumes and complexity of human-generated data our customers have. Our maintenance renewal rate for the period ended June 30, 2014 and 2013 was over 90%. Our key strategies to maintain our renewal rate include focusing on the quality and reliability of our customer service and support to ensure our customers receive value from our products, providing consistent software upgrades and having more dedicated renewal sales personnel.

We sell the vast majority of our products and services to channel partners, including distributors and resellers, which sell to end-user customers, which we refer to as our customers. We believe that our sales model, which combines the leverage of a channel sales model with our highly trained and professional sales force, has and will continue to play a major role in our ability to grow and to successfully deliver our unique value proposition for enterprise human-generated data. We target customers of all sizes, in all industries and all geographies. As of June 30, 2014, we had approximately 2,750 customers, spanning leading firms in the financial services, public, healthcare, industrial, energy and utilities, technology, consumer and retail, education and media and entertainment sectors. We believe our customer count is a key indicator of our market penetration and the value that our products bring to our customer base. We also believe our existing customers represent significant future revenue opportunities for us.

We believe there is a significant growth opportunity in both domestic and foreign markets, which could include any organization that uses file shares, intranets and email for collaboration, regardless of region. For the three and six months ended June 30, 2014 approximately 60% and 57%, respectively, of our revenues were derived from the United States, while Europe, the Middle East and Africa accounted for approximately 31% and 35%, respectively. While we expect sales in the United States to continue to account for a majority of revenues in the near- and medium- term, we expect sales in Asia-Pacific and Latin America to account for a larger proportion of revenues in the long-term. We expect both continued sales growth in the United States and international expansion to be key components of our growth strategy, and we will continue to market our products and services aggressively in international markets. We plan to continue to expand our international operations as part of our growth strategy. In particular, we expect to expand our operations in Latin America and Asia. The expansion of our international operations depends in particular on our ability to hire, integrate and retain local sales and marketing personnel in these international markets, acquire new channel partners and implement an effective marketing strategy. In addition, the further expansion of our international operations will increase our sales and marketing and general and administrative expenses, and will subject us to a variety of risks and challenges, including those related to economic and political conditions in each region, compliance with foreign laws and regulations, and compliance with domestic laws and regulations applicable to our international operations.

We derive revenues from license sales of our various products, various services, including initial maintenance contracts and professional services, and renewals. Substantially all of our license sales are derived from a platform of products, consisting of DatAdvantage, DataPrivilege, IDU Classification Framework and Data Transport Engine. As of June 30, 2014 and 2013, 95.5% and 98.5% of our customers, respectively, had purchased DatAdvantage; 19.7% and 21.7% of our customers, respectively, had purchased DataPrivilege; 24.4% and 21.4% of our customers, respectively, had purchased IDU Classification Framework; and 2.2% and 0.6% of our customers, respectively, had purchased Data Transport Engine. As of June 30, 2014 and 2013, 55.5% and 61.1% of our customers, respectively, made standalone purchases of DatAdvantage, and 0.4% of our customers made standalone purchases of DataPrivilege. As of June 30, 2014, our customers made no standalone purchases of IDU Classification Framework or Data Transport Engine. Licenses sales accounted for 58.6% and 58.9% of our total revenues for the three month periods ended June 30, 2014 and 2013, respectively, and 53.4% and 53.8% of our total revenues for the six month periods ended June 30, 2014 and 2013, respectively. We expect maintenance and services revenues to continue to comprise a larger portion of our total revenues as our installed customer base grows.

We have achieved significant growth and scale in recent periods utilizing our business model. For the three month periods ended June 30, 2014 and 2013, our revenues were $ 24.6 million and $17.8 million, respectively, representing year-over-year growth of 38%. For the six month periods ended June 30, 2014 and 2013, our revenues were $ 42.1 million and $30.4 million, respectively, representing year-over-year growth of 38%. For the three month periods ended June 30, 2014 and 2013, we had operating losses of $4.6 million and $1.3 million and net losses of $4.6 million and $1.6 million, respectively. For the six month periods ended June 30, 2014 and 2013, we had operating losses of $12.5 million and $5.3 million and net losses of $12.7 million and $6.4 million, respectively.

Components of Operating Results

Revenues

Our revenues consist of licenses and maintenance and services revenues.

Licenses Revenues. License revenues reflect the revenues recognized from sales of software licenses to new customers and additional licenses to existing customers. A substantial majority of our license revenues consist of revenues from perpetual licenses, under which we generally recognize the license fee portion of the arrangement upon delivery,

assuming all revenue recognition criteria are satisfied. Customers may also purchase term license agreements, under which we recognize the license fee ratably, on a straight-line basis, over the term of the underlying maintenance contract, which is typically up to one year. We are focused on acquiring new customers and increasing revenues from our existing customers.

Maintenance and Services Revenues. Maintenance and services revenues consist of revenues from maintenance agreements and, to a lesser extent, professional services. Typically, when purchasing a perpetual license, a customer also purchases a one year maintenance contract for which we charge a percentage of the license fee. Customers may renew, and generally have renewed, their maintenance agreements for a fee that is based upon a percentage of the initial license fee paid. Customers with maintenance agreements are entitled to receive support and unspecified upgrades and enhancements when and if they become available during the maintenance period. We have experienced growth in maintenance revenues primarily due to increased license sales to new customers and high annual retention of existing customers. We recognize the revenues associated with maintenance ratably, on a straight-line basis, over the associated maintenance period. We measure the perpetual license maintenance renewal rate for our customers over a 12-month period, based on a dollar renewal rate for contracts expiring during that time period. Our maintenance renewal rate for each of the periods ended June 30, 2014 and 2013 has been over 90%. We also offer professional services focused on both deployment and training our customers to fully leverage the use of our products. We recognize the revenues associated with these professional services on a time and materials basis as we deliver the services, provide the training or when the service term has expired.

The following table sets forth the percentage of our revenues that have been derived from licenses and maintenance and services revenues for the periods presented.


	Three Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Revenues:
Licenses		58.6	%		58.9	%
Maintenance and services		41.4			41.1


Total revenues		100.0	%		100.0	%

We expect maintenance and services revenues to continue to comprise a larger portion of our total revenues as our installed customer base grows. Our products are used by a wide range of enterprises, including Fortune 500 corporations and small and medium-sized businesses. As of June 30, 2014, we had approximately 2,750 customers across a broad array of company sizes and industries located in over 55 countries.

Cost of Revenues, Gross Profit and Gross Margin

Our cost of revenues consists of cost of maintenance and services revenues. Cost of maintenance and services revenues consists primarily of salaries and benefits, as well as commissions, bonuses and stock-based compensation for our maintenance and services employees, travel expenses and allocated overhead costs for facilities, IT and depreciation of equipment. We recognize expenses related to maintenance and services as they are incurred. We expect that our cost of maintenance and services revenues will increase in absolute dollars as we increase our headcount to support revenue growth.

Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Our gross margin has historically fluctuated slightly from period to period as a result of changes in licenses and maintenance and services mix. Due to the seasonality of our business, the first quarter typically results in the lowest gross margin as revenues have historically been lowest and the majority of our expenses are relatively fixed quarter over quarter.

Operating Costs and Expenses

Our operating costs and expenses are classified into three categories: research and development, sales and marketing and general and administrative. For each category, the largest component is personnel costs, which consists of salaries, employee benefits (including commissions and bonuses) and stock-based compensation. Operating costs and expenses also include allocated overhead costs for depreciation of equipment. Allocated costs for facilities primarily consist of rent and office maintenance. Operating costs and expenses are generally recognized as incurred. We expect personnel costs to continue to increase in absolute dollars as we hire new employees to continue to grow our business.

Research and Development . Research and development expenses primarily consist of personnel costs attributable to our research and development personnel, as well as allocated overhead costs. We expense research and development costs as incurred. We expect that our research and development expenses will continue to increase in absolute dollars as we increase our research and development headcount to further strengthen our technology platform and invest in the development of both existing and new products.

Sales and Marketing . Sales and marketing expenses are the largest component of our operating costs and expenses and consists primarily of personnel costs, as well as marketing and business development costs, travel expenses and allocated overhead costs. We expect that sales and marketing expenses will continue to increase in absolute dollars, as we plan to expand our sales and marketing efforts, both domestically and internationally. We expect sales and marketing expenses to be our largest category of operating costs and expenses as we continue to expand our business worldwide.

General and Administrativ e. General and administrative expenses mostly consist of personnel and facility-related costs for our executive, finance, legal, human resources and administrative personnel. Other expenses are comprised of legal, accounting and other consultant fees and other corporate expenses and allocated overhead. We expect that general and administrative expenses will increase in absolute dollars as we grow and expand our operations, including internationally, and operate as a public company, including higher legal, corporate insurance, accounting expenses and additional expenses for compliance with the Sarbanes-Oxley Act of 2002 and other related regulations.

Financial Income (Expenses), Net

Prior to our IPO, financial income (expenses), net consisted primarily of charges to record outstanding warrants to purchase convertible preferred stock at fair value, interest earned on our cash, cash equivalents and short-term deposits and interest expense associated with our previously outstanding debt, foreign currency forward contract gains and losses, as well as foreign currency exchange gains and losses. Following the closing of our IPO during the first quarter of 2014, our outstanding warrants to purchase convertible preferred stock automatically converted into warrants to purchase shares of common stock and, after such conversion, are no longer classified as a liability on our consolidated balance sheet or included as financial expenses in our consolidated statement of operations.

Income Taxes

We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax. To date, we have incurred accumulated net losses and have not recorded any U.S. federal tax provisions.

Because of our history of U.S. net operating losses, we have established a full valuation allowance against potential future benefits for deferred tax assets including loss carryforwards. Our income tax provision could be significantly impacted by estimates surrounding our uncertain tax positions and changes to our valuation allowance in future periods. We reevaluate the judgments surrounding our estimates and make adjustments as appropriate each reporting period.

Our Israeli subsidiary currently qualifies as a beneficiary enterprise which, upon fulfillment of certain conditions, allows it to qualify for a reduced tax rate based on the beneficiary program guidelines.

In addition, we are subject to the continuous examinations of our income tax returns by different tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Results of Operations

The following tables are a summary of our consolidated statements of operations for the three months ended June 30, 2014 and 2013 in dollars and as a percentage of our total revenues.


	Three Months Ended June 30,
	2014			2013
	(unaudited)
	(In thousands)
Statement of Operations Data:
Revenues:
Licenses	$	14,422		$	10,498

Maintenance and services		10,194			7,339


Total revenues		24,616			17,837


Cost of revenues		2,491			1,507


Gross profit		22,125			16,330
Operating costs and expenses:
Research and development		6,832			4,875
Sales and marketing		17,186			10,500
General and administrative		2,665			2,220


Total operating expenses		26,683			17,595


Operating loss		(4,558	)		(1,265	)
Financial income (expenses), net		74			(324	)


Loss before income taxes, net		(4,484	)		(1,589	)
Income taxes		(155	)		(47	)


Net loss	$	(4,639	)	$	(1,636	)


	Three Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)
Statement of Operations Data:
Revenues:
Licenses		58.6	%		58.9	%
Maintenance and services		41.4			41.1


Total revenues		100.0			100.0


Cost of revenues		10.1			8.4


Gross profit		89.9			91.6


Operating costs and expenses:
Research and development		27.8			27.3
Sales and marketing		69.8			58.9
General and administrative		10.8			12.4


Total operating expenses		108.4			98.6


Operating loss		(18.5	)		(7.1	)
Financial income (expenses), net		0.3			(1.8	)


Loss before income taxes, net		(18.2	)		(8.9	)


Income taxes		(0.6	)		(0.3	)

Net loss		(18.8	)%		(9.2	)%

Comparison of Three Months Ended June 30, 2014 and 2013

Revenues


	Three Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)
Revenues:
Licenses	$	14,422	$	10,498		37.4	%
Maintenance and services		10,194		7,339		38.9


Total revenues	$	24,616	$	17,837		38.0	%


	Three Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Revenues:
Licenses		58.6	%		58.9	%
Maintenance and services		41.4			41.1


Total revenues		100.0	%		100.0	%

Total revenue growth was achieved due to increased demand for our products and services from new and existing customers, mostly in the domestic market, as well as in international markets. The increase in license revenues was driven by sales to 206 new customers in the three month period ended June 30, 2014 compared to 149 new customers in the three month period ended June 30, 2013, sales to existing customers and sales of new products. As of June 30, 2014 and 2013, we had approximately 2,750 and over 2,000 customers, respectively. A substantial majority of our license revenues was attributable to sales of perpetual licenses. The increase in maintenance and services revenues was primarily due to an increase in the sale of maintenance agreements resulting from the growth of our installed customer base. Of the license and first year maintenance and services revenues recognized in the three months ended June 30, 2014, 62% was attributable to revenues from new customers, and 38% was attributable to revenues from existing customers. Of the license and first year maintenance and services revenues recognized in the three months ended June 30, 2013, 65% was attributable to revenues from new customers, and 35% was attributable to revenues from existing customers. As of June 30, 2014 and 2013, 40% and 37%, respectively, of our customers had purchased two or more products.

In each of the three months ended June 30, 2014 and 2013, our maintenance renewal rate was over 90%.

Cost of Revenues and Gross Margin


	Three Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)

Cost of revenues	$	2,491	$	1,507		65.3	%


	Three Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Total gross margin		89.9	%		91.6	%

The increase in cost of revenues was primarily related to an increase of $0.6 million in salaries and benefits expense due to increased headcount for support and professional services, a $0.2 million increase in facilities and allocated overhead costs and a $0.1 million increase in other related expenses due to the increased headcount.

Operating Costs and Expenses


	Three Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)

Operating costs and expenses:
Research and development	$	6,832	$	4,875		40.1	%
Sales and marketing		17,186		10,500		63.7
General and administrative		2,665		2,220		20.0


Total operating expenses	$	26,683	$	17,595		51.7	%


	Three Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Operating costs and expenses:
Research and development		27.8	%		27.3	%
Sales and marketing		69.8			58.9
General and administrative		10.8			12.4


Total operating expenses		108.4	%		98.6	%

The increase in research and development expenses was primarily related to an increase of $1.8 million in salaries and benefits and stock based compensation resulting from increased headcount and consultants as part of our focus on enhancing and developing our existing and new products.

The increase in sales and marketing expenses was primarily related to a $5.0 million increase in salaries and benefits and stock based compensation due to increased headcount in all regions to expand our sales force and commissions on increased customer orders. The remainder of the increase was attributable to a $0.4 million increase in marketing related expenses and a $0.4 million increase related to travel expenses.

The increase in general and administrative expenses was primarily related to an increase of $0.3 million in salaries and benefits, due to increased headcount to support the overall growth of our business and $0.1 million of other expenses primarily relating to rent, insurance and IT expenses.

Financial Income (Expenses), Net


	Three Months Ended June 30,					%Change
	2014		2013			%Change
	(unaudited)
	(In thousands)

Financial income (expenses), net	$	74	$	(324	)		122.8	%

For the three months ended June 30, 2013, financial income (expense), net was primarily comprised of revaluation of our warrants to purchase convertible preferred stock. Upon completion of our IPO, the warrants automatically converted into warrants to purchase our common stock and, as a result, are no longer evaluated at each balance sheet date. As such, financial income (expense), net for the three months ended June 30, 2014 was primarily comprised of foreign exchange gains and interest income.

Income Taxes


	Three Months Ended June 30,						%Change
	2014			2013			%Change
	(unaudited)
	(In thousands)

Income taxes	$	(155	)	$	(47	)		229.8	%

Income taxes for the three months ended June 30, 2014 and 2013 were comprised primarily of foreign income taxes and state taxes.

The following tables are a summary of our consolidated statements of operations for the six months ended June 30, 2014 and 2013 in dollars and as a percentage of our total revenues.


	Six Months Ended June 30,
	2014			2013
	(unaudited)
	(In thousands)
Statement of Operations Data:
Revenues:
Licenses	$	22,475		$	16,377
Maintenance and services		19,596			14,040


Total revenues		42,071			30,417


Cost of revenues		4,533			2,856


Gross profit		37,538			27,561
Operating costs and expenses:
Research and development		13,271			9,394
Sales and marketing		31,427			19,708
General and administrative		5,330			3,759


Total operating expenses		50,028			32,861


Operating loss		(12,490	)		(5,300	)
Financial income (expenses), net		36			(1,003	)


Loss before income taxes, net		(12,454	)		(6,303	)
Income taxes		(259	)		(124	)


Net loss	$	(12,713	)	$	(6,427	)


	Six Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)
Statement of Operations Data:
Revenues:
Licenses		53.4	%		53.8	%
Maintenance and services		46.6			46.2


Total revenues		100.0			100.0


Cost of revenues		10.8			9.4


Gross profit		89.2			90.6


Operating costs and expenses:
Research and development		31.5			30.9
Sales and marketing		74.7			64.7
General and administrative		12.7			12.4


Total operating expenses		118.9			108.0


Operating loss		(29.7	)		(17.4	)
Financial income (expenses), net		0.1			(3.3	)


Loss before income taxes, net		(29.6	)		(20.7	)


Income taxes		(0.6	)		(0.4	)

Net loss		(30.2	)%		(21.1	)%

Comparison of Six Months Ended June 30, 2014 and 2013

Revenues


	Six Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)
Revenues:
Licenses	$	22,475	$	16,377		37.2	%
Maintenance and services		19,596		14,040		39.6


Total revenues	$	42,071	$	30,417		38.3	%


	Six Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Revenues:
Licenses		53.4	%		53.8	%
Maintenance and services		46.6			46.2


Total revenues		100.0	%		100.0	%

Total revenue growth was achieved due to increased demand for our products and services from new and existing customers, mostly in the domestic market, as well as in international markets. The increase in license revenues was driven by sales to 364 new customers in the six month period ended June 30, 2014 compared to 270 new customers in the six month period ended June 30, 2013, sales to existing customers and sales of new products. As of June 30, 2014 and 2013, we had approximately 2,750 and 2,000 customers, respectively. A substantial majority of our license revenues was attributable to sales of perpetual licenses. The increase in maintenance and services revenues was primarily due to an increase in the sale of maintenance agreements resulting from the growth of our installed customer base. Of the license and first year maintenance and services revenues recognized in the six months ended June 30, 2014, 64% was attributable to revenues from new customers, and 36% was attributable to revenues from existing customers. Of the license and first year maintenance and services revenues recognized in the six months ended June 30, 2013, 69% was attributable to revenues from new customers, and 31% was attributable to revenues from existing customers. As of June 30, 2014 and 2013, 40% and 37%, respectively, of our customers had purchased two or more products.

In each of the six months ended June 30, 2014 and 2013, our maintenance renewal rate was over 90%.

Cost of Revenues and Gross Margin


	Six Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)

Cost of revenues	$	4,533	$	2,856		58.7	%


	Six Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Total gross margin		89.2	%		90.6	%

The increase in cost of revenues was primarily related to an increase of $1.1 million in salaries and benefits expense due to increased headcount for support and professional services, $0.3 million increase in facilities and allocated overhead costs and a $0.2 million increase in other related expenses due to the increased headcount.

Operating Costs and Expenses


	Six Months Ended June 30,				%Change
	2014		2013		%Change
	(unaudited)
	(In thousands)

Operating costs and expenses:
Research and development	$	13,271	$	9,394		41.3	%
Sales and marketing		31,427		19,708		59.5
General and administrative		5,330		3,759		41.8


Total operating expenses	$	50,028	$	32,861		52.2	%


	Six Months Ended June 30,
	2014			2013
	(As a percentage of total revenues)

Operating costs and expenses:
Research and development		31.5	%		30.9	%
Sales and marketing		74.7			64.7
General and administrative		12.7			12.4


Total operating expenses		118.9	%		108.0	%

The increase in research and development expenses was primarily related to an increase of $3.3 million in salaries and benefits and stock based compensation resulting from increased headcount and consultants as part of our focus on enhancing and developing our existing and new products. We also had an increase of $0.3 million in facilities and allocated overhead costs.

The increase in sales and marketing expenses was primarily related to a $9.0 million increase in salaries and benefits and stock based compensation due to increased headcount in all regions to expand our sales force and commissions on increased customer orders. The remainder of the increase was attributable to a $0.9 million increase in marketing related expenses and a $0.7 million increase related to travel expenses.

The increase in general and administrative expenses was primarily related to an increase of $0.7 million in salaries and benefits, due to increased headcount to support the overall growth of our business, an increase of $0.5 million of other expenses primarily relating to rent, insurance and IT expenses and an increase of $0.3 million in consulting and services fees primarily in connection with becoming a public company.

Financial Income (Expenses), Net


	Six Months Ended June 30,					%Change
	2014		2013			%Change
	(unaudited)
	(In thousands)

Financial income (expenses), net	$	36	$	(1,003	)		103.6	%

For the six months ended June 30, 2013, financial income (expense), net was primarily comprised of revaluation of warrants to purchase convertible preferred stock. Upon completion of our IPO, the warrants automatically converted into warrants to purchase our common stock and, as a result, are no longer evaluated at each balance sheet date. As such, financial income (expense), net for the six months ended June 30, 2014 was primarily comprised of foreign exchange gains and interest income.

Income Taxes


	Six Months Ended June 30,						%Change
	2014			2013			%Change
	(unaudited)
	(In thousands)

Income taxes	$	(259	)	$	(124	)		108.9	%

Income taxes for the six months ended June 30, 2014 and 2013 were comprised primarily of foreign income taxes and state taxes.

Liquidity and Capital Resources

The following table shows our cash flows from operating activities, investing activities and financing activities for the stated periods:


	Six Months Ended June 30,
	2014			2013
	(unaudited)
	(In thousands)

Net cash provided by (used in) operating activities	$	(580	)	$	27
Net cash provided by (used in) investing activities		3,260			(700	)
Net cash provided by financing activities		107,815			48


Increase (decrease) in cash and cash equivalents	$	110,495		$	(625	)

Since 2009, we have funded our operations primarily through cash generated from operations. In March 2014, we closed our IPO in which 5,300,436 shares of common stock were sold to the public at an offering price of $22 per share. We received proceeds of $106.1 million from the IPO, net of underwriting discounts and commissions and offering expenses. On June 30, 2014, our cash and cash equivalents and short-term deposits of $120.2 million were held for working capital purposes and were invested primarily in short-term deposits. We intend to increase our investment in capital expenditures in 2014, consistent with the growth in our business and operations. We believe that our existing cash and cash equivalents, short-term deposits and cash flow from operations will be sufficient to fund our operations and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts and expansion into new geographic locations, the timing of introductions of new software products and enhancements to existing software products and the continuing market acceptance of our software offerings.

As of June 30, 2014, we had no outstanding debt under our debt agreements. We have begun incurring costs as a public company that we had not previously incurred prior to our initial public offering, including, but not limited to, increased directors’ and officers’ insurance, consultants fees, expenses for compliance with the Sarbanes-Oxley Act of 2002 and rules implemented by the SEC and various other costs.

Operating Activities

Net cash provided by operating activities is driven by sales of our products less costs and expenses, primarily payroll and related expenses. Collection of accounts receivable from the sales of our software offerings is a significant component of our cash flows from operating activities, as is the change in deferred revenues which represents unearned amounts billed to our channel partners, related to these sales.

For the six months ended June 30, 2014, cash outflows from our operating activities were $0.6 million. Net cash used in operating activities was impacted by two of our historically known seasonal patterns (i) most of our sales are typically made during the last three weeks of every quarter, and (ii) our highest sales of products and services occur during the fourth fiscal quarter, with a low or negative sequential revenue growth in the first quarter. While both patterns had an impact on the six months ended June 30, 2014, the second pattern has historically caused our largest collections to occur during the first quarter, and a relatively lower collection during the second quarter. These seasonal trends also impact our operating income (loss) because the majority of our expenses are relatively fixed in the short term. For the six months ended June 30, 2014, net

cash outflows from our operating activities reflect our net loss of $12.7 million, adjusted by non-cash charges of $2.2 million. Our net loss was primarily driven by increased headcount of our sales force personnel. Additional sources of cash outflows were from changes in our working capital, including a $0.7 million decrease in deferred revenues. This is partially offset by a $9.4 million decrease in accounts receivable reflecting the seasonal pattern discussed above, a $1.1 million increase in accrued compensation and accrued expenses and other liabilities and a $0.1 million increase in accounts payable due to the timing of payments. Our days’ sales outstanding (“DSO”) was 74 days as of June 30, 2014.

For the six months ended June 30, 2013, cash inflows from our operating activities were $0.03 million, reflecting a $5.7 million decrease in accounts receivable and a $0.4 million decrease in prepaid expenses and other current assets, partially offset by our net loss of $6.4 million, adjusted by non-cash charges of $1.7 million. Additional sources of cash outflows were from changes in our working capital, including a $0.7 million decrease in deferred revenues and $0.6 million decrease in accounts payable due to the timing of payments. Our DSO was 74 days as of June 30, 2013.

Investing Activities

Our investing activities consist primarily of capital expenditures to purchase property and equipment, sales and purchases of short-term investments and changes in our restricted cash. In the future, we expect to continue to incur capital expenditures to support our expanding operations.

During the six months ended June 30, 2014, net cash provided by investing activities of $3.3 million was primarily attributable to a decrease of $4.2 million in short-term deposits and a decrease of $0.3 million in restricted cash, partially offset by a $1.3 million increase in capital expenditures for technology hardware to support our growth during the period including hardware, software, office equipment and leasehold improvements.

During the six months ended June 30, 2013, net cash used in investing activities of $0.7 million was primarily attributable to capital expenditures for technology hardware to support our growth during the period, as well as software, office equipment and leasehold improvements.

Financing Activities

For the six months ended June 30, 2014, net cash provided by financing activities of $107.8 million was primarily attributable to proceeds from our IPO, net of underwriting discounts and commissions.

For the six months ended June 30, 2013, net cash provided by financing activities of $0.05 million was attributable to proceeds received from the sale of common stock.

Promissory Note

On March 31, 2014, we entered into a promissory note and related security documents with Bank Leumi USA. We may borrow up to $7.0 million against certain of our accounts receivable outstanding amount, based on several conditions, at an annual interest rate of the Wall Street Journal Prime Rate less 0.15%. As of June 30, 2014, that rate amounted to 3.1%. This promissory note enables us to engage in foreign currency hedging transactions with Bank Leumi USA to manage our exposure to foreign currency risk without restricted cash requirements. We may borrow under the promissory note until March 31, 2015 at which time the principal sum of each such loan, together with accrued and unpaid interest payable, will become due and payable. As of June 30, 2014, we had no balance outstanding under the promissory note. As part of the transaction, we granted the lender a security interest in our personal property, excluding intellectual property and other intangible assets. The promissory note also contains customary events of default.

Contractual Payment Obligations

Our principal commitments primarily consist of obligations under leases for office space and motor vehicles. Aggregate minimum rental commitments under non-cancelable leases as of June 30, 2014 for the upcoming years were as follows:


	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	(In thousands)
Operating lease obligation	$	32,163	$	1,313	$	5,358	$	5,324	$	20,168

On June 18, 2014, we entered into an amendment of the existing lease for our New York headquarters. Pursuant to the lease amendment, we are leasing two more floors in addition to the floor that we already leased in such building. The lease began on June 18, 2014 for one of the additional floors and will begin for the other floor upon the completion of construction work on such floor. The initial term of the lease was extended until February 26, 2026, and we have an option to extend the lease for an additional five years.

We have obligations related to unrecognized tax benefit liabilities totaling $0.4 million, which have been excluded from the table above as we do not think it is practicable to make reliable estimates of the periods in which payments for these obligations will be made.

Off-Balance Sheet Arrangements

As of June 30, 2014, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. 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. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.

Recently Issued Accounting Pronouncement

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using IFRS and US GAAP. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. ASU 2014-09 will be effective for us in the first quarter of fiscal 2017 and may be applied on a full retrospective or modified retrospective approach. We are still evaluating the impact of implementation of this standard on our financial statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes.

Foreign Currency Exchange Risk

Approximately one third of our revenues for the six months ended June 30, 2014 and 2013 were earned in non-U.S. dollar denominated currencies, mainly in the Euro and Pounds Sterling. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar and NIS, and to a lesser extent the Euro and Pounds Sterling. Our NIS-denominated expenses consist primarily of personnel and overhead costs from our operations in Israel. Our consolidated results of operations and cash flow are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements.

For purposes of our consolidated financial statements, local currency assets and liabilities are translated at the rate of exchange to the U.S. dollar on the balance sheet date and local currency revenues and expenses are translated at the exchange rate at the date of the transaction or the average exchange rate dollar during the reporting period to the United States.

To date, we have used derivative financial instruments, specifically foreign currency forward contracts, to manage exposure to foreign currency risks, by hedging a portion of our forecasted expenses denominated in NIS expected to occur within six months. The effect of exchange rate changes on foreign currency forward contracts is expected to offset the effect of exchange rate changes on the underlying hedged item. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

We had cash and cash equivalents and short-term deposits of $120.2 million as of June 30, 2014. We hold our cash and cash equivalents and short-term deposits for working capital purposes. Our cash and cash equivalents are held in cash deposits and money market funds. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce our future interest income.

As of June 30, 2014, we had no outstanding obligations under our line of credit. To the extent we enter into other long-term debt arrangements in the future, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operation.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently a party to any material litigation.

Item 1A.

Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained herein, including our consolidated financial statements and the related notes thereto, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business and Industry

The market for software that maps, analyzes, manages and migrates human-generated unstructured data is new and unproven and may not grow.

We believe our future success depends in large part on the growth of the market for software that enables enterprises to map, analyze, manage and migrate their human-generated, unstructured data. In order for us to market and sell our products, we must successfully demonstrate to enterprise IT and business personnel the potential value of their human-generated data and persuade them to devote a portion of their budgets to the single integrated solution that we offer to manage, protect and extract value from this resource. We cannot provide any assurance that enterprises will recognize the need for our products or, if they do, that they will decide that they need a solution that offers the range of functionalities that we offer. Software solutions focused on human-generated unstructured data may not yet be viewed as a necessity by enterprises, and accordingly, our sales effort is and will be focused in large part on explaining the need for, and value offered by, our solution. We can provide no assurance that the market for our solution will continue to grow at its current rate or at all. The failure of the market to develop would materially adversely impact our results of operations.

Our quarterly results of operations have fluctuated and may fluctuate significantly due to variability in our revenues which could adversely impact our share price.

Our revenues and other results of operations have fluctuated from quarter to quarter in the past and could continue to fluctuate in the future. Our revenues depend in part on the conversion of enterprises that have installed an evaluation license for our software into paying customers. In this regard, most of our sales are typically made during the last three weeks of every quarter. We may fail to meet market expectations for that quarter if we are unable to close the number of transactions that we expect during this short period and closings are deferred to a subsequent quarter. In addition, our sales cycle from initial contact to delivery of and payment for the software license generally becomes longer and less predictable with respect to large transactions and often involves multiple meetings or consultations at a substantial cost and time commitment to us. Although we try to minimize the potential impact of large transactions on our quarterly results of operations, the closing of a large transaction in a particular quarter may make it more difficult for us to meet market expectations in subsequent quarters and our failure to close a large transaction may adversely impact our revenues in a particular quarter. In addition, we base our current and future expense levels on our revenue forecasts and operating plans, and our expenses are relatively fixed in the short term. Accordingly, we would likely not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues and even a relatively small decrease in revenues could disproportionately and adversely affect our financial results for that quarter. The variability and unpredictability of these and other factors could result in our failing to meet or exceed financial expectations for a given period.

The ability to attract, recruit and retain highly qualified engineers is critical to our success and growth.

Our future success and growth depends, in part, on our ability to continue to recruit and retain highly skilled personnel, particularly engineers. Any of our employees may terminate their employment at any time and competition for highly skilled engineering personnel is frequently intense, especially in Israel, where we have a substantial presence and need for qualified engineers. Moreover, to the extent we hire personnel from other companies, we may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information. If we are unable to attract or retain qualified engineers, our ability to innovate, introduce new products and compete would be adversely impacted, and our financial condition and results of operations may suffer.

A failure to hire and integrate additional sales and marketing personnel or maintain their productivity could adversely affect our results of operations and growth prospects.

Our business requires intensive sales and marketing activities. Our sales and marketing personnel are essential to attracting new customers and expanding sales to existing customers, both of which are key to our future growth. We face a number of challenges in successfully expanding our sales force. We must locate and hire a significant number of qualified individuals, and competition for such individuals is intense. In addition, as we expand into new markets with which we have less familiarity, we will need to recruit individuals who are multilingual or who have skills particular to a certain geography, and it may be difficult to find candidates with those qualifications. We may be unable to achieve our hiring or integration goals due to a number of factors, including, but not limited to, the number of individuals we hire, challenges in finding individuals with the correct background due to increased competition for such hires and increased attrition rates among new hires. Furthermore, based on our past experience, it often can take up to one year before a new sales force member is trained and operating at a level that meets our expectations. We invest significant time and resources in training new members of our sales force and we may be unable to achieve our target performance levels with new sales personnel as rapidly as we have done in the past due to larger numbers of hires or lack of experience training sales personnel to operate in new jurisdictions. Our failure to hire a sufficient number of qualified individuals, or to integrate new sales force members within the time periods we have achieved historically, may materially impact our projected growth rate.

If we fail to manage our rapid growth effectively, our business and results of operations will be adversely affected.

We have experienced rapid growth in a relatively short period of time. Our revenues grew from $39.8 million in 2011 to $74.6 million in 2013. Our number of employees and independent contractors increased from 281 as of December 31, 2011 to 722 as of June 30, 2014. During this period, we also established and expanded our operations in a number of countries outside the United States. We intend to continue to aggressively grow our business. For example, we plan to continue to hire new employees, particularly in our sales and marketing and research and development groups. If we cannot adequately train these new employees, including our sales force, software engineers and customer support staff, our sales may not grow at the rates we project or our customers may lose confidence in the knowledge and capability of our employees. In addition, we are expanding our current operations, including in additional countries where we have not previously had a presence, and we intend to make direct and substantial investments to continue our expansion efforts. We must successfully manage our growth to achieve our objectives. Although our business has experienced significant growth in the past, we cannot provide any assurance that our business will continue to grow at the same rate, or at all.

Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to do the following:

•

effectively recruit, integrate, train and motivate a large number of new employees, including our sales force and engineers, while retaining existing employees, maintaining the beneficial aspects of our corporate culture and effectively executing our business plan;

•

satisfy existing customers and attract new customers;

•

effectively manage existing channel partnerships and expand to new ones;

•

successfully introduce new products and enhancements;

•

improve our key business applications and processes to support our business needs;

•

enhance information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing customer base;

•

enhance our internal controls to ensure timely and accurate reporting of all of our operations and financial results;

•

protect and further develop our strategic assets, including our intellectual property rights; and

•

make sound business decisions in light of the scrutiny associated with operating as a public company.

These activities will require significant investments and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure. There are no guarantees we will be able to grow our business in an efficient or timely manner, or at all. Moreover, if we do not effectively manage the growth of our business and operations, the quality of our software could suffer, which could negatively affect our brand, results of operations and overall business.

Our failure to continually enhance and improve our human-generated unstructured data technology could adversely affect sales of our products.

The market is characterized by the exponential growth in human-generated unstructured data, rapid technological advances, changes in customer requirements, including customer requirements driven by changes to legal, regulatory and self-regulatory compliance mandates, frequent new product introductions and enhancements and evolving industry standards in computer hardware and software technology. As a result, we must continually change and improve our products in response to changes in operating systems, application software, computer and communications hardware, networking software, data center architectures, programming tools and computer language technology. Moreover, the technology in our products is especially complex because it needs to effectively identify and respond to a user’s data retention, security and governance needs, while minimizing the impact on database and file system performance. Our products must also successfully interoperate with products from other vendors.

We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to extend our technological expertise and develop new products or expand the functionality of our current products in a timely manner or at all. Even if we are able to anticipate, develop and introduce new products and expand the functionality of our current products, there can be no assurance that enhancements or new products will achieve widespread market acceptance.

Our product enhancements or new products could fail to attain sufficient market acceptance for many reasons, including:

•

failure to accurately predict market demand in terms of product functionality and to supply products that meet this demand in a timely fashion;

•

inability to interoperate effectively with the database technologies and file systems of prospective customers;

•

defects, errors or failures;

•

negative publicity or customer complaints about performance or effectiveness; and

•

poor business conditions, causing customers to delay IT purchases.

If we fail to anticipate market requirements or stay abreast of technological changes, we may be unable to successfully introduce new products, expand the functionality of our current products or convince our customers and potential customers of the value of our solutions in light of new technologies. Accordingly, our business, results of operations and financial condition could be materially and adversely affected.

We are dependent on the continued services and performance of our two founders, the loss of either of whom could adversely affect our business.

Our future performance depends on the continued services and continuing contributions of our two founders, Yakov Faitelson, our Chief Executive Officer and President, and Ohad Korkus, our Chief Technology Officer, to execute on our business plan, and to identify and pursue new opportunities and product innovations. The loss of services of either of Mr. Faitelson or Mr. Korkus could significantly delay or prevent the achievement of our development and strategic objectives. We carry key-man insurance on Mr. Faitelson and Mr. Korkus; however, the amount of any such insurance would likely be insufficient to compensate for the impact of losing their services.

We may face increased competition in our market.

While there are some companies which offer certain features similar to those imbedded in our solutions, as well as others with whom we compete in certain tactical use cases, we believe that we do not currently compete with a company that offers the same breadth of functionalities that we offer in a single integrated solution. Nevertheless, we do compete against a select group of software vendors that provide standalone solutions, similar to those found in our comprehensive software suite, in the specific markets in which we operate. We also face direct competition with respect to certain of our products, specifically DatAnywhere, Data Transport Engine and DatAdvantage for Directory Services. In the future, as customer requirements evolve and new technologies are introduced, we may experience increased competition if established or emerging companies develop solutions that address the human-generated unstructured data market. Furthermore, because we operate in a relatively new and evolving area, we anticipate that competition will increase based on customer demand for these types of products.

In particular, if a more established company were to target our market, we may face significant competition. They may have competitive advantages, such as greater name recognition, larger sales, marketing, research and acquisition resources, access to larger customer bases and channel partners, a longer operating history and lower labor and development costs, which may enable them to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of their products than we do. Increased competition could result in us failing to attract customers or maintain licenses at the same rate. It could also lead to price cuts, alternative pricing structures or the introduction of products available for free or a nominal price, reduced gross margins, longer sales cycles and loss of market share.

In addition, our current or prospective channel partners may establish cooperative relationships with any future competitors. These relationships may allow future competitors to rapidly gain significant market share. These developments could also limit our ability to obtain revenues from existing and new customers.

Our ability to compete successfully in our market will also depend on a number of factors, including ease and speed of product deployment and use, the quality and reliability of our customer service and support, total cost of ownership, return on investment and brand recognition. Any failure by us to successfully address current or future competition in any one of these or other areas may reduce the demand for our products and adversely affect our business, results of operations and financial condition.

We have a history of losses, and we may not be profitable in the future.

We have incurred net losses in each year since our inception, including net losses of $3.8 million in 2011, $4.8 million in 2012 and $7.5 million in 2013 and $12.7 million in the six months ended June 30, 2014. Because the market for our software is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase over the next several years as we hire additional personnel, particularly in sales and marketing and research and development groups, expand and improve the effectiveness of our distribution channels, and continue to develop features and applications for our software.

We have a limited operating history, which makes it difficult to evaluate and predict our future prospects and may increase the risk that we will not be successful.

We were established in 2004 and have a short history operating our business. This limited operating history, as well as the early stage of our relationships with many of our channel partners and customers, makes financial forecasting and evaluation of our business difficult. We also operate in a new and growing market that may not develop as expected. Because we depend in part on the market’s acceptance of our products, it is difficult to evaluate trends that may affect our business. If our assumptions regarding these trends and uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in the market, our operating and financial results could differ materially from our expectations and our business could suffer.

Our future success will depend in large part on our ability to, among other things:

•

maintain and expand our business, including our customer base and operations, to support our growth, both domestically and internationally;

•

develop new products and services and bring products and services in beta to market;

•

renew maintenance and support agreements with, and sell additional products to, existing customers;

•

hire, integrate, train and retain skilled talent, including members of our sales force and software engineers; and

•

maintain compliance with applicable governmental regulations and other legal obligations, including those related to intellectual property, international sales and taxation.

If we fail to address these and other risks and difficulties, our business will be adversely affected and our business, operations and financial results will suffer.

Prolonged economic uncertainties or downturns could materially adversely affect our business.

Our business depends on our current and prospective customers’ ability and willingness to invest money in information technology services, which in turn is dependent upon their overall economic health. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from financial and credit market fluctuations and terrorist attacks on the United States, Europe, Asia Pacific or elsewhere, could cause a decrease in corporate spending on enterprise software in general.

Continuing uncertainty in the global economy, particularly in Europe, which accounted for approximately one-third of our revenues in 2013 and for the six months ended June 30, 2014, makes it extremely difficult for our customers and us to forecast and plan future business activities accurately, and could cause our customers to reevaluate decisions to purchase our product or to delay their purchasing decisions, which could lengthen our sales cycles.

We have a significant number of customers in the financial services, the public sector and the pharmaceutical and manufacturing industries. A substantial downturn in any of these industries, or a reduction in public sector spending, may cause enterprises to react to worsening conditions by reducing their capital expenditures in general or by specifically reducing their spending on information technology. Customers may delay or cancel information technology projects, choose to focus on in-house development efforts or seek to lower their costs by renegotiating maintenance and support agreements. To the extent purchases of licenses for our software are perceived by customers and potential customers to be discretionary, our revenues may be disproportionately affected by delays or reductions in general information technology spending. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our software. If the economic conditions of the general economy or industries in which we operate worsen from present levels, our business, results of operations and financial condition could be adversely affected.

If we are unable to maintain successful relationships with our channel partners, our business could be adversely affected.

We rely on channel partners, such as distribution partners and resellers, to sell licenses and support and maintenance agreements for our software. In 2013, our channel partners fulfilled the vast majority of our sales, and we expect that sales to channel partners will continue to account for a substantial portion of our revenues for the foreseeable future. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners, and particularly the relationships we have with our larger channel partners, such as EMC, which accounted for 5.4% and 6.1% of our revenues for the six month period ended June 30, 2014 and for the year ended December 31, 2013, respectively.

Our agreements with our channel partners are generally non-exclusive, meaning our channel partners may offer customers the products of several different companies. If our channel partners do not effectively market and sell our software, choose to use greater efforts to market and sell their own products or those of others, or fail to meet the needs of our customers, our ability to grow our business, sell our software and maintain our reputation may be adversely affected. Our contracts with our channel partners generally allow them to terminate their agreements for any reason upon 30 days’ notice. The loss of a substantial number of our channel partners, our possible inability to replace them, or the failure to recruit additional channel partners could materially and adversely affect our results of operations. If we are unable to maintain our relationships with these channel partners, our business, results of operations, financial condition or cash flows could be adversely affected.

If our technical support or professional services are not satisfactory to our customers, they may not renew their maintenance and support agreements or buy future products, which could adversely affect our future results of operations.

Our business relies on our customers’ satisfaction with the technical support and professional services we provide to support our products. While substantially all of our software is sold under perpetual license agreements, all of our maintenance and support agreements are sold on a term basis. Our customers typically purchase one year of software maintenance and support as part of their initial purchase of our products, with an option to renew their maintenance agreements. In order for us to maintain and improve our results of operations, it is important that our existing customers renew their maintenance and support agreements when the contract term expires. For example, our maintenance renewal rate for each of the years ended December 31, 2012 and 2013 and for the six month period ended June 30, 2014 was over 90%, and maintenance and service revenues have increased as a percentage of our revenues in each of such years.

If we fail to provide technical support services that are responsive, satisfy our customers’ expectations and resolve issues that they encounter with our products and services, then they may elect not to purchase or renew annual maintenance and support contracts and they may choose not to purchase additional products and services from us. Accordingly, our failure to provide satisfactory technical support or professional services could lead our customers not to renew their agreements with us or renew on terms less favorable to us, and therefore have a material and adverse effect on our business and results of operations.

Because we derive substantially all of our revenues and cash flows from sales of licenses for a single platform of products, failure of the four products in the platform to satisfy customers or to achieve increased market acceptance would adversely affect our business.

In 2013 and for the six months ended June 30, 2014, we generated substantially all of our revenues from sales of licenses for our platform of products that encompasses four of our current products , DatAdvantage, DataPrivilege, IDU Classification Framework and Data Transport Engine. We expect to continue to derive a majority of our revenues from license sales relating to this platform in the future. As such, market acceptance of this platform of products is critical to our continued success. Demand for licenses for our platform of products is affected by a number of factors, some of which are outside of our control, including continued market acceptance of our software by referenceable accounts for existing and new use cases, technological change and growth or contraction in our market. We expect the proliferation of unstructured data to lead to an increase in the data analysis demands, and data security and retention concerns, of our customers, and our software, including the software underlying our platform of products, may not be able to scale and perform to meet those demands. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of our software, our business, operations, financial results and growth prospects will be materially and adversely affected.

Failure to protect our proprietary technology and intellectual property rights could substantially harm our business.

The success of our business depends on our ability to obtain, protect and enforce our trade secrets, trademarks, copyrights, patents and other intellectual property rights. We attempt to protect our intellectual property under patent, trademark, copyrights and trade secret laws, and through a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection.

As of July 31, 2014, we had 16 issued patents in the United States and 42 pending U.S. patent applications. We also had three patents issued and 56 applications pending for examination in non-U.S. jurisdictions, and 42 pending Patent Cooperation Treaty (the “PCT”), patent applications, all of which are counterparts of our U.S. patent applications. We may file additional patent applications in the future. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner all the way through to the successful issuance of a patent. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Furthermore, it is possible that our patent applications may not issue as granted patents, that the scope of our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. In addition, issuance of a patent does not guarantee that we have an absolute right to practice the patented invention. Our policy is to require our employees (and our consultants and service providers that develop intellectual property included in our products) to execute written agreements in which they assign to us their rights in potential inventions and other intellectual property created within the scope of their employment (or, with respect to consultants and service providers, their engagement to develop such intellectual property), but we cannot assure you that we have adequately protected our rights in every such agreement or that we have executed an agreement with every such party. Finally, in order to benefit from patent and other intellectual property protection, we must monitor, detect and pursue infringement claims in certain circumstances in relevant jurisdictions, all of which is costly and time-consuming. As a result, we may not be able to obtain adequate protection or to enforce our issued patents or other intellectual property effectively.

In addition to patented technology, we rely on our unpatented proprietary technology and trade secrets. Despite our efforts to protect our proprietary technologies and our intellectual property rights, unauthorized parties, including our employees, consultants, service providers or customers, may attempt to copy aspects of our products or obtain and use our trade secrets or other confidential information. We generally enter into confidentiality agreements with our employees, consultants, service providers, vendors, channel partners and customers, and generally limit access to and distribution of our proprietary information and proprietary technology through certain procedural safeguards. These agreements may not effectively prevent unauthorized use or disclosure of our intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our intellectual property or technology. We cannot assure you that the steps taken by us will prevent misappropriation of our trade secrets or technology or infringement of our intellectual property. In addition, the laws of some foreign countries where we operate do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States.

Moreover, industries in which we operate, such as data security, data retention and data governance are characterized by the existence of a large number of relevant patents and frequent claims and related litigation regarding patent and other intellectual property rights. From time to time, third parties have asserted and may assert their patent, copyright, trademark and other intellectual property rights against us, our channel partners or our customers. Successful claims of infringement or misappropriation by a third party could prevent us from distributing certain products or performing certain services or could require us to pay substantial damages (including, for example, treble damages if we are found to have willfully infringed patents and increased statutory damages if we are found to have willfully infringed copyrights), royalties or other fees. Such claims also could require us to cease making, licensing or using solutions that are alleged to infringe or

misappropriate the intellectual property of others or to expend additional development resources to attempt to redesign our products or services or otherwise to develop non-infringing technology. Even if third parties may offer a license to their technology, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause our business, results of operations or financial condition to be materially and adversely affected. In some cases, we indemnify our channel partners and customers against claims that our products infringe the intellectual property of third parties. Defending against claims of infringement or being deemed to be infringing the intellectual property rights of others could impair our ability to innovate, develop, distribute and sell our current and planned products and services. If we are unable to protect our intellectual property rights and ensure that we are not violating the intellectual property rights of others, we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that have enabled us to be successful to date.

Interruptions or performance problems associated with our website or support website may adversely affect our business.

Our continued growth depends in part on the ability of our existing and potential customers to quickly access our website and support website. Access to our support website is also imperative to our daily operations and interaction with customers, as it allows customers to download our software, fixes and patches, as well as open and respond to support tickets and register license keys for evaluation or production purposes. We have experienced, and may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including natural disasters, infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our website simultaneously and denial of service or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the performance of our websites, especially during peak usage times and as our software becomes more complex and our user traffic increases. If our websites are unavailable or if our users are unable to download our software, patches or fixes within a reasonable amount of time or at all, we may suffer reputational harm and our business would be negatively affected.

Real or perceived errors, failures or bugs in our software could adversely affect our growth prospects.

Because our software uses complex technology, undetected errors, failures or bugs may occur. Our software is often installed and used in a variety of computing environments with different operating system management software, and equipment and networking configurations, which may cause errors or failures of our software or other aspects of the computing environment into which it is deployed. In addition, deployment of our software into computing environments may expose undetected errors, compatibility issues, failures or bugs in our software. Despite testing by us, errors, failures or bugs may not be found in our software until it is released to our customers. Moreover, our customers could incorrectly implement or inadvertently misuse our software, which could result in customer dissatisfaction and adversely impact the perceived utility of our products as well as our brand. Any of these real or perceived errors, compatibility issues, failures or bugs in our software could result in negative publicity, reputational harm, loss of or delay in market acceptance of our software, loss of competitive position or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.

If our software is perceived as not being secure, customers may reduce the use of or stop using our software, and we may incur significant liabilities.

Our software involves the transmission of data between data stores, and between data stores and desktop and mobile computers, and may in the future involve the storage of data. Any security breaches with respect to such data could result in the loss of this information, litigation, indemnity obligations and other liabilities. While we have taken steps to protect the confidential information that we have access to, including confidential information we may obtain through our customer support services or customer usage of our products, we have no direct control over the substance of the content. Therefore, if customers use our software for the transmission of personally identifiable information and our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, our reputation could be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. While we maintain insurance coverage for some of the above events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Any or all of these issues could tarnish our reputation, negatively impact our ability to attract new customers or sell additional products to our existing customers, cause existing customers to elect not to renew their maintenance and support agreements or subject us to third-party lawsuits, regulatory fines or other action or liability, thereby adversely affecting our results of operations.

We are subject to federal, state and industry privacy and data security regulations, which could result in additional costs and liabilities to us or inhibit sales of our software.

Although our software does not transmit our customers’ data to us, we collect and utilize demographic and other information, including personally identifiable information, from and about users (such as customers, potential customers and others) as they interact with us over the internet and otherwise provide us with information whether via our website or blog or through email or other means. Users may provide personal information to us in many contexts, including through our direct telephonic support service, blog alert sign-up, product purchase, survey registration, or when accessing our online support

portals or using other community or social networking features. Because we may collect and utilize this information, we are subject to laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996 (the “HIPAA”), and state breach notification laws. Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy legal framework with which we or our customers must comply, including the Data Protection Directive established in the European Union and the Federal Data Protection Act recently implemented in Germany.

Further, the regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations. In addition, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our software. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business. Any inability to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.

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

We use open source software and expect to continue to use open source software in the future. Some open source software licenses require users who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost. We may face ownership claims of third parties over, or seeking to enforce the license terms applicable to, such open source software, including by demanding the release of the open source software, derivative works or our proprietary source code that was developed using such software. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our software, any of which would have a negative effect on our business and results of operations. In addition, if the license terms for the open source code change, we may be forced to re-engineer our software or incur additional costs. Finally, we cannot assure you that we have incorporated open source software into our own software in a manner that conforms with our current policies and procedures.

Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation may adversely affect our business.

We believe that enhancing the “Varonis” brand identity and maintaining our reputation in the information technology industry is critical to our relationships with our customers and to our ability to attract new customers. Our brand recognition and reputation is dependent upon:

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our ability to continue to offer high-quality, innovative and error- and bug-free products;

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our ability to maintain customer satisfaction with our products;

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our ability to be responsive to customer concerns and provide high quality customer support, training and professional services;

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our marketing efforts;

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any misuse or perceived misuse of our products;

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positive or negative publicity;

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interruptions, delays or attacks on our website; and

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litigation or regulatory-related developments.

We may not be able to successfully promote our brand or maintain our reputation. In addition, independent industry analysts often provide reviews of our products, as well as other products available in the market, and perception of our product in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive than reviews about other products available in the market, our brand may be adversely affected. Furthermore, negative publicity relating to events or activities attributed to us, our employees, our channel partners or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity may reduce demand for our products and have an adverse effect on our business, results of operations and financial condition. Any attempts to rebuild our reputation and restore the value of our brand may be costly and time consuming, and such efforts may not ultimately be successful.

Moreover, it may be difficult to enhance our brand and maintain our reputation in connection with sales to channel partners. Promoting our brand requires us to make substantial expenditures, and we anticipate that the expenditures will

increase as our market becomes more competitive, as we expand into new markets and geographies and as more sales are generated to our channel partners. To the extent that these activities yield increased revenues, these revenues may not offset the increased expenses we incur. If we do not successfully enhance our brand and maintain our reputation, our business may not grow, we may have reduced pricing power relative to competitors with stronger brands, and we could lose customers, all of which would adversely affect our business, operations and financial results.

Our long-term growth depends, in part, on being able to continue to expand internationally on a profitable basis, which subjects us to risks associated with conducting international operations.

Historically, we have generated a majority of our revenues from customers in the United States. In 2013, and for the six months ended June 30, 2014, approximately 57% of our total revenues were derived from sales in the United States. Nevertheless, we have operations across the globe, and we plan to continue to expand our international operations as part of our growth strategy. In particular, we expect to expand our operations in Latin America and Asia. The further expansion of our international operations will subject us to a variety of risks and challenges, including:

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sales and customer service challenges associated with operating in different countries;

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increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations;

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difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds or collecting accounts receivable, especially in emerging markets;

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variations in economic or political conditions between each country or region;

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economic uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions;

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compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations;

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compliance with laws and regulations for foreign operations, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software in certain foreign markets, and the risks and costs of non-compliance;

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heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;

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reduced protection for intellectual property rights in certain countries and practical difficulties and costs of enforcing rights abroad; and

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compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes.

Any of these risks could adversely affect our international operations, reduce our revenues from outside the United States or increase our operating costs, adversely affecting our business, results of operations and financial condition and growth prospects. There can be no assurance that all of our employees, independent contractors and channel partners will comply with the formal policies we have and will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees, independent contractors and channel partners could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our software and services and could have a material adverse effect on our business and results of operations.

Significant changes in the contracting or fiscal policies of the public sector, or our failure to comply with certain laws or regulations, could have a material adverse effect on the business we do with the public sector.

We derive a portion of our revenues from governments and government-owned or -controlled entities (such as public health care bodies, educational institutions and utilities), which we refer to as the public sector herein, and we believe that the success and growth of our business will continue to depend on our successful procurement of public sector contracts. Factors that could impede our ability to maintain or increase the amount of revenues derived from public sector contracts include:

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changes in public sector fiscal or contracting policies;

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decreases in available public sector funding;

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changes in public sector programs or applicable requirements;

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the adoption of new laws or regulations or changes to existing laws or regulations;

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potential delays or changes in the public sector appropriations or other funding authorization processes; and

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delays in the payment of our invoices by public sector payment offices.

Furthermore, we must comply with laws and regulations relating to public sector contracting, which affect how we and our channel partners do business in both the United States and abroad. These laws and regulations may impose added costs on our business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages from our channel partners, penalties, termination of contracts, and temporary suspension or permanent debarment from public sector contracting.

The occurrence of any of the foregoing could cause public sector customers to delay or refrain from purchasing licenses of our software in the future or otherwise have an adverse effect on our business, operations and financial results.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

We incorporate encryption technology into certain of our products and these products are subject to U.S. export control. We are also subject to Israeli export controls on encryption technology since our product development initiatives are primarily conducted by our wholly-owned Israeli subsidiary. We have obtained the required licenses to export our products outside of the United States. In addition, the current encryption means used in our products are listed in the “free means encryption items” published by the Israeli Ministry of Defense, which means we are exempt from obtaining an encryption control license. If the applicable U.S. or Israeli legal requirements regarding the export of encryption technology were to change or if we change the encryption means in our products, we may need to apply for new licenses in the United States and may no longer be able to rely on our licensing exception in Israel. There can be no assurance that we will be able to obtain the required licenses under these circumstances. Furthermore, various other countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries.

We are also subject to U.S. and Israeli export control and economic sanctions laws, which prohibit the shipment of certain products to embargoed or sanctioned countries, governments and persons. Our products could be exported to these sanctioned targets by our channel partners despite the contractual undertakings they have given us and any such export could have negative consequences, including government investigations, penalties and reputational harm. Any change in export or import regulations, economic sanctions or related legislation, 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 products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

If currency exchange rates fluctuate substantially in the future, our results of operations, which are reported in U.S. dollars, could be adversely affected.

Our functional and reporting currency is the U.S. dollar, and we generate a majority of our revenues and incur a majority of our expenses in U.S. dollars. Revenues and expenses are also incurred in other currencies, primarily Euros, New Israeli Shekels, or NIS, and Pounds Sterling. Accordingly, changes in exchange rates may have a material adverse effect on our business, results of operations and financial condition. The exchange rates between the U.S. dollar and foreign currencies have fluctuated substantially in recent years and may continue to fluctuate substantially in the future. Furthermore, a strengthening of the U.S. dollar could increase the cost in local currency of our software to customers outside the United States, which could adversely affect our business, results of operations, financial condition and cash flows. We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currencies. The weakening of the U.S. dollar against such currencies would cause the dollar equivalent of such expenses to increase. This could have a negative impact on our reported results of operations. We use forward foreign exchange contracts to hedge or mitigate the effect of changes in foreign exchange rates on our operating expenses denominated in certain foreign currencies. However, this strategy might not eliminate our exposure to foreign exchange rate fluctuations and involves costs and risks of its own, such as cash expenditures, ongoing management time and expertise, external costs to implement the strategy and potential accounting implications. Additionally, our hedging activities may contribute to increased losses as a result of volatility in foreign currency markets.

Our ability to use our net operating loss carryforwards and other tax attributes may be limited if we undergo an “ownership change.”

Our ability to utilize our net operating loss carryforwards (“NOLs”) and other tax attributes could be limited if we undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). An ownership change is generally defined as a greater than 50 percentage point increase in equity ownership by 5% stockholders in any three-year period. If an ownership change occurred as a result of the sale of our common stock in our initial public offering, prior and future equity issuances, or the cumulative effect of such transactions, we may not be able to fully realize the benefits of these NOLs. Also, the cash tax benefit from our NOLs is dependent upon our ability to generate sufficient taxable income. Accordingly, we may be unable to earn enough taxable income in order to fully utilize our current NOLs.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

We are subject to income taxation in the United States, Israel and numerous other jurisdictions. Determining our provision for income taxes requires significant management judgment. In addition, our provision for income taxes could be adversely affected by many factors, including, among other things, changes to our operating structure, changes in the amounts of earnings in jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws. We are subject to ongoing tax examinations in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. While we regularly evaluate the likely outcomes of these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. In addition, we may be audited in various jurisdictions, and such jurisdictions may assess additional taxes against us. For example, we are currently subject to tax audits in Florida and New York relating to sales and excise taxes, and one audit in Israel. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our results of operations or cash flows in the period or periods for which a determination is made.

Significant judgment is required to determine the recognition and measurement attributes prescribed in Accounting Standards Codification, (“ASC 740-10-25”). In addition, ASC 740-10-25 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes. Further, as a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our results of operations.

The enactment of legislation changing the United States taxation of international business activities or the adoption of other tax reform policies could materially impact our financial position and results of operations.

Recent changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside the United States are repatriated to the United States, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our foreign earnings. Due to the expansion of our international business activities, any changes in the U.S. taxation of such activities may increase our worldwide effective tax rate and adversely affect our financial position and results of operations.

We conduct our operations in a number of jurisdictions worldwide and report our taxable income based on our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

We may require additional capital to support our business growth, and this capital might not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our software, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financing to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

Our business is subject to the risks of fire, power outages, floods, earthquakes and other catastrophic events, and to interruption by manmade problems such as terrorism.

A significant natural disaster, such as a fire, flood or an earthquake, or a significant power outage could have a material adverse impact on our business, results of operations and financial condition. In the event our customers’ information technology systems or our channel partners’ selling or distribution abilities are hindered by any of these events, we may miss financial targets, such as revenues and sales targets, for a particular quarter. Further, if a natural disaster occurs in a region from which we derive a significant portion of our revenue, customers in that region may delay or forego purchases of our

products, which may materially and adversely impact our results of operations for a particular period. In addition, acts of terrorism could cause disruptions in our business or the business of channel partners, customers or the economy as a whole. Given our typical concentration of sales at each quarter end, any disruption in the business of our channel partners or customers that impacts sales at the end of our quarter could have a significant adverse impact on our quarterly results. All of the aforementioned risks may be augmented if the disaster recovery plans for us and our channel partners prove to be inadequate. To the extent that any of the above results in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment of our products, our business, financial condition and results of operations would be adversely affected.

Risks Related to our Operations in Israel

Conditions in Israel may limit our ability to develop and sell our products, which could result in a decrease of our revenues.

Our principal research and development facility, which also houses a portion of our support and general and administrative teams, is located in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries, as well as incidents of terror activities and other hostilities, and a number of state and non-state actors have publicly committed to its destruction. Political, economic and security conditions in Israel could directly affect our operations. We could be adversely affected by hostilities involving Israel, including acts of terrorism or any other hostilities involving or threatening Israel, the interruption or curtailment of trade between Israel and its trading partners, a significant increase in inflation or a significant downturn in the economic or financial condition of Israel. Any on-going or future armed conflicts, terrorist activities, tension along the Israeli borders or with other countries in the region, including Iran, or political instability in the region could disrupt international trading activities in Israel and may materially and negatively affect our business and could harm our results of operations.

Certain countries, as well as certain companies and organizations, continue to participate in a boycott of Israeli companies, companies with large Israeli operations and others doing business with Israel and Israeli companies. The boycott, restrictive laws, policies or practices directed towards Israel, Israeli businesses or Israeli citizens could, individually or in the aggregate, have a material adverse effect on our business in the future.

Some of our officers and employees in Israel are obligated to perform routine military reserve duty in the Israel Defense Forces, depending on their age and position in the armed forces. Furthermore, they have been and may in the future be called to active reserve duty at any time under emergency circumstances for extended periods of time. Our operations could be disrupted by the absence, for a significant period, of one or more of our officers or key employees due to military service, and any significant disruption in our operations could harm our business.

We may be required to pay royalties to employees who develop inventions that have been or will be commercialized by us.

Under the Israeli Patents Law, 5727-1967, if there is no agreement that prescribes whether, to what extent and on what conditions, an employee is entitled to remuneration from commercialization of an invention developed by or with the contribution of such employee during his or her employment, then such matter may, upon application by the employee, be decided by a government-appointed compensation and royalties committee established under the Patents Law. In a decision issued in February 2010, the committee ruled that an employee’s assignment of a service invention to his employer does not necessarily negate the employee’s right to receive royalties or other compensation. In a subsequent decision of the Israeli Supreme Court from August 2012 the Supreme Court stated that even if the employee has signed an express written waiver of royalties for inventions made during his employment, the employee can still bring a compensation claim before the committee.

A significant portion of our intellectual property (including our patents) has been developed by our Israeli employees in the course of their employment for us. Our policy is to require all of our employees to execute invention assignment agreements upon commencement of employment, in which they assign their rights to potential inventions and acknowledge that they will not be entitled to additional compensation or royalties from commercialization of inventions. However, given the foregoing uncertainty with respect to the enforceability of a waiver of the right to future royalties, we may be required to pay royalties to our employees who have invented intellectual property that we have commercialized, which in turn may have a material adverse effect on our results of operations.

The tax benefits that are available to our Israeli subsidiary require it to continue to meet various conditions and may be terminated or reduced in the future, which could increase its taxes.

Our Israeli subsidiary benefits from a status of a “Beneficiary Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law. Based on an evaluation of the relevant factors under the Investment Law, including the level of foreign (i.e., non-Israeli) investment in our Israeli subsidiary, we have determined that the effective tax rate to be paid by our Israeli subsidiary as a “Beneficiary Enterprise” has historically been below 10%. If our Israeli subsidiary does not meet the requirements for maintaining this status, for example, if the Israeli subsidiary materially changes the nature of its business, it may no longer be eligible to enjoy this reduced tax rate. As a result, our Israeli subsidiary would be subject to Israeli corporate tax at the standard rate, which is currently set at 26.5%. Even if our

Israeli subsidiary continues to meet the relevant requirements, the tax benefits that the status of “Beneficiary Enterprise” provides may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that our Israeli subsidiary would pay would likely increase, as all of our Israeli operations would consequently be subject to corporate tax at the standard rate, which could adversely affect our results of operations. Additionally, if our Israeli subsidiary increases its activities outside of Israel, for example, through acquisitions, these activities may not be eligible for inclusion in Israeli tax benefit programs. The tax benefits derived from the status of “Beneficiary Enterprise” is dependent upon the ability to generate sufficient taxable income. Accordingly, our Israeli subsidiary may be unable to earn enough taxable income in order to fully utilize its tax benefits.

Risks Related to the Ownership of our Common Stock

Our stock price has been and will likely continue to be volatile.

The market price for our common stock has been, and is likely to continue to be, volatile for the foreseeable future. For example, since shares of our common stock were sold in our initial public offering in March 2014 at a price of $22.00 per share, our common stock’s price on The Nasdaq Global Select Market has ranged from $19.69 to $56.80 through August 5, 2014. On August 5, 2014, the closing price of our common stock was $22.80. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot predict or control, including the factors listed below and other factors described in this “Risk Factors” section:

•

actual or anticipated fluctuations in our results or those of our competitors;

•

the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•

failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•

ratings changes by any securities analysts who follow our company;

•

announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

•

fluctuations in stock market prices and trading volumes of securities of similar companies;

•

general market conditions and overall fluctuations in U.S. equity markets;

•

changes in accounting principles;

•

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

•

additions or departures of any of our key personnel;

•

lawsuits threatened or filed against us;

•

changing legal or regulatory developments in the United States and other countries; and

•

other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, results of operations, financial condition and cash flows.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

We have a small public float relative to the total number of shares of our common stock that are issued and outstanding, and a substantial majority of our issued and outstanding shares are currently restricted as a result of securities laws and lock-up agreements. Some of these shares will be sold into the public market as these restrictions expire. In particular, as of June 30, 2014, approximately 18.7 million shares of our common stock will become eligible for sale into the public market upon expiration of underwriter lock-up agreements in late August 2014. Sales of a substantial number of shares of our common stock into the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

In addition, as of June 30, 2014, we had options outstanding that, if fully exercised, would result in the issuance of approximately 3.8 million shares of our common stock. All of the shares of our common stock issuable upon exercise of options have been registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements, subject to the lock-up agreements described above.

Holders of approximately 17.2 million shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our other stockholders.

Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock.

Concentration of ownership among our existing executive officers, directors and their affiliates may prevent other investors from influencing significant corporate decisions.

As of June 30, 2014, our executive officers, directors and 5% or greater stockholders beneficially owned, in the aggregate, approximately 75.2% of our outstanding common stock. As a result, such persons, acting together, have the ability to control our management and affairs and substantially all matters submitted to our stockholders for approval, including the election and removal of directors and approval of any significant transaction. These persons also have the ability to control our management and business affairs. Additionally, these persons’ interests may not be, at all times, the same as those of our other stockholders, and they may vote in a way that is adverse to other stockholders’ interests. Our officers and directors are not simply passive investors but also include our executive officers, and as such their interests as executives may at times be adverse to those of our passive investors.

This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of The Nasdaq Global Select Market and other applicable securities rules and regulations. Compliance with these rules and regulations have increased our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and results of operations. We may need to hire more employees in the future or engage outside consultants to comply with these requirements, which will increase our costs and expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

We 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 our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected. However, for as long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of 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 may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

We will remain an “emerging growth company” for up to five years. If our non-convertible debt issued within a three year period or revenues exceeds $1 billion, or the market value of our common stock held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an “emerging growth company” as of the following fiscal year.

We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. We will be required, pursuant to Section 404 of the Sarbanes–Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending December 31, 2015. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. We have commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.

We are required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions contained in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.

If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” 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 do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.

We have never declared or paid cash dividends on our common stock. We currently anticipate that we will retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on a number of factors, including our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. In addition, the loan agreement for our credit facility contains a prohibition on the payment of cash dividends. Until such time that we pay a dividend, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include:

•

authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock, which would increase the number of outstanding shares and could thwart a takeover attempt;

•

a classified board of directors whose members can only be dismissed for cause;

•

the prohibition on actions by written consent of our stockholders;

•

the limitation on who may call a special meeting of stockholders;

•

the establishment of advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings; and

•

the requirement of at least 75% of the outstanding capital stock to amend any of the foregoing second through fifth provisions.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

None.

Use of Proceeds from Public Offerings of Common Stock

On March 5, 2014, we closed our initial public offering of 5,520,000 million shares of common stock, including 5,300,436 shares of common stock sold by us (inclusive of 500,436 shares of common stock from the full exercise of the overallotment option of shares granted to the underwriters) and 219,564 shares of common stock sold by the selling stockholder at a price to the public of $22.00 per share. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-191840), which was declared effective by the SEC on February 27, 2014. The offering commenced on February 28, 2014, closed on March 5, 2014 and did not terminate before all of the shares in the IPO that were registered in the registration statement were sold. Morgan Stanley & Co. LLC, Barclays Capital Inc., Jefferies LLC, RBC Capital Markets, LLC and Needham & Company, LLC acted as the underwriters. The aggregate offering price for shares sold in the offering was approximately $121.4 million. We did not receive any proceeds from the sale of shares by the selling stockholder. We raised approximately $106.1 million in net proceeds from the offering, after deducting underwriter discounts and commissions of approximately $8.2 million and other offering expenses of approximately $2.4 million.

No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on March 3, 2014. Pending the uses described, we have invested the net proceeds in short-term securities such as certificates of deposit and money market funds.

Item 6.

Exhibits


Exhibit Number		Description of the Document

3.1(1)		Amended and Restated Certificate of Incorporation

3.2(2)		Amended and Restated Bylaws

4.1(3)		Third Amended and Restated Investors’ Rights Agreement, dated as of February 24, 2011, by and among the Company and certain holders of the Company’s capital stock named therein

10.1		Forms of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2013 Omnibus Equity Incentive Plan

10.2		First Modification of Lease Agreement, dated as of June 18, 2014, between JT MH 1250 Owner LP and the Company

31.1		Rule 13a-14(a) Certification of Chief Executive Officer and President of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Section 1350 Certification of Chief Executive Officer and President of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

101**		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Cash Flows and (v) related notes to these consolidated financial statements, tagged as blocks of text and in detail

(*)

Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

(**)

In accordance with Rule 406T of Regulation S-T, the information in this exhibit is furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing, and otherwise is not subject to liability under these sections.

(1)	Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2014 (File No. 001-35324) (the “Company’s First Quarter 2014 Form 10-Q”) and incorporated herein by reference.

(2)	Filed as Exhibit 3.2 to the Company’s First Quarter 2014 Form 10-Q and incorporated herein by reference.

(3)	Filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File 333-191840) with the SEC on October 22, 2013 and incorporated herein by reference.

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.


	VARONIS SYSTEMS, INC.

August 6, 2014	By:	/s/ Yakov Faitelson
		Yakov Faitelson
		Chief Executive Officer and President

August 6, 2014	By:	/s/ Gili Iohan
		Gili Iohan
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX


Exhibit Number		Description of the Document

3.1(1)		Amended and Restated Certificate of Incorporation

3.2(2)		Amended and Restated Bylaws

4.1(3)		Third Amended and Restated Investors’ Rights Agreement, dated as of February 24, 2011, by and among the Company and certain holders of the Company’s capital stock named therein

10.1		Forms of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2013 Omnibus Equity Incentive Plan

10.2		First Modification of Lease Agreement, dated as of June 18, 2014, between JT MH 1250 Owner LP and the Company

31.1		Rule 13a-14(a) Certification of Chief Executive Officer and President of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Section 1350 Certification of Chief Executive Officer and President of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

101**		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Cash Flows and (v) related notes to these consolidated financial statements, tagged as blocks of text and in detail

(*)

(**)

(1)	Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2014 (File No. 001-35324) (the “Company’s First Quarter 2014 Form 10-Q”) and incorporated herein by reference.

(2)	Filed as Exhibit 3.2 to the Company’s First Quarter 2014 Form 10-Q and incorporated herein by reference.

(3)	Filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File 333-191840) with the SEC on October 22, 2013 and incorporated herein by reference.

Exhibit 10.1

[FORM OF]

VARONIS SYSTEMS, INC.

2013 OMNIBUS EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD GRANT NOTICE

Varonis Systems, Inc. (the “ Company ”), pursuant to its 2013 Omnibus Equity Incentive Plan (the “ Plan ”), hereby grants to the individual listed below (the “ Participant ”), an Award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”). Each vested Restricted Stock Unit represents the right to receive, in accordance with the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “ Agreement ”), one share of the common stock of the Company (“ Share ”). This Award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Agreement and the Plan, which are incorporated herein by reference.

Capitalized terms not specifically defined herein shall have the meanings specified in the Plan.

Participant: [ — ]

Grant Date: [ — ]

Total Number of RSUs Subject to Grant: [ — ]

Vesting Schedule: [ — ]

Termination: Except to the extent paid in accordance with the above vesting schedule, the Total Number of RSUs Subject to Grant shall terminate, become forfeited or expire without settlement in accordance with the terms of the Agreement.

By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Notice. The Participant has reviewed the Agreement, the Plan and this Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the Award of RSUs. [ For employee awards only: In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy any withholding obligations in accordance with Section 2.6(b) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6(b) of the Agreement or the Plan.]


VARONIS SYSTEMS, INC.						PARTICIPANT

By:						By:

Print Name:						Print Name:

Title:

Exhibit A

RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the Restricted Stock Unit Award Grant Notice (the “ Notice ”) to which this Restricted Stock Unit Award Agreement (this “ Agreement ”) is attached, Varonis Systems, Inc. (the “ Company ”) has granted to the Participant an Award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”) under the Company’s 2013 Omnibus Equity Incentive Plan (the “ Plan ”). Each vested Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company (“ Share ”) to purchase the number of Shares indicated in the Notice. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Notice.

ARTICLE I

GENERAL

1.1 Incorporation of Terms of Plan . The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II

GRANT OF RESTRICTED STOCK UNITS

2.1 Grant of RSUs . In consideration of the Participant’s employment or service to the Company or any Affiliate and other good and valuable consideration, effective as of the Grant Date set forth in the Notice, the Company hereby grants to the Participant an Award of RSUs under the Plan, upon the terms and conditions set forth in the Plan and this Agreement.

2.2 Unsecured Obligation . Unless and until the RSUs have vested in the manner set forth in Article 2 hereof, the Participant will have no right to receive Common Stock with respect to any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3 Vesting Schedule . Subject to Sections 2.5 and 3.1 hereof, the RSUs shall vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth in the Notice (rounding down to the nearest whole Share).

2.4 Consideration to the Company . In consideration of the grant of the Award of RSUs pursuant hereto, the Participant agrees to render faithful and efficient employment or other service to the Company or any Affiliate. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employment or service of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the employment or service of the Participant at any time for any reason whatsoever, with or without Cause.

A-1

2.5 Forfeiture, Termination and Cancellation Upon Termination of Employment or Service .

(a) Upon the Participant’s termination of employment or service with the Company and all Affiliates thereof, the RSUs shall be treated as follows [f or employee awards only: , except as specifically provided in an employment agreement between the Company and the Participant]:

(i) In the event that the employment or service of a Participant with the Company and all Affiliates thereof (including by reason of the Participant’s employer ceasing to be an Affiliate of the Company) shall terminate for any reason other than Cause, unvested RSUs granted to such Participant shall terminate at the close of business on the date of such termination.

(ii) In the event of the termination of a Participant’s employment or service for Cause, all outstanding RSUs (whether vested or not) granted to such Participant shall terminate at the commencement of business on the date of such termination.

(b) [ For employee awards only: In the sole discretion of the Administrator, RSUs shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial disability or other changes in the employment status of an Participant.]

2.6 Issuance of Common Stock upon Vesting .

(a) The RSUs shall represent the right to receive, on the first business day following the Vesting Date, the number of Shares determined in accordance with the Vesting Schedule set forth on the Notice of Grant to have been earned to the extent determined by the Compensation Committee after the applicable year-end audit, and provided that the Participant remains employed by the Company or an Affiliate through the Vesting Date, subject to the provisions of Section 2.5 or Section 3.1. Notwithstanding the above, earned Shares shall be treated as delivered on the first business day following the Vesting Date (the “ Delivery Date ”) provided that they are delivered on a date following the Delivery Date that is in the same calendar year as the Delivery Date. On the Delivery Date, the Company shall deliver to the Participant (or any transferee permitted under Section 4.2 hereof) a number of Shares (either by delivering one or more certificates for such Shares or by entering such Shares in book entry form, as determined by the Company in its sole discretion) equal to the number of RSUs subject to this Agreement that vest on the Vesting Date, unless such RSUs terminate prior to the Vesting Date pursuant to Section 2.5 hereof. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 19 of the Plan, the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with such Section.

(b) [ For employee awards only: As set forth in Section 16 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require the

A-2

Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state and local taxes required by law to be withheld with respect to any taxable event arising in connection with the Restricted Stock Units. The Company shall not be obligated to deliver any new certificate representing Shares to the Participant or the Participant’s legal representative or enter such Shares in book entry form unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of the Participant resulting from the grant or vesting of the Restricted Stock Units or the issuance of Shares.]

2.7 Conditions to Delivery of Shares . The Shares deliverable hereunder may be either previously authorized but unissued Shares, treasury Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares deliverable hereunder prior to fulfillment of the conditions set forth in Section 19 of the Plan.

ARTICLE III

CHANGE IN CONTROL

3.1 Change in Control . In the event of a Change in Control, the RSUs shall be treated in accordance with Section 13 of the Plan.

ARTICLE IV

OTHER PROVISIONS

4.1 Administration . The Administrator shall have the power and authority to interpret and construe the terms and provisions of this Agreement and to adopt such rules for the administration, interpretation and application of this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All decisions made by the Administrator shall be final, conclusive and binding on all persons, including the Participant, the Company and all other interested persons.

4.2 Transferability of Grant . Except as otherwise set forth in the Plan:

(a) The RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution;

(b) Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 4.2(a) hereof.

A-3

4.3 Taxes . The Participant represents that the Participant has consulted with any tax consultants the Participant deems advisable in connection with the grant of RSUs and the issuance of Shares with respect thereto and that the Participant is not relying on the Company for any tax advice. The Company makes no warranties or representations whatsoever to the Participant regarding the tax consequences of the grant of RSUs or the receipt of Shares with respect thereto. The Participant shall be solely responsible for any taxes in respect of the RSUs.

4.4 Adjustments . The Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided in this Agreement and Section 5 of the Plan.

4.5 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Legal Department at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to his or her RSUs pursuant to Section 4.2(a) hereof by written notice under this Section 4.5.

4.6 Participant’s Representations . If the Shares issuable hereunder have not been registered under the Securities Act or any applicable state laws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance, make such written representations as are deemed necessary or appropriate by the Company and/or its counsel.

4.7 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.8 Governing Law . The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

4.9 Conformity to Securities Laws . The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted and settled, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

4.10 Amendments and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended, altered or terminated at any time or from time to time by the Administrator or the Board, but no amendment, alteration or termination of this Agreement shall be made that would materially impair the rights of a Participant under the RSUs without such Participant’s consent.

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4.11 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 4.2 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

4.12 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

4.13 Entire Agreement . The Plan, the Notice and this Agreement (including all Exhibits thereto, if any) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

4.14 Section 409A . This Restricted Stock Unit Award is intended to comply with Code Section 409A to the extent subject thereto and shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including, without limitation, any such regulations or other guidance that may be issued after the Grant Date. Notwithstanding any provision in the Plan or Agreement to the contrary, no payment or distribution under this Agreement that constitutes an item of deferred compensation under Code Section 409A and becomes payable by reason of the Participant’s termination of employment or service with the Company will be made to the Participant until the Participant’s termination of employment or service constitutes a “separation from service” (as defined in Code Section 409A). For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Code Section 409A. [ For employee awards only: If a participant is a “specified employee” (as defined in Code Section 409A), then to the extent necessary to avoid the imposition of taxes under Code Section 409A, such Participant shall not be entitled to any payments upon a termination of his or her employment or service until the earlier of: (i) the expiration of the six (6)-month period measured from the date of such Participant’s “separation from service” or (ii) the date of such Participant’s death. Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 4.15 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than sixty (60) calendar days, following such expired period, and any remaining payments due under this Agreement will be paid in accordance with the normal payment dates specified for them herein.] The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Code Section 409A.

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4.15 Electronic Signature; Electronic Delivery and Acceptance . The Participant’s electronic signature of this Agreement shall have the same validity and effect as a signature affixed by hand. The Company may, in its sole discretion, decide to deliver any documents related to the Participant’s current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

4.16 Addendum . Notwithstanding any provisions in this Agreement, the RSUs shall be subject to any special provisions set forth in the Country Addendum attached hereto as Exhibit A for the Participant’s country of residence, if any. If the Participant relocates to one of the countries included in the Country Addendum or the United States during the term of the RSUs, the special provisions for such country shall apply to Participant to the extent the Company determines that the application of such provisions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement.

4.17 Waiver . The Participant acknowledges that a waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant.

4.18 Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

4.19 Tax Withholding . Regardless of any action the Company and its Affiliates or, if Participant is an employee, the employer (the “ Employer ”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“ Tax-Related Items ”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or any Affiliate. Participant further acknowledges that the Company, its Affiliates and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant or vesting of the RSUs, the subsequent sale of Shares acquired pursuant to the RSUs and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company, its Affiliates and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. If Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the RSUs, notwithstanding that a number of the Shares are

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held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan.

4.20 Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other grant materials by and among, as applicable, the Company, the Employer and any Affiliate of the Company for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“ Data ”), for the exclusive purpose of implementing, administering and managing the Plan. Participant understands that Data may be transferred to a stock plan transfer agent, trustee, broker or administrator designated by the Company or any such other stock plan service provider as may be designated by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, the Company’s designated transfer agent, trustee, stock plan broker or administrator and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment or service relationship with the Company, its Affiliates or Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact the Company.

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Exhibit 10.2

FIRST MODIFICATION OF LEASE AGREEMENT

FIRST MODIFICATION OF LEASE AGREEMENT (this “ Amendment ”), made as of this 18 ^th day of June, 2014 (the “ Effective Date ”), between JT MH 1250 OWNER LP, a Delaware limited partnership (“ Landlord ”), having an address at c/o Jamestown, One Overton Park, Twelfth Floor, 3625 Cumberland Boulevard, Atlanta, Georgia 30339, and VARONIS SYSTEMS, INC., a Delaware corporation (“ Tenant ”), having an address at 1250 Broadway, New York, New York 10001.

WITNESSETH

WHEREAS, Landlord and Tenant are parties to that certain Agreement of Lease, dated as of December 19, 2011 (as amended hereby, the “ Lease ”), whereby Tenant leased certain premises (the “ 31 ^st Floor Premises ”) more particularly described therein and located on the thirty-first (31 ^th ) floor of the building commonly known as and located at 1250 Broadway, New York, New York; and

WHEREAS, Landlord and Tenant desire to extend the term of the Lease, add additional premises to the 31 ^st Floor Premises, and modify certain other provisions of the Lease as more specifically set forth herein.

NOW, THEREFORE, for Ten Dollars, the mutual covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree that the Lease is hereby modified as follows:

1.	Definitions .

Unless otherwise defined herein, all capitalized terms used herein shall have the meanings ascribed to them in the Lease.

2.	Term Extension .

2.1. The term of the Lease (the “ Term ”) is hereby extended upon and subject to the same terms, covenants and conditions as in the Lease, except as otherwise set forth herein, for the period (the “ Extended Term ”) commencing on February 1, 2015 and ending on February 28, 2026 (the “ Extended Term Expiration Date ”).

2.2. As of the date hereof, the “Term” or “term” shall mean the term of the Lease, as extended by the Extended Term, and the “Expiration Date” shall mean the Extended Term Expiration Date, unless the term of the Lease, as extended hereby, shall sooner terminate pursuant to the terms of the Lease or by law.

2.3. When the 29 ^th Floor Rent Commencement Date, the 29 ^th Floor First Rental Period, the 29 ^th Floor Second Rental Period, the 29 ^th Floor Third Rental Period, the 28 ^th Floor Commencement Date, the 28 ^th Floor Rent Commencement Date, the 28 ^th Floor First Rental Period, the 28 ^th Floor Second Rental Period and the 28 ^th Floor Third Rental Period (as all such terms are hereinafter defined) shall have been determined in accordance with the terms of this Amendment, Landlord and Tenant shall, upon the request of either of them, execute a statement prepared by Landlord setting forth such dates. Any failure of Tenant to execute such statement shall not affect the determination of any of the foregoing dates.

3.	Additional Premises.

3.1. Commencing on the Effective Date, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, on all of the terms and conditions of the Lease (except as otherwise provided in this Amendment), those certain premises located on the twenty-ninth (29 ^th ) floor of the Building conclusively deemed to comprise 15,356 rentable square feet, substantially as shown on the floor plan annexed as Exhibit A hereto (the “ 29 ^th Floor Premises ”). On the Effective Date the 29 ^th Floor Premises shall be delivered to Tenant vacant and broom-clean. From and after the Effective Date, all references in the Lease to the “Premises” or the “demised premises” shall be deemed to include the 29 ^th Floor Premises.

3.2. Commencing on the date on which Landlord delivers possession of the 28 ^th Floor Premises (as hereinafter defined) to Tenant vacant and broom-clean with Landlord’s 28 ^th Floor Premises Work (as hereinafter defined) Substantially Complete (as hereinafter defined) and an SNDA (as hereinafter defined) from the lessor under any ground or underlying lease and the holder of any mortgage then in effect (the “ 28 ^th Floor Commencement Date ”), which shall occur no sooner than October 1, 2014, those certain premises located on the twenty-eighth (28 ^th ) floor of the Building conclusively deemed to comprise 15,356 rentable square feet, substantially as shown on the floor plan annexed as Exhibit B hereto (the “ 28 ^th Floor Premises ”), shall be leased to Tenant on all of the terms and conditions of the Lease, except as otherwise provided in this Amendment. From and after the 28 ^th Floor Commencement Date, all references in the Lease to the “Premises” or the “demised premises” shall be deemed to include the 28 ^th Floor Premises.

3.3. (a) On (x) the Effective Date Tenant shall accept the 29 ^th Floor Premises, and (y) on the 28 ^th Floor Commencement Date Tenant shall accept the 28 ^th Floor Premises with the 28th Floor Premises Work Substantially Completed, and otherwise in their “AS IS” condition on such dates, and Landlord shall not be required to perform any additional work to make the 29 ^th Floor Premises or the 28 ^th Floor Premises ready for Tenant’s use and occupancy.

(b) As used herein, “ Substantially Complete ” shall mean that Landlord’s 28 ^th Floor Premises Work shall be substantially completed other than (a) minor or insubstantial details of construction, mechanical adjustment or decoration that remain to be performed or (b) portions of Landlord’s 28 ^th Floor Premises Work have not been completed because under good construction scheduling practice such work should be done after still uncompleted finishing or other work to be done by or on behalf of Tenant is completed. In addition, the date Landlord’s 28 ^th Floor Premises Work shall be deemed Substantially Completed shall be accelerated one day for each day of any delay caused by Tenant or its employees, agents or contractors.

3.4. If for any reason Landlord shall be unable to deliver possession of the 29 ^th Floor Premises or the 28 ^th Floor Premises to Tenant on any date specified in this Amendment for such delivery, Landlord shall have no liability to Tenant therefor except as expressly provided in this Section 3.4 and the validity of this Amendment (or the Lease) shall not be impaired, nor shall the Term under the Lease (as modified by this Amendment) be extended, by reason thereof. This Section 3.4 shall be an express provision to the contrary for purposes of Section 223-a of the New York Real Property Law and any other law of like import now or hereafter in effect. Notwithstanding the foregoing, in the event the 28 ^th Floor Commencement Date fails to occur on or prior to December 1, 2014, (i) Landlord shall use commercially reasonable efforts to remove any party then occupying the 28 ^th Floor Premises, which efforts shall include but not be limited to prompt initiation and diligent prosecution of appropriate legal proceedings to evict such party and regain possession of the 28 ^th Floor Premises and to cause vacant and exclusive possession of such space to be delivered to Tenant in the condition required under this Amendment as soon as reasonably possible; (ii) the fixed annual rent allocable to the 28 ^th Floor Premises shall be abated one (1) day for every day that the 28 ^th Floor Commencement Date fails to occur following December 1, 2014 (subject, however, to the terms of clause (iii) ); (iii) to the extent available, Landlord shall make substitute space in the Building available to Tenant at no charge (other than the payment of utilities and overtime

services), provided , however , that in the event Tenant elects to use such substitute space, then the rent abatement described in the preceding clause (ii) and, if applicable, the following sentence shall not apply). In addition, in the event the 28 ^th Floor Commencement Date fails to occur on or prior to March 1, 2015, fixed annual rent allocable to the 28 ^th Floor Premises shall be abated two (2) days for every day that the 28 ^th Floor Commencement Date fails to occur following March 1, 2015 (subject, however, to the terms of clause (iii) of the preceding sentence).

4.	Fixed Annual Rent .

4.1. The fixed annual rent for the 31 ^st Floor Premises shall be payable as follows:

(a)

For the period commencing on the Effective Date and ending on January 31, 2015, at the applicable rate provided in Section 1.01 of the Lease;

(b)

For the period commencing on February 1, 2015 and ending on September 30, 2015, provided Tenant is not then in default beyond the expiration of any applicable notice and cure period, fixed annual rent, Tenant’s Tax Payment, the Expense Payment, Insurance Expense Payment and Energy Expense Payment (as such terms are hereinafter defined) for the 31 ^st Floor Premises shall be abated (it being agreed that if Tenant is so in default, fixed annual rent for such period shall be payable at the rate provided for in Section 4.1(c) hereof and Tenant’s Tax Payment, the Expense Payment, Insurance Expense Payment and Energy Expense Payment for such period shall be payable as otherwise provided in Section 5 hereof);

(c)

For the period commencing on October 1, 2015 and ending on September 30, 2018, at the rate of $882,970.00 per annum ($73,580.83 per month);

(d)

For the period commencing on October 1, 2018 and ending on September 30, 2022, at the rate of $921,360.00 per annum ($76,780.00 per month); and

(e)

For the period commencing on October 1, 2022 and ending on the Extended Term Expiration Date, at the rate of $959,750.00 per annum ($79,979.17 per month).

4.2. The fixed annual rent for the 29 ^th Floor Premises shall be payable as follows:

(a)

For the period commencing on the Effective Date and ending on the fourteen (14) month anniversary thereof (the “ 29 ^th Floor Rent Commencement Date ”), provided Tenant is not then in default beyond the expiration of any applicable notice and cure period, fixed annual rent, Tenant’s Tax Payment, the Expense Payment, Insurance Expense Payment and Energy Expense Payment for the 29 ^th Floor Premises shall be abated (it being agreed that if Tenant is so in default, fixed annual rent for such period shall be payable at the rate provided for in Section 4.2(b) hereof and Tenant’s Tax Payment, the Expense Payment, Insurance Expense Payment and Energy Expense Payment for such period shall be payable as otherwise provided in Section 5 hereof);

(b)

For the period (the “ 29 ^th Floor First Rental Period ”) commencing on the 29 ^th Floor Rent Commencement Date and ending on the last day of the month in which occurs the three (3) year anniversary of the 29 ^th Floor Rent

Commencement Date (unless the 29 ^th Floor Rent Commencement Date is the first day of the month, in which event the 29 ^th Floor First Rental Period shall end on the day preceding the three (3) year anniversary of the 29 ^th Floor Rent Commencement Date), at the rate of $882,970.00 per annum ($73,580.83 per month);

(c)

For the period (the “ 29 ^th Floor Second Rental Period ”) commencing on the day immediately following the 29 ^th Floor First Rental Period and ending on the day preceding the four (4) year anniversary thereof, at the rate of $921,360.00 per annum ($76,780.00 per month); and

(d)

For the period (the “ 29 ^th Floor Third Rental Period ”) commencing on the day immediately following the 29 ^th Floor Second Rental Period and ending on the Extended Term Expiration Date, at the rate of $959,750.00 per annum ($79,979.17 per month).

4.3. The fixed annual rent for the 28 ^th Floor Premises shall be payable as follows:

(a)

For the period commencing on the 28 ^th Floor Commencement Date and ending on the later to occur of (x) October 1, 2015 and (y) the day preceding the seventeen (17) month anniversary thereof (such later date known as the “ 28 ^th Floor Rent Commencement Date ”), provided Tenant is not then in default beyond the expiration of any applicable notice and cure period, fixed annual rent for the 28 ^th Floor Premises shall be abated (it being agreed that if Tenant is so in default, fixed annual rent for such period shall be payable at the rate provided for in Section 4.3(b) hereof);

(b)

For the period (the “ 28 ^th Floor First Rental Period ”) commencing on the 28 ^th Floor Rent Commencement Date and ending on the last day of the month in which occurs the three (3) year anniversary of the 28 ^th Floor Rent Commencement Date (unless the 28 ^th Floor Rent Commencement Date is the first day of the month, in which event the 28 ^th Floor First Rental Period shall end on the day preceding the three (3) year anniversary of the 28 ^th Floor Rent Commencement Date), at the rate of $882,970.00 per annum ($73,580.83 per month);

(c)

For the period (the “ 28 ^th Floor Second Rental Period ”) commencing on the day immediately following the 28 ^th Floor First Rental Period and ending on the day preceding the four (4) year anniversary thereof, at the rate of $921,360.00 per annum ($76,780.00 per month); and

(d)

For the period (the “ 28 ^th Floor Third Rental Period ”) commencing on the day immediately following the 28 ^th Floor Second Rental Period and ending on the Extended Term Expiration Date, at the rate of $959,750.00 per annum ($79,979.17 per month).

5.	Additional Rent .

5.1. Tenant shall make separate Tenant’s Tax Payments for each of the 31 ^st Floor Premises, the 29 ^th Floor Premises and the 28 ^th Floor Premises pursuant to Article 3 of the Lease, subject to the following:

(a)

For the 31 ^st Floor Premises, (i) between the Effective Date and January 31, 2015, Tenant shall continue to make Tenant’s Tax Payment pursuant to Article 3 of the Lease, and (ii) from and after February 1, 2015, Tenant shall make Tenant’s Tax Payment pursuant to Article 3 of the Lease, except that the term “ Base Tax ” shall be deemed to mean the average of (X) the amount determined by multiplying (i) the amount for which the Building and the Land are assessed by the City of New York for the purposes of establishing Taxes to be paid by Landlord for the Tax Year commencing July 1, 2014, as finally determined, by (ii) the real property tax rate applicable to the Borough of Manhattan with respect to the Tax Year commencing July 1, 2014, and (Y) the amount determined by multiplying (i) the amount for which the Building and the Land are assessed by the City of New York for the purposes of establishing Taxes to be paid by Landlord for the Tax Year commencing July 1, 2015, as finally determined, by (ii) the real property tax rate applicable to the Borough of Manhattan with respect to the Tax Year commencing July 1, 2015 (hereafter, the “ 2015 Taxes ”);

(b)

For the 29 ^th Floor Premises, from and after the Effective Date, Tenant shall make Tenant’s Tax Payment pursuant to Article 3 of the Lease, except that the term “ Tenant’s Tax Proportionate Share ” shall be deemed to mean 2.18% and the term “ Base Tax ” shall be deemed to mean the 2015 Taxes; and

(c)

For the 28 ^th Floor Premises, from and after the 28 ^th Floor Commencement Date, Tenant shall make Tenant’s Tax Payment pursuant to Article 3 of the Lease, except that the term “ Tenant’s Tax Proportionate Share ” shall be deemed to mean 2.18% and the term “ Base Tax ” shall be deemed to mean the 2015 Taxes; and

5.2. Tenant shall pay to Landlord, as additional rent, separate Expense Payments, Insurance Expense Payments and Energy Expense Payments for each of the 31 ^st Floor Premises, the 29 ^th Floor Premises and the 28 ^th Floor Premises in accordance with the terms of Exhibit C annexed hereto.

6.	Electricity .

Tenant shall purchase electricity from Landlord pursuant to Article 4 of the Lease, except that (A) from and after (i) February 1, 2015 (with respect to the 31 ^st Floor Premises), (ii) the Effective Date (with respect to the 29 ^th Floor Premises) and (iii) the 28 ^th Floor Commencement Date (with respect to the 28 ^th Floor Premises), the reference to “seven (7%) percent” appearing in Section 4.01(ii) of the Lease is replaced with “five (5%) percent”, and (B) any unused electricity allocated to the Premises may be recaptured by Landlord. Landlord shall bear all cost and expense associated with installing submeters for Tenant’s electricity consumption. No building-wide HVAC or HVAC that serves any portion of the Building other than the Premises shall be included on Tenant’s electricity submeter.

7.	Landlord’s 28 ^th Floor Premises Work .

Solely with respect to the 28 ^th Floor Premises, Landlord shall perform, at Landlord’s sole cost and expense, the work more particularly described on Exhibit D (“ Landlord’s 28 ^th Floor Premises Work ”). Landlord’s 28 ^th Floor Premises Work shall be performed using Building standard materials in a Building standard manner.

8.	Tenant Allowances .

8.1. Landlord shall provide to Tenant (i) a tenant improvement allowance (“ Tenant’s General Allowance ”) in the amount of sums expended by Tenant on Tenant’s initial permanent leasehold improvements in the demised premises (“ Tenant’s General Work ”), but in no event greater than $2,687,300.00; and (ii) a second tenant improvement allowance (“ Tenant’s Lavatory Allowance ”) in the amount of sums expended by Tenant on Tenant’s upgrading of the men’s and women’s lavatories in the demised premises in compliance with the provisions of the Americans With Disabilities Act of 1990 and any municipal laws, ordinances and rules of like import, and any regulations adopted and amendments promulgated pursuant to any of the foregoing (“ Tenant’s Lavatory Work ”), but in no event greater than $300,000.00. No more than fifteen percent (15%) of Tenant’s General Allowance and Tenant’s Lavatory Allowance shall be applied to Soft Costs (hereinafter defined). Such Tenant’s General Allowance and Tenant’s Lavatory Allowance shall be made in Pro Rata Installments (hereinafter defined) within thirty (30) days of Tenant’s request for payment, but in no event more than once per month, and shall be given to Tenant upon satisfaction of the following conditions with respect to each such request for payment:

(a) Tenant shall have delivered to Landlord a completed requisition for payment, signed and certified as true by Tenant and by Tenant’s architect, stating the amount requested for payment, which shall include an itemized breakdown of the costs and expenses incurred by Tenant, stating the percentage of Tenant’s General Work or Tenant’s Lavatory Work that has been completed, and shall indicate a minimum of ten (10%) percent retainage of payments by Tenant to its contractors (it being understood that any request for payment hereunder shall not be on account of such required retainage) accompanied by copies of invoices, bills or receipts (or other evidence reasonably satisfactory to Landlord) for the costs with respect to which such request for payment is being made;

(b) such Tenant’s General Work and Tenant’s Lavatory Work shall have been completed in accordance with plans and specifications approved by Landlord and otherwise in accordance with the Lease (including, without limitation, in accordance with the terms and conditions of Article 6 of the Lease) and such completion shall be certified by Tenant and Tenant’s architect;

(c) Tenant shall not be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period; and

(d) Tenant shall have fully paid all bills for labor, materials and services in connection with Tenant’s General Work and Tenant’s Lavatory Work (as applicable) performed through the immediately prior request for payment of Tenant’s General Allowance or Tenant’s Lavatory Allowance (as applicable), and Tenant shall provide Landlord with (i) satisfactory evidence of payment thereof, including paid bills and cancelled checks, and (ii) executed lien waivers from all contractors and subcontractors respecting work performed.

8.2. At Tenant’s request, Landlord shall pay any installment of Tenant’s General Allowance or Tenant’s Lavatory Allowance to Tenant’s contractors and/or vendors or jointly to Tenant and Tenant’s contractors and/or vendors.

8.3. The final Pro Rata Installment for Tenant’s General Work or Tenant’s Lavatory Work (as applicable), which shall not be less than 10% of Tenant’s General Allowance or Tenant’s Lavatory Allowance (as applicable), shall not be paid until, in addition to satisfaction of the provisions above, Tenant provides Landlord with evidence that the applicable municipal department has issued the appropriate sign-off relating to Tenant’s General Work or Tenant’s Lavatory Work (as applicable).

8.4. “ Pro Rata Installments ” shall mean the cost of the portion of Tenant’s General Work or Tenant’s Lavatory Work (as applicable) performed multiplied by a fraction, the numerator of which is Tenant’s General Allowance or Tenant’s Lavatory Allowance (as applicable) and the denominator of

which is the total cost of Tenant’s General Work or Tenant’s Lavatory Work (as applicable), as reasonably estimated by Landlord based upon information, plans and construction contracts given by Tenant to Landlord.

8.5. In the event Landlord has not paid Tenant any installment of Tenant’s General Allowance or Tenant’s Lavatory Allowance pursuant to this Section 8 within thirty (30) days of the date that the same was payable to Tenant in accordance with the terms hereof, Tenant may deliver a written notice to Landlord, specifying in bold and capitalized letters that if Landlord fails to pay the amount being requested within fifteen (15) business days of the giving of such notice, that Tenant shall be entitled to offset such amount against the next installment(s) of rent that are due and owning under the Lease. If Landlord so fails to timely make such payment, Tenant may so offset such unpaid payment against the next installment(s) of rent that are due and owing under the Lease. Notwithstanding the foregoing, the offset right in this Section 8.5 shall not be available to Tenant if Tenant is then in default under the Lease (provided that upon the cure of any such default, such offset right shall then apply).

9.	ROFO Option .

9.1. Subject to the terms hereinafter provided, Landlord shall not lease to any individual or entity other than Tenant or Landlord’s affiliate the premises located on (i) the entire twenty-seventh (27 ^th ) floor of the Building and more particularly shown on the floor plan annexed hereto as Exhibit E-1 (the “ 27 ^th Floor Option Space ”); and (ii) the entire thirty-second (32 ^nd ) floor of the Building and more particularly shown on the floor plan annexed hereto as Exhibit E-2 (the “ 32 ^nd Floor Option Space ”) at any time during the Term of the Lease, without first instituting the procedure described in, and subject to the limitations set forth in, this Section 9 .

9.2. Landlord shall institute the procedure described in this Section 9 by giving notice thereof (the “ Option Notice ”) to Tenant, which Option Notice shall (i) describe the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable) (the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space that is described in a particular Option Notice being referred to herein as the “ Applicable Option Space ”), (ii) have attached thereto a floor plan depicting the Applicable Option Space, (iii) set forth the date that Landlord reasonably expects that the Applicable Option Space will be vacant and available for Tenant’s occupancy (such date designated by Landlord being referred to herein as the “ Scheduled Option Space Commencement Date ”), and (iv) set forth Landlord’s calculation of the number of square feet of rentable area in the Applicable Option Space.

9.3. Tenant shall have the option (the “ ROFO Option ”) to lease the Applicable Option Space for a term commencing on the Option Space Commencement Date (as hereinafter defined) and expiring on the Extended Term Expiration Date by giving notice thereof (the “ Option Response Notice ”) to Landlord not later than the thirtieth (30 ^th ) day after the date that Landlord gives the Option Notice to Tenant. Time shall be of the essence as to the date by which Tenant must give the Option Response Notice to Landlord to exercise the ROFO Option. If Tenant does not give the Option Response Notice to Landlord on or prior to the thirtieth (30 ^th ) day after the date that Landlord gives the Option Notice to Tenant, then Landlord shall thereafter have the right to lease the Applicable Option Space (or any part thereof) to any other person or entity on terms acceptable to Landlord in Landlord’s sole discretion without being required to make any other offer to Tenant regarding the Applicable Option Space under this Section 9 (and, accordingly, such Applicable Option Space shall not thereafter constitute the 27 ^th Floor Option Space or the 32 ^nd Floor Option Space, as applicable). Tenant shall not have the right to revoke an Option Response Notice given to Landlord pursuant to this Section 9.3 .

9.4. Notwithstanding anything to the contrary in this Section 9 :

(a) Tenant shall not have the right to exercise the ROFO Option (and, accordingly (x) Landlord shall have no obligation to give an Option Notice to Tenant, and (y) Landlord shall have the right to lease the Applicable Option Space to any other person or entity without first offering the Applicable Option Space to Tenant as contemplated by this Section 9 ) if, on the date that Landlord offers the Applicable Space for lease to the general public, Tenant does not Occupy (as hereinafter defined) at least sixty-six percent (66%) the entire demised premises (such occupancy requirement, the “ Minimum Occupancy Requirement ”). For purposes of this Amendment, Tenant shall be deemed to “Occupy” a portion of the Premises if Tenant has not subleased such portion of the Premises.

(b) Tenant shall not have the right to exercise the ROFO Option prior to Landlord’s leasing the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable) to any individual or entity that then occupies the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable) (or such portion thereof) (regardless of whether such leasing is pursuant to an option or right contained in such individual or entity’s lease), and, accordingly, (I) Landlord shall have no obligation to give an Option Notice to Tenant with respect to the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable), and (II) Landlord shall have the right to lease the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable) (or such portion thereof) to any such individual or entity without first offering the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space (as applicable) (or the applicable portion thereof) to Tenant as contemplated by this Section 9 . The following is a list of the current occupants of the 27 ^th Floor Option Space and the 32 ^nd Floor Option Space and the current expiration dates of such occupants’ existing leases or occupancy agreements: (i) 27 ^th Floor Option Space: Newman Ferrarra: April 30, 2026, and (ii) 32 ^nd Floor Option Space: Visiting Nurse Service: December 31, 2018 (subject to tenant renewal rights and an early termination right effective as of August 1, 2015).

(c) Tenant’s exercise of the ROFO Option shall be ineffective if, on the date that Tenant gives the Option Response Notice, Tenant shall be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period. If (I) Tenant exercises the ROFO Option, and (II) at any time prior to the applicable Option Space Commencement Date, Tenant shall be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period, the Minimum Occupancy Requirement is not satisfied, then, at any time prior to the applicable Option Space Commencement Date, Landlord shall have the right to declare Tenant’s exercise of the ROFO Option ineffective by giving notice thereof to Tenant, in which case Landlord shall have the right to lease the Applicable Option Space (or any portion thereof) to any other individual or entity on terms acceptable to Landlord in Landlord’s sole discretion.

(d) Tenant shall not have the right to exercise the ROFO Option from and after the Option Cutoff Date (as hereinafter defined), and, accordingly, from and after the Option Cutoff Date, (I) Landlord shall have no obligation to give an Option Notice to Tenant with respect to the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space, and (II) Landlord shall have the right to lease the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space to any other individual or entity without first offering such 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space to Tenant as contemplated by this Section 9 . The term “ Option Cutoff Date ” shall mean (x) if Tenant shall have not exercised the Renewal Option (as hereinafter defined), the date that is three (3) years before the Extended Term Expiration Date, provided, however, that Tenant shall nevertheless have the right to exercise the ROFO Option in the three (3) years before the Extended Term Expiration Date if, simultaneous with exercising the ROFO Option, Tenant shall also give the Renewal Notice, and (y) if Tenant shall have exercised the Renewal Option, the date that is three (3) years before the expiration of the Renewal Term (as hereinafter defined).

(e) Tenant’s right to lease the 27 ^th Floor Option Space and/or the 32 ^nd Floor Option Space as set forth in this Section 9 shall be subject to any rights thereto that have been granted on or prior to the date hereof to other tenants of the Building. Except as provided in Section 9.4(b) , no rights have

been granted on or prior to the date hereof to other tenants of the Building with respect to the 27 ^th Floor Option Space and the 32 ^nd Floor Option Space.

(f) Subject to the terms of this Section 9.4(f) , any Option Response Notice that Tenant gives to Landlord shall not be effective for purposes hereof (and shall be of no force or effect) unless Tenant includes therewith an increase in the Security Letter (such increase known as the “ Applicable Option Space Security ”) by an amount equal to the product obtained by multiplying (I) the monthly per-square-foot fixed annual rent that is then payable hereunder for the balance of the demised premises, by (II) the number of square feet of rentable area comprising the Applicable Option Space. Landlord, by (III) eight (8), subject to adjustment as provided in Section 9.5(g) .

9.5. If Tenant exercises the ROFO Option in accordance with the provisions of this Section 9 , then, on the Option Space Commencement Date for the Applicable Option Space, the following provisions shall become effective:

(a) The Applicable Option Space shall be added to the demised premises for purposes of the Lease (except as otherwise provided in this Section 9.5 ).

(b) The term of the Lease with respect to the Applicable Option Space shall be coterminous with the term of the Lease with respect to the balance of the Premises;

(d) Landlord shall not be obligated to perform any work or make any installations in the Applicable Option Space or grant Tenant a work allowance therefor.

(e) The fixed annual rent for the Applicable Option Space shall be the Rental Value (as hereinafter defined) thereof.

(f) Tenant shall make a separate Tenant’s Tax Payment, Expense Payment, Insurance Expense Payment and Energy Expense Payment with respect to the Applicable Option Space pursuant to the Lease, except that the Tenant’s Tax Share and the Tenant’s Share for the Applicable Option Space shall be equitably determined based upon the rentable square footage of the Applicable Option Space and the Base Tax shall be determined based upon the Tax Year in which shall occur the Option Space Commencement Date and the Base Year shall be the calendar year in which shall occur the Option Space Commencement Date.

(g) The Applicable Option Space Security to be held by Landlord (and, if applicable, any reductions thereof to occur during the Term), shall be determined as part of the determination of the Fair Market Rent in accordance with the terms of Section 12 hereof. Notwithstanding the payment made by Tenant pursuant Section 9.4(f) hereof, within ten (10) Business Days after the date that the parties determine the Fair Market Rent (as hereinafter defined) for the Applicable Option Space in accordance with the terms of Section 12 hereof, the payment made by Tenant pursuant to Section 9.4(f) hereof shall be adjusted to reflect such determination.

9.6. Landlord shall deliver vacant and exclusive possession of the Applicable Option Space to Tenant on the Scheduled Option Space Commencement Date; provided , however , that (x) if an individual or entity remains in occupancy of the Applicable Option Space (or any portion thereof) on the Scheduled Option Space Commencement Date, then Landlord, at Landlord’s expense, shall use reasonable diligence to cause vacant and exclusive possession of such space to be delivered to Tenant as promptly as

reasonably practicable thereafter (the Scheduled Option Space Commencement Date, or such later date on which Landlord delivers vacant and exclusive possession of the Applicable Option Space to Tenant as contemplated by this Section 9.6 , being referred to herein as the “ Option Space Commencement Date ”), and (y) if such individual’s or entity’s right to remain in occupancy of the Applicable Option Space (or a portion thereof) terminates prior to the Scheduled Option Space Commencement Date, then Landlord shall have no liability to Tenant (except as otherwise set forth in clause (x) above), and Tenant shall have no right to terminate or rescind the Lease or Tenant’s exercise of the ROFO Option or reduce the fixed annual rent, in each case deriving from Landlord’s failure to deliver vacant and exclusive possession of the Applicable Option Space to Tenant on the Scheduled Option Space Commencement Date. Landlord and Tenant intend that this Section 9.6 constitutes an “express provision to the contrary” for purposes of Section 223-a of the New York Real Property Law. Notwithstanding the foregoing, in the event that (x) the Option Space Commencement Date fails to occur within one hundred eighty (180) days of the Scheduled Option Space Commencement Date, the fixed annual rent allocable to the Applicable Option Space shall be abated one and one-half (1 ¹ ⁄ ₂ ) days for every day that the Option Space Commencement Date fails to occur following such one hundred eightieth (180 ^th ) day.

10.

Renewal Option .

10.1. Subject to the terms of this Section 10 , Tenant shall have the option (the “ Renewal Option ”) to extend the term of the Lease for the entire demised premises for one (1) additional period of five (5) years (the “ Renewal Term ”), which Renewal Term shall commence on the day immediately succeeding the Extended Term Expiration Date and end on the day that is five (5) years after the Extended Term Expiration Date, provided that (a) the Lease has not been previously terminated as of the date that Tenant gives Landlord notice (the “ Renewal Notice ”) of Tenant’s election to exercise the Renewal Option, (b) no default beyond the expiration of any applicable notice and cure period has occurred and is continuing on the date that Tenant gives Landlord the Renewal Notice, and (c) the Minimum Occupancy Requirement is satisfied on the date that Tenant gives the Renewal Notice to Landlord.

10.2. The Renewal Option shall be exercisable only by Tenant’s delivering the Renewal Notice to Landlord not later than the date which is twelve (12) months prior the Extended Term Expiration Date (as to which date time shall be of the essence) and no earlier than the date which is fifteen (15) months prior to the Extended Term Expiration Date. Landlord shall have the right to declare Tenant’s exercise of the Renewal Option ineffective if (a) Tenant is in default beyond the expiration of any applicable notice and cure period as of the Extended Term Expiration Date, or (b) the Minimum Occupancy Requirement is not satisfied as of the Extended Term Expiration Date, in either case by giving notice thereof to Tenant during the period commencing on the Extended Term Expiration Date and ending on the date that is thirty (30) days after the Extended Term Expiration Date (it being understood that (x) if Landlord so declares Tenant’s exercise of the Renewal Option ineffective, then the Term shall terminate on the sixtieth (60 ^th ) day after the date that Landlord gives Tenant notice of such declaration (in which case Tenant shall pay the fixed annual rent due hereunder in respect of the Renewal Term to the extent accruing during the period commencing on the first day of the Renewal Term and ending on the date that the Term so terminates), and (y) nothing contained in this Section 10.2 limits Landlord’s other rights or remedies after the occurrence of a default under the Lease).

10.3. If Tenant exercises the Renewal Option, then the leasing of the demised premises during the Renewal Term shall be upon the terms set forth herein, except that:

(a) the fixed annual rent for the demised premises during the Renewal Term shall be the Rental Value thereof;

(b) On the commencement of the Renewal Term, the Base Tax shall be revised to the Tax Year in which shall occur the commencement of the Renewal Term and the Base Year shall be revised to the calendar year in which shall occur the commencement of the Renewal Term.

(c) Landlord shall have no obligation to perform any work in connection with Tenant’s exercise of the Renewal Option (it being agreed that such provision shall be contemplated in the determination of the Fair Market Rent);

(d) Landlord shall have no obligation to grant to Tenant any work allowance in connection with Tenant’s exercise of the Renewal Option (it being agreed that such provision shall be contemplated in the determination of the Fair Market Rent); and

(e) the provisions of this Section 10 shall not be applicable to permit Tenant to further extend the Term.

11.

30 ^th Floor Option .

11.1. Tenant shall have the right, at its option (the “ 30th Floor Option ”), to lease the entire thirtieth (30 ^th ) floor of the Building and more particularly shown on the floor plan annexed as Exhibit F (the “ 30 ^th Floor Premises ”), in accordance with this Section 11 , for a term commencing on the date on which Landlord shall deliver possession thereof to Tenant (such date, the “ 30 ^th Floor Commencement Date ”), but in no event prior to January 1, 2016 (and if the 30 ^th Floor Commencement Date shall not occur within three (3) business days of January 1, 2016, Landlord shall give Tenant at least ten (10) days’ prior written notice of the 30 ^th Floor Commencement Date), and expiring on the Extended Term Expiration Date by giving notice thereof (the “ 30th Floor Option Notice ”) to Landlord no later than March 1, 2015. Time shall be of the essence as to the date by which Tenant must give the 30 ^th Floor Option Notice to Landlord to exercise the 30 ^th Floor Option. If Tenant does not give the 30th Floor Option Notice to Landlord on or prior to March 1, 2015, then Landlord shall thereafter have the right to lease the 30 ^th Floor Premises (or any part thereof) to any other person or entity on terms acceptable to Landlord in Landlord’s sole discretion.

11.2. Tenant’s exercise of the 30 ^th Floor Option shall be ineffective if, on the date that Tenant gives the 30th Floor Option Notice, Tenant shall be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period. If (I) Tenant exercises the 30 ^th Floor Option, and (II) at any time prior to the 30 ^th Floor Commencement Date, Tenant shall be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period, the Minimum Occupancy Requirement is not satisfied, then, at any time prior to the 30 ^th Floor Commencement Date, Landlord shall have the right to declare Tenant’s exercise of the 30 ^th Floor Option ineffective by giving notice thereof to Tenant, in which case Landlord shall have the right to lease the 30 ^th Floor Premises (or any portion thereof) to any other individual or entity on terms acceptable to Landlord in Landlord’s sole discretion.

11.3. Subject to the terms of this Section 11.3 , the 30th Floor Option Notice that Tenant gives to Landlord shall not be effective for purposes hereof (and shall be of no force or effect) unless Tenant includes therewith an increase in the Security Letter (such increase known as the “ 30 ^th Floor Security ”) by an amount equal to the product obtained by multiplying (x) an amount equal to the first installment of fixed annual rent for a full calendar month that becomes payable hereunder for the 30 ^th Floor Premises (the “ 30 ^th Floor First Month’s Rent ”), by (y) eight (8). Landlord and Tenant shall calculate initially the amount of the aforesaid increase in the Security Letter assuming that the fixed annual rent for the 30 ^th Floor Premises is an amount equal to the product obtained by multiplying (I) the per-square-foot fixed annual rent that is then payable hereunder for the balance of the demised premises, by (II) the number of

square feet of rentable area comprising the 30 ^th Floor Premises. Landlord and Tenant shall adjust the amount of the aforesaid increase in the Security Letter to the extent (if any) necessary within ten (10) Business Days after the date that the parties determine the Fair Market Rent (as hereinafter defined) for the 30 ^th Floor Premises in accordance with the terms of Section 12 hereof.

11.4. If Tenant exercises the 30 ^th Floor Option in accordance with the provisions of this Section 11 , then, on 30 ^th Floor Commencement Date, the following provisions shall become effective:

(a) The 30 ^th Floor Premises shall be added to the demised premises for purposes of the Lease (except as otherwise provided in this Section 11.4 ).

(b) The 30 ^th Floor Premises may be used only for the uses permitted under the Lease.

(c) Landlord shall not be obligated to perform any work or make any installations in the 30 ^th Floor Premises or grant Tenant a work allowance therefor (it being agreed that such provision shall be contemplated in the determination of the Fair Market Rent).

(d) The fixed annual rent for the 30 ^th Floor Premises shall be the Rental Value thereof.

(e) Tenant shall make a separate Tenant’s Tax Payment, Expense Payment, Insurance Expense Payment and Energy Expense Payment with respect to the 30 ^th Floor Premises pursuant to the Lease, except that the Tenant’s Tax Share and the Tenant’s Share for the 30 ^th Floor Premises shall be 2.18%, and the Base Tax shall be determined based upon the Tax Year commencing on July 1, 2015 and the Base Year shall be the calendar year 2016.

(f) Provided Tenant shall have not been in default hereunder or under the Lease beyond the expiration of any applicable notice and cure period, and provided further that Tenant is not then in default hereunder or under the Lease, to the extent applicable, Tenant may reduce the 30 ^th Floor Security (i) to an amount equal to the product obtained by multiplying the 30 ^th Floor First Month’s Rent by seven (7) on the one (1) year anniversary of the 30 ^th Floor Commencement Date; (ii) to an amount equal to the product obtained by multiplying the 30 ^th Floor First Month’s Rent by six (6) on the two (2) year anniversary of the 30 ^th Floor Commencement Date; (iii) to an amount equal to the product obtained by multiplying the 30 ^th Floor First Month’s Rent by five (5) on the three (3) year anniversary of the 30 ^th Floor Commencement Date; and (iv) to an amount equal to the product obtained by multiplying the 30 ^th Floor First Month’s Rent by four (4) on the four (4) year anniversary of the 30 ^th Floor Commencement Date. Landlord shall cooperate with Tenant to arrange for the reduction of the 30 ^th Floor Security pursuant to this Section 11.4(f) .

11.5. Notwithstanding any provision contained in this Section 11 to the contrary, if for any reason the 30 ^th Floor Commencement Date shall fail to occur on January 1, 2016, Landlord shall have no liability to Tenant therefor and the validity of the Lease and this Amendment, the inclusion of the 30 ^th Floor Premises in the demised premises or the obligations of Landlord or Tenant hereunder, shall not be impaired, nor shall the Term be extended, by reason thereof. This Section 11.5 shall be an express provision to the contrary for purposes of Section 223-a of the New York Real Property Law and any other law of like import now or hereafter in effect. Notwithstanding the foregoing, in the event that (x) the 30 ^th Floor Commencement Date fails to occur within one hundred eighty (180) days of January 1, 2016, the fixed annual rent allocable to the 30 ^th Floor Premises shall be abated one and one-half (1 ¹ ⁄ ₂ ) days for every day that the 30 ^th Floor Commencement Date fails to occur following such one hundred eightieth (180 ^th ) day.

12.

Determination of Rental Value and Fair Market Rent .

12.1. As used herein, the following terms shall have the following meanings:

(a) The term “ Rental Value ” shall mean:

(i) if Tenant exercises the ROFO Option, the Rental Value of the Applicable Option Space shall be an amount equal to the Fair Market Rent (as hereinafter defined) of the Applicable Option Space on the Option Space Commencement Date;

(ii) if Tenant exercises the 30 ^th Floor Option, the Rental Value of the 30 ^th Floor Premises shall be the Fair Market Rent of the 30 ^th Floor Premises on January 1, 2016; and

(iii) if Tenant exercises the Renewal Option, the Rental Value of the demised premises shall be the Fair Market Rent of the demised premises on the Extended Term Expiration Date.

(b) The term “ Fair Market Rent ” shall mean annual fair market rental value of the Applicable Area including (i) any increases therein during the portion of the Term applicable to the Applicable Area, and (ii) with respect to the Applicable Option Space, any increases in the Security Letter with respect thereto (and, if applicable, any reductions thereto during the portion of the Term applicable thereto).

(c) The term “ Applicable Area” shall mean: (x) the demised premises, in connection with the determination of the Fair Market Rent thereof, (y) the Applicable Option Space, in connection with the determination of the Fair Market Rent thereof, and (z) the 30 ^th Floor Premises, in connection with the determination of the Fair Market Rent thereof.

(d) The term “ Applicable Date ” shall mean: (x) the Extended Term Expiration Date, in connection with the determination of the Fair Market Rent of the demised premises, (y) the Scheduled Option Space Commencement Date, in connection with the determination of the Fair Market Rent for the Applicable Option Space, and (z) January 1, 2016 in connection with the determination of the Fair Market Rent for the 30 ^th Floor Premises.

12.2. The Fair Market Rent shall be determined as of the Applicable Date assuming that the Applicable Area is free and clear of all leases and tenancies (including the Lease), that the Applicable Area is available for the purposes permitted by the Lease in comparable buildings in the same rental market as the Building, that Landlord has had a reasonable time to locate a tenant, and that neither Landlord nor the prospective tenant is under any compulsion to rent, and taking into account all relevant factors (including, without limitation, the presence or absence of rent escalations, additional rent charges and the applicable base year, and tenant concessions (including without limitation free rent, landlord work, tenant improvements and tenant allowances) and whether or not Landlord is obligated to pay a brokerage commission).

12.3. (a) If Tenant exercises any of the Renewal Option, the 30 ^th Floor Option or the ROFO Option, then with respect to the exercise of each such option, Landlord and Tenant shall each deliver simultaneously to the other, at Landlord’s office, a notice (each, a “ Rent Notice ”), on a date mutually agreed upon, but in no event later than:

(i) one hundred eighty (180) days before the Extended Term Expiration Date, with respect to the Rent Notice for the determination of the Fair Market Rent for the Premises, and

(ii) the later to occur of (I) three (3) months before the Scheduled Option Space Commencement Date, and (II) the thirtieth (30th) day after the date that Tenant gives the applicable Option Response Notice to Landlord, with respect to the Rent Notice for the determination of the Fair Market Rent for the Applicable Option Space,

(iii) July 1, 2015, with respect to the Rent Notice for the determination of the Fair Market Rent for the 30 ^th Floor Premises,

as the case may be, which Rent Notice shall set forth each of their respective determinations of the Fair Market Rent (Landlord’s determination of the Fair Market Rent is referred to as “ Landlord’s Determination ” and Tenant’s determination of the Fair Market Rent is referred to as “ Tenant’s Determination ”). If (1) Landlord fails to give Landlord’s Determination to Tenant, and (2) Tenant tenders Tenant’s Determination to Landlord, then the Fair Market Rent for the Applicable Area shall be Tenant’s Determination. If (1) Tenant fails to give Tenant’s Determination to Landlord, and (2) Landlord tenders Landlord’s Determination to Tenant, then the Fair Market Rent for the Applicable Area shall be Landlord’s Determination.

(b) If Tenant’s Determination is lower than Landlord’s Determination, then Landlord and Tenant shall attempt in good faith to agree upon the Fair Market Rent for a period of thirty (30) days after the date that Landlord gives Landlord’s Determination to Tenant, and Tenant gives Tenant’s Determination to Landlord. If Tenant’s Determination is higher than Landlord’s Determination, then the Fair Market Rent for the Applicable Area shall be the average of Landlord’s Determination and Tenant’s Determination. If Landlord and Tenant do not agree on the Fair Market Rent for the Applicable Area within thirty (30) days after the date that Landlord gives Landlord’s Determination to Tenant, and the date that Tenant gives Tenant’s Determination to Landlord, then Landlord and Tenant shall select jointly an independent real estate appraiser that (x) neither Landlord nor Tenant, nor any of their respective Affiliates, has engaged during the immediately preceding period of three (3) years, and (y) has at least ten (10) years of experience in leasing properties in the applicable market that are similar in character to the Building (such appraiser being referred to herein as the “ Appraiser ”). Landlord and Tenant shall each pay fifty percent (50%) of the Appraiser’s fee. If Landlord and Tenant do not agree on the Appraiser within ten (10) days after the last day of such period of thirty (30) days, then either party shall have the right to seek arbitration for the sole purpose of designating the Appraiser.

(c) The parties shall instruct the Appraiser to (i) conduct the hearings and investigations that he or she deems appropriate, and (ii) choose either Landlord’s Determination or Tenant’s Determination as the better estimate of Fair Market Rent for the Applicable Area, within thirty (30) days after the date that the Appraiser is designated. The Appraiser’s aforesaid choice shall be conclusive and binding upon Landlord and Tenant. Each party shall pay its own counsel fees and expenses, if any, in connection with the procedure described in this Section 12 . The Appraiser shall not have the power to supplement or modify any of the provisions of the Lease or this Amendment.

(d) If the final determination of the Fair Market Rent is not made on or before the Applicable Date in accordance with the provisions of this Section 12 , then, pending such final determination, the Fair Market Rent shall be deemed to be an amount equal to the average of Landlord’s Determination and Tenant’s Determination. If, based upon the final determination hereunder of the Fair Market Rent, the payments made by Tenant on account of the fixed annual rent and additional rent for the period prior to the final determination of the Fair Market Rent were less than the fixed annual rent and additional rent payable for such period, then Tenant, not later than the tenth (10th) day after Landlord’s demand therefor, shall pay to Landlord the amount of such deficiency, together with interest thereon at the Interest Rate. If, based upon the final determination of the Fair Market Rent, the payments made by Tenant on account of the fixed annual rent and additional rent for the period prior to the final

determination of the Fair Market Rent were more than the fixed annual rent and additional rent due hereunder for such period, then Landlord, not later than the tenth (10th) day after Tenant’s demand therefor, shall pay such excess to Tenant, together with interest thereon at the Interest Rate.

13.

Cancellation Option .

13.1. Provided that Tenant has not exercised either the ROFO Option or the Renewal Option, Tenant shall have the one-time option (the “ Cancellation Option ”) to cancel the Lease effective as of February 28, 2023 (the “ Cancellation Date ”); provided, however, that such cancellation shall only be effective upon strict compliance with the following terms and conditions:

(a) Tenant shall give Landlord at least one (1) years’ prior written notice of its election to cancel the Lease (the “ Cancellation Notice ”), which Cancellation Notice shall be given in the manner prescribed in the Lease for the giving of notices; provided , however , in no event shall the Cancellation Notice be given prior to January 1, 2018. Any such Cancellation Notice shall be irrevocable upon delivery and time shall be of the essence in connection with the exercise of any election to cancel hereunder.

(b) If Tenant shall have not exercised the 30 ^th Floor Option at the time of the giving of the Cancellation Notice, Tenant shall pay to Landlord the sum of $3,713,682.77 (the “ Cancellation Payment ”); provided , however , if Tenant shall have exercised the 30 ^th Floor Option at the time of the giving of the Cancellation Notice, the Cancellation Payment shall be the sum of (i) $3,713,682.77, plus (ii) an amount calculated pursuant to Exhibit G annexed hereto. The Cancellation Payment shall be by good unendorsed certified or bank check of Tenant and shall be paid to Landlord within one (1) month following the delivery of the Cancellation Notice, time being of the essence. Tenant’s failure to timely pay Landlord the Cancellation Payment shall render its exercise of the Cancellation Option void ab initio, and Tenant shall have no further rights under this Article 13 .

(c) Tenant shall not be in default under the Lease or this Amendment beyond the expiration of any applicable notice and cure period at the time of the giving of the Cancellation Notice.

(d) Notwithstanding any such cancellation by Tenant hereunder, Tenant shall remain liable to pay all fixed annual rent and additional rent through the Cancellation Date and to cure any default under any of the terms, covenants, and conditions of the Lease or this Amendment existing on the Cancellation Date. Such defaults shall be cured within the periods provided in the Lease and such liability of Tenant shall survive any such cancellation.

(e) On or prior to the Cancellation Date, Tenant shall vacate the demised premises and surrender possession thereof to Landlord in accordance with the provisions of the Lease, as if said Cancellation Date were the original expiration date.

(f) Upon the cancellation of the Lease, Landlord and Tenant shall be relieved of any obligations under the Lease in respect of the period following such Cancellation Date, other than those accruing prior to the Cancellation Date and except with respect to those obligations expressly provided herein to survive the expiration or sooner termination of the Lease. Upon request of Landlord, Tenant shall enter into an agreement with Landlord in form reasonably satisfactory to Landlord stating the Cancellation Date.

(g) The Cancellation Option shall be personal to Varonis Systems, Inc. or any assignee pursuant to Section 11.02 of the Lease.

14.

Security Deposit .

14.1. Contemporaneous with the execution of this Agreement, Tenant is delivering to Landlord an amendment of the Security Letter, increasing the amount thereof to $1,765,940.00, which shall be held by Landlord as security for Tenant’s obligations under the Lease pursuant to Section 41.04 of the Lease.

14.2. Provided Tenant shall have not been in default hereunder or under the Lease beyond the expiration of any applicable notice and cure period, and provided further that Tenant is not then in default hereunder or under the Lease, Tenant may reduce the Security Letter (i) to $1,545,197.50 on the one (1) year anniversary of the 28 ^th Floor Rent Commencement Date, (ii) to $1,324,455.00 on the two (2) year anniversary of the 28 ^th Floor Rent Commencement Date, (iii) to $1,103,712.50 on the three (3) year anniversary of the 28 ^th Floor Rent Commencement Date, and (iv) to $882,970.00 on the four (4) year anniversary of the 28 ^th Floor Rent Commencement Date. Landlord shall cooperate with Tenant to arrange for the reduction of the Security Letter pursuant to this Section 14.2 .

15.

Freight Elevator .

Notwithstanding anything contained in the Lease to the contrary (including, without limitation, Section 21.01(a) thereof), if Tenant shall require freight elevator service other than between the hours on 8:00 A.M. and 5:00 P.M and/or other than on Business Days (“ Freight Elevator Overtime Service ”), Landlord shall furnish said service upon reasonable advance notice from Tenant, and, Tenant shall pay to Landlord on demand Landlord’s standard charges therefor (which shall be commercially competitive). As of the date hereof, Landlord’s established charges for the provision of Freight Elevator Overtime Service is $100 per hour with a 4 hour minimum on non-Business Days, but such charges shall be subject to increase, from time to time, to reflect any increases in the then established rates charged by Landlord to other tenants of the Building. Notwithstanding the foregoing, Tenant shall be entitled to forty (40) hours of Freight Elevator Overtime Service at no charge in connection with Tenant’s Initial Work (as hereinafter defined).

16.

Lease of 38 ^th Floor Premises.

Landlord leases to Tenant, and Tenant hires and leases from Landlord, those certain premises located on the 38 ^th floor of the Building more particularly shown on Exhibit H hereto (the “ 38 ^th Floor Premises ”) for the period (the “ 38 ^th Floor Term ”) commencing on November 1, 2014 and expiring on January 31, 2014. The lease of the 38 ^th Floor Premises shall be upon all of the terms and conditions of the Lease; provided , however , that notwithstanding anything to the contrary in the Lease or this Amendment (i) the 38 ^th Floor Premises shall be delivered to Tenant in their then “as is” condition (and without any representation or warranty of Landlord) and Landlord shall have no obligation to make any improvements to the 38 ^th Floor Premises to prepare the same for Tenant’s occupancy; (ii) if for any reason Landlord shall be unable to deliver possession of the 38 ^th Floor Premises to Tenant on November 1, 2014, Landlord shall have no liability to Tenant therefor and the validity of this Amendment (or the Lease) shall not be impaired, nor shall the Term under the Lease (as modified by this Amendment) be extended, by reason thereof, it being agreed that this clause (ii) shall be an express provision to the contrary for purposes of Section 223-a of the New York Real Property Law and any other law of like import now or hereafter in effect; (iii) Landlord shall make no contribution or payment to Tenant (including, without limitation any Tenant Improvement Allowance) with respect to the 38 ^th Floor Premises; (iv) the fixed annual rent for the 38 ^th Floor Premises during the 38 ^th Floor Term shall be payable at the rate of $45,313 per month; (v) there shall be no Tenant’s Tax Payment, Expense Payment, Insurance Expense Payment or Energy Expense Payment payable for the 38 ^th Floor Premises; (v) Tenant shall pay for electricity consumed in the 38 ^th Floor Premises, as additional rent, such amount as Landlord shall reasonably determine, which sum shall be payable monthly in advance on the first of the month; (vi) Tenant shall have no renewal right,

expansion right or cancellation right with respect to the 38 ^th Floor Premises or the 38 ^th Floor Term; and (vii) Tenant shall not be permitted to make any alterations (other than decorations) to the 38 ^th Floor Premises and shall not be permitted to sublease the 38 ^th Floor Premises apart from a sublease of the balance of the Premises.

17.

Broker .

Each party represents to the other that such party has dealt with no broker in connection with this Amendment or the Building other than ABS Partners Real Estate and Cushman &Wakefield (collectively, “ Broker ”), and each party shall indemnify and hold the other harmless from and against all loss, cost, liability and expense (including, without limitation, reasonable attorneys’ fees and disbursements) arising out of any claim for a commission or other compensation by any broker (other than Broker) who alleges that it has dealt with the indemnifying party in connection with this Amendment or the Building. Landlord shall pay all fees due to Broker pursuant to separate agreement.

18.

Non-Disturbance .

The subordination of the Lease to any present or future ground or underlying leases and mortgages and referred to in Article 25 of the Lease is conditioned upon the lessor of any such ground or underlying lease and the holder of any such mortgage granting to Tenant a subordination, non-disturbance and attornment agreement on the form attached hereto as Exhibit I (hereafter, an “ SNDA ”). Landlord shall pay any costs and expenses imposed by the lessor of any such ground or underlying lease and the holder of any such mortgage in connection with the giving of any SNDA.

19.

Miscellaneous .

If any of the provisions of the Lease, or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of the Lease or the circumstances other than those as to whom or which it is held invalid or unenforceable shall not be affected thereby, and every provision of the Lease shall be valid and enforceable to the fullest extent permitted by law. Tenant hereby certifies that as of the Effective Date (a) the Lease is in full force and effect and has not been modified or amended except as herein provided, (b) to the best of Tenant’s knowledge, Landlord is not now in default under the Lease, and has completed all improvements and made all payments (if any) required of Landlord under the Lease (except as provided in Section 8 of this Amendment) and Tenant knows of no event which, with notice of the passage of time or both would constitute such a default, and (c) Tenant has made no demand against Landlord and has no present right to make such demand with respect to charges, liens, defenses, counterclaims, offsets, claims, or credits against the payment of rent or additional rent or the performance of Tenant’s obligations under the Lease. Landlord hereby certifies that (a) the Lease is in full force and effect and has not been modified or amended except as herein provided, and (b) to the best of Landlord’s knowledge, Tenant is not now in default under the Lease. Except as modified hereby, the Lease shall remain in full force and effect, and as modified hereby, the Lease is ratified and confirmed in all respects. The Lease may not be orally changed or terminated, nor any of its provisions waived, except by an agreement in writing signed by the party against whom enforcement of any changes, termination or waiver is sought. Tenant and Landlord each hereby represents and warrants that it has full right, power and authority to enter into this Amendment and that the person executing this Amendment on behalf of Tenant and Landlord, respectively, is duly authorized to do so. This Amendment may be executed in one or more counterparts, each of which shall constitute an original and all of which when taken together shall constitute one and the same instrument. Whenever the term “demised premises” or Premises is used in this Amendment, it shall mean all of the space, on any floor in the Building, that Tenant leases pursuant to the Lease (as amended by this Amendment), as the same may change from time to time pursuant to the terms of the Lease.

20.

Hazardous Materials .

If any asbestos, PCB’s, lead paint or other “Hazardous Materials” or “Hazardous Substances” (as such terms are defined under the “Comprehensive Environmental Response, Compensation and Liability Act”, as amended 42 U.S.C. 9601, et seq.), which are in violation of legal requirements are discovered in the demised premises, and the same were not brought into the demised premises, or caused to be in violation of legal requirements, by Tenant or any agent, contractor or employee of Tenant, then Landlord shall remove same from the demised premises or cause the same to comply with legal requirements, at Landlord’s sole cost and expense.

21.

Building Directory .

Tenant shall be entitled to Tenant’s Share of the listings in any directory that Landlord elects to maintain in the Building lobby.

22.

Building Access .

Tenant shall have access to the Building and the demised premises twenty-four (24) hours a day, seven (7) days a week.

23.

Riser Space and Telecom Use .

Subject to Landlord’s prior written consent (which consent shall not be unreasonably withheld), at no additional or separate charge, Tenant may install, in the vertical riser space in the Building dedicated for the installation of fiber optic cable (the “ Vertical Riser Space ”), (i) one ³ ⁄ ₄ ” armored fiber optic cable between the 31 ^st floor and the 29 ^th floor, and (ii) one ³ ⁄ ₄ ” armored fiber optic cable between the 31 ^st floor and the 28 ^th floor, at Tenant’s sole cost and expense, for Tenant’s telecommunication wires and cables, provided that such right shall be limited to Tenant’s Share of the Vertical Riser Space. Tenant’s installation of any such armored cables shall be deemed alterations and subject to the terms and conditions of the Lease respecting alterations. In addition, the installation of any such armored cables shall be deemed alterations of a non-Building Standard nature pursuant to Section 6.04 of the Lease. Landlord shall provide Tenant and its representatives reasonable access to the Vertical Riser Space at reasonable times upon reasonable notice for Tenant’s installation, maintenance, repair and replacement thereof. Tenant shall be allowed to utilize Light Path as its primary data provider to the demised premises. Landlord may elect to install a neutral armored fiber optic cable (“ Landlord’s Cable ”) in the Vertical Riser Space. In such event Tenant shall have the option of using Landlord’s Cable in lieu of installing its own armored fiber optic cables, and Tenant shall pay Landlord, as additional rent, its proportionate share (equitably determined) of the cost of Landlord’s Cable and the installation thereof, but in no event in excess of the cost Tenant would have incurred had it installed the armored fiber optic cables as provided in the first sentence of this Section.

24.

Lease Amendments .

24.1 The following provisions of the Lease are amended as of the Effective Date as follows:

(a) The following sentence is added to the end of Section 6.04 : “Notwithstanding anything to the contrary herein, simultaneous with Tenant’s request for Landlord’s approval of any of Tenant’s alterations, installations, additions or improvements, Tenant may also request Landlord to advise Tenant whether such alterations, installations, additions or improvements are of a Building Standard nature (as defined in this Section 6.04) . If, at or about the time Landlord grants its consent to such alterations,

installations, additions or improvements, Landlord either (i) advises Tenant that the same are of a Building standard nature, or (ii) fails to respond to Tenant’s request, then such alterations, installations, additions or improvements shall be deemed to be of a Building standard nature for purposes of this Section 6.04 . If Landlord so advises Tenant that the same are of a non-Building standard nature, then they shall be subject to restoration as provided in this Section 6.04 .”

(b) Notwithstanding anything to the contrary in the Lease, Landlord shall not be entitled to any compensation or fees in connection with the review and oversight of Tenant’s alterations, installations, additions or improvements; provided , however , if in Landlord’s reasonable opinion, it shall be necessary to retain an independent architect or engineer to review plans and specifications for Tenant’s alterations, installations, additions or improvements, Tenant shall pay, as additional rent and on demand, the reasonable out-of-pocket fees charged thereby.

(c) The following is added to the end of Section 11.03 : “Without limitation of the foregoing, in the event any assignee shall extend the term of this Lease or lease additional space in the Building (whether pursuant to an option contained in this Lease or substantially in accordance with an option contained in this Lease), Tenant shall remain fully and primarily liable for the payment of all rent and the performance of all obligations arising in connection therewith.”

(d) The following is added to Section 11.05(d) after the words “is not then an occupant of any part of the Building”: “(provided Landlord then has comparable space in the high rise elevator bank available to lease for a comparable term),”.

(e) Section 11.05(k) is deleted in its entirety.

(f) The portion of Section 11.05(l) , beginning with the words “The proposed assignment” and ending with the words “subletting), and” is deleted. In addition, the words “or list with brokers” in Section 11.05(l) are deleted.

(g) Section 11.06(c) is modified (A) by inserting, prior to the words “terminate this Lease” appearing in the sixth (6 ^th ) line thereof, the following: “in the event of an assignment of this Lease or a sublease expiring within two (2) years of the Expiration Date,”; and (B) by inserting, after the words “less one day” appearing in the eleventh (11 ^th ) line thereof, the following: “(in the event of a proposed sublease expiring within two (2) years of the Expiration Date), or for the term of the proposed sublease (in the event of a proposed sublease expiring more than two (2) years prior to the Expiration Date)”.

(h) In Sections 11.06(f)(i) and (ii) , the phrase “or other personal property” is hereby replaced with “(excluding Tenant’s personal property)”.

(i) Section 16.02(d) is deleted in its entirety.

(j) The following language is added to the end of Section 27.01 : “In the event that Landlord or Tenant commences or engages in any legal action or proceeding against the other arising out of or in connection with this Lease, the prevailing party shall recover its attorneys’ fees, disbursements and court costs from the other in connection with such matter.”

(k) The following language is added to the end of Section 34.01 : “The terms of this Section 34.01 shall be mutual to Tenant, other than the obligation to pay fixed annual rent or additional rent under this Lease.”

(l) The following shall be added at the end of Section 39.01 : “Landlord shall indemnify, defend and save harmless Tenant, its agents and employees from and against any liability or expense suffered by Tenant arising from or in connection with the negligence of Landlord or that of its agents, contractors or employees, in or about the Building and Premises.”

(m) The following paragraph shall be added as Section 42.13 of the Lease:

“42.13. 31 ^st Floor Furnishings . Tenant shall have the right to use all of the furniture, fixtures and equipment which were present in the 31 ^st Floor Premises on the day the 31 ^st Floor Premises was delivered to Tenant. Landlord makes no representation or warranty as to the condition, ownership or claims with respect to such furniture, fixtures and equipment, provided that Landlord has not received any written claims of ownership as to such furniture, fixtures and equipment.”

(n) The following paragraph shall be added as Section 42.14 of the Lease:

“ 42.14 Condominium Conversion . Tenant acknowledges that the Building and the land of which the Premises form a part may be subjected to the condominium form of ownership prior to the end of the Term of this Lease. Tenant agrees that if, at any time during the Term, the Building and the land shall be subjected to the condominium form of ownership, then, this Lease and all rights of Tenant hereunder are and shall be subject and subordinate in all respects to any condominium declaration and any other documents (collectively, the “ Declaration ”) which shall be recorded in order to convert the Building and the land of which the Premises form a part to a condominium form of ownership in accordance with the provisions of Article 9-B of the Real Property Law of the State of New York or any successor thereto, provided Tenant’s rights and Landlord’s obligations are not materially adversely affected as a result thereof. If any such Declaration is to be recorded, Tenant, upon request of Landlord, shall enter into an amendment of this Lease in such respects as shall be necessary to conform to such condominiumization, including, without limitation, appropriate adjustments to the Taxes that are included in the Base Tax Amount, the Expenses that are included in the Base Year, the Building Insurance Expenses that are included in the Base Insurance Expense, the Building Energy Expenses that are included in the Base Energy Expense, the Tenant’s Tax Share and the Tenant’s Share.”

25. Tenant’s Initial Alterations in the 29 ^th Floor Premises and the 28 ^th Floor Premises, and Tenant’s Initial Renovation of the 31 ^st Floor Premises.

25.01. Tenant’s initial alterations in the 29 ^th Floor Premises and the 28 ^th Floor Premises, and Tenant’s initial renovation of the 31 ^st Floor Premises (collectively, “ Tenant’s Initial Work ”) shall be performed in accordance with the terms of the Lease (including, without limitation, Article 6 and Schedule C thereof), except as otherwise provided in this Article 25 .

25.02. As a result of the potentially different delivery dates of the 31 ^st Floor Premises, the 29 ^th Floor Premises and the 28 ^th Floor Premises, Tenant’s Initial Work on each such floor may be performed at different times. Accordingly, while Tenant must comply with the terms of the Lease in connection with Tenant’s Initial Work, the alterations on each such floor may be performed as distinct “projects” (so that, by way of example, Tenant need not obtain Landlord’s approval to plans and specifications for Tenant’s Initial Work on all three (3) floors before commencing Tenant’s Initial Work on any one floor). Nothing in the preceding sentence, however, shall modify the terms of Article 8 hereof.

25.03 If, in connection with Tenant’s Initial Work, Landlord shall fail to respond to Tenant’s request for Landlord’s consent to (i) a proposed alteration which is a non-Building standard alteration (as defined in Section 6.04 of the Lease) within thirty (30) days of Tenant’s written request; (ii) any other proposed alteration within twenty (20) days of Tenant’s written request; or (iii) a resubmission of plans

and specifications for any proposed alteration within ten (10) days of Tenant’s written request, then in any of such events, Tenant shall be permitted to give Landlord written notice stating, in bold faced capitalized letters at the top thereof, the following: “ LANDLORD HAS FAILED TO TIMELY RESPOND TO TENANT’S REQUEST FOR APPROVAL OF TENANT’S INITIAL WORK. IF LANDLORD FAILS TO RESPOND TO TENANT’S REQUEST WITHIN THE LATER TO OCCUR OF (I) FIVE (5) DAYS AND (II) THREE (3) BUSINESS DAYS FOLLOWING THE GIVING OF THIS NOTICE, LANDLORD’S CONSENT TO SUCH ALTERATIONS SHALL BE DEEMED GIVEN.” If Landlord fails to respond to Tenant’s request within the later to occur of (i) five (5) days and (ii) three (3) business days following the giving of such notice, Landlord’s consent to the proposed alteration shall be deemed given.

25.04 If, in connection with Tenant’s Initial Work, Landlord does not approve Tenant’s proposed alterations, Landlord shall give the reason for such refusal.

25.05 Landlord shall not unreasonably withhold, condition or delay its consent to any proposed contractors performing any of Tenant’s Initial Work.

[Signatures appear on following page]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective Date.


JT MH 1250 OWNER LP,
a Delaware limited partnership

By:	JT MH 1250 Owner GP, LLC,
	a Delaware limited liability company,
	its general partner

	By:	/s/ John Wilson
		Name:	John Wilson
		Title:	Authorized Person

VARONIS SYSTEMS, INC.,
a Delaware corporation

By:	/s/ Gili Iohan
	Name:	Gili Iohan
	Title:	Chief Financial Officer


Tenant’s Federal Tax I.D. No.:		57-1222280

EXHIBIT A

29 ^th Floor Premises

[Attached hereto]

EXHIBIT B

28 ^th Floor Premises

[Attached hereto]

EXHIBIT C

Expense Payments, Insurance Expense Payments, Energy Expense Payments

(a) Tenant shall pay to Landlord, as additional rent, Expense Payments, Insurance Expense Payments and Energy Expense Payments in accordance with this Exhibit C :

(b) For the purpose of this Exhibit C , the following definitions shall apply:

(i) The term “ Base Year Expenses ” shall mean the average of the Expenses for 2014 and the Expenses for 2015, the term “ Base Year Insurance Expenses ” shall mean the average of the Building Insurance Expenses for 2014 and the Building Insurance Expenses for 2015, and the term “ Base Year Energy Expenses ” shall mean the average of the Building Energy Expenses for 2014 and the Building Energy Expenses for 2015.

(ii) The term “ Tenant’s Share ” means: 2.18% with respect to the 31 ^st Floor Premises; 2.18% with respect to the 29 ^th Floor Premises; and 2.18% with respect to the 28 ^th Floor Premises.

(iii) The term “ Comparative Expense Year ” for purposes of this Exhibit C shall mean the twelve (12) month period commencing as of January 1, 2015 and each subsequent period of twelve (12) months, the term “ Comparative Insurance Year ” for purposes of this Section shall mean the twelve (12) month period commencing as of January 1, 2015 and each subsequent period of twelve (12) months, and the term “ Comparative Energy Year ” for purposes of this Section shall mean the twelve (12) month period commencing as of January 1, 2015 and each subsequent period of twelve (12) months.

(iv) The term “ Building Insurance Expenses ” shall mean the total of all the costs and expenses incurred or borne by Landlord with respect to procuring and maintaining in respect of the Building, including, without limitation, comprehensive all risk insurance on the Building and the personal property of Landlord contained therein or thereon (and not separately billed to, paid by, or otherwise the responsibility of Tenant or other tenants of the Building); commercial general liability insurance against claims for personal injury, bodily injury, death or property damage, occurring upon, in or about the Building; extended coverage, boiler and machinery, sprinkler, apparatus, rental, business income and plate glass insurance; owner’s contingent or protective liability insurance; workers’ compensation and employer’s liability insurance; insurance against acts of terrorism (including, without limitation, bio-terrorism), and any insurance required by a mortgagee. In no event shall Building Insurance Expenses include environmental insurance or any other insurance that is required because of the particular use or manner of use of any other tenant or for non-office use purposes;

(v) The term “ Building Energy Expenses ” shall mean the total of all the costs and expenses incurred or borne by Landlord (and not separately billed to, paid by, or otherwise the responsibility of Tenant or other tenants of the Building) with respect to electric current for the common areas of the Building and operation of the Building’s systems, the cost of oil, steam or gas furnished to the Building, the cost of operating, maintaining and repairing the Building’s HVAC systems, and any and all taxes or other impositions imposed with regard thereto.

(vi) The term “ Expenses ” shall mean the total of all the costs and expenses incurred or borne by Landlord with respect to the operation and maintenance of the Building and the services provided tenants therein, including, but not limited to, the costs and expenses incurred for and with respect to: water rates and sewer rents; cleaning, by contract or otherwise; window washing (interior and exterior); elevators, escalators; porters and matron service; protection and security; lobby decoration; repairs, replacements and improvements which are appropriate for the continued operation of the Building as a first-class building; maintenance; management fees; painting of non-tenant areas; supplies; wages, salaries, disability benefits, pensions, hospitalization, retirement plans and group insurance respecting employees of the Building up to and including the building manager; uniforms and working clothes for such employees and the cleaning thereof and expenses imposed pursuant to law or to any collective bargaining agreement with respect to such employees; workmen’s compensation insurance, payroll, social security, unemployment and other similar taxes with respect to such employees; and association fees or dues.

Provided, however, that the foregoing Expenses shall exclude or have deducted from them, as the case may be and as shall be appropriate:

(1) leasing commissions;

(2) managing agents’ fees or commissions in excess of the rates then customarily charged by owner/operators for building management for buildings of like class and character, but in no event in excess of three (3%) percent of the gross rental received on an annual basis;

(3) salaries, wages and benefits to personnel above the grade of building manager;

(4) expenditures for capital improvements except those which under generally applied real estate practice are expensed or regarded as deferred expenses and except for capital expenditures (I) required by law either effective after the date hereof, or prior to the date hereof, but with which Landlord is now in compliance, or (II) designed to result in savings or reductions in Expenses (but not in excess of such savings or reductions), in any of which cases the cost thereof shall be included in Expenses for the Comparative Expense Year in which the costs are incurred and subsequent Comparative Expense Years, amortized on a straight line basis over the useful life thereof as determined by generally accepted accounting principles consistently applied, with an interest factor equal to the prime rate of the JP Morgan Chase, New York (or the successor thereto) at the time of Landlord’s having incurred said expenditure. If Landlord shall lease any item of capital equipment designed to result in savings or reductions in Expenses, then the rentals and other costs paid pursuant to such leasing shall be included in Expenses for the comparative year in which they were incurred;

(5) amounts received by Landlord through proceeds of insurance to the extent the proceeds are compensation for expenses which were previously included in Expenses hereunder;

(6) cost of repairs or replacements incurred by reason of fire or other casualty to the extent to which Landlord is compensated therefor through proceeds of insurance, or caused by the exercise of the right of eminent domain;

(7) advertising and promotional expenditures;

(8) legal fees for disputes with tenants and legal and auditing fees, other than legal and auditing fees reasonably incurred in connection with the maintenance and operation of the Building or in connection with the preparation of statements required pursuant to additional rent or lease escalation provisions; and

(9) the incremental cost of furnishing services such as overtime HVAC to any tenant at such tenant’s expense; costs incurred in performing work or furnishing services for individual tenants (including this Tenant) at such tenant’s expense; and costs of performing work or furnishing services for tenants other than this Tenant at Landlord’s expense to the extent that such work or service is in excess of any work or service Landlord is obligated to furnish to this Tenant at Landlord’s expense;

(10) Building Insurance Expenses;

(11) Building Energy Expenses;

(12) Taxes;

(13) amounts received by Landlord from Tenant or other tenants in the Building for Expenses;

(14) costs and expenses relating to any retail space, or to any dining or eating facility, any athletic, fitness, or recreational club or facility, or any observatory, antenna or other unusual facility not made available to all tenants of the Building;

(15) except as provided in clause (2) above, any amount paid or incurred to any affiliate of Landlord (including any related person or business) or of any their respective agents, in excess of the amount which would have been paid or incurred on an open market basis in the absence of such affiliation;

(16) all costs and expenses, including interest, penalties and late charges arising out of (i) any violation of any law or legal requirement (except as otherwise provided above) by Landlord, (ii) late payments made by Landlord (unless Tenant is late making a corresponding payment), or (ii) any violation or breach of any lease of space in the Building;

(17) finance and debt service fees;

(18) principal and/or interest on debt or amortization payments on any mortgages executed by Landlord and/or covering Landlord’s property;

(19) all costs associated with the operation of the business of the ownership or entity which constitutes “Landlord”, as distinguished from the costs of Building operations, including, but not limited to, costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (unless due to Tenant’s default under the Lease), costs of selling, syndicating, financing, mortgaging, or hypothecating any of the Landlord’s interest in the Building, costs of any disputes between Landlord and its employees, costs of disputes of Landlord with Building management;

(20) all costs (including permit, license and inspection fees) incurred in preparing any leased or leasable space for occupancy by a tenant (including Tenant);

(21) any cost or expense related to removal, cleaning, abatement or remediation of “hazardous material” in or about the Building or the ground underlying the Building, including without limitation, hazardous substances in the ground water or soil except that Tenant shall pay all costs associated with any removal, clean-up or remediation caused by Tenant;

(22) charitable contributions and donations; and

(23) acquisition costs for fine art.

(d) If during all or part of a Comparative Expense Year, Comparative Insurance Year or Comparative Energy Year Landlord shall not furnish any particular item(s) of work or service (which would constitute an Expense, Building Insurance Expense or Building Energy Expense, as the case may be, hereunder) to portions of the Building due to the fact that such portions are not occupied or leased, or because such item of work or service is not required or desired by the tenant of such portion, or such tenant is itself obtaining and providing such item of work or service, or for other reasons, then, for the purposes of computing the additional rent payable hereunder, (i) the amount of the Expense, Building Insurance Expense or Building Energy Expense, as the case may be, for such item for such period shall be increased by an amount equal to the additional operating and maintenance expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such item of work or services to such portion of the Building Project (such an adjustment being referred to as being “ Grossed Up ”), and (ii) such item shall be Grossed Up on the same basis in the Base Year Expenses, Base Year Insurance Expenses or Base Year Energy Expenses, as applicable.

(e) (i) If the Expenses for any Comparative Expense Year shall be greater than the Base Year Expenses, Tenant shall pay to Landlord, as additional rent for such Comparative Expense Year, in the manner hereinafter provided, an amount equal to the Tenant’s Share of the excess of the Expenses for such Comparative Expense Year over the Base Year Expenses (such amount being hereinafter called the “ Expense Payment ”); provided , however , that Tenant shall not be obligated to make any Expense Payment (x) with respect to the 31 ^st Floor Premises prior to February 1, 2015, (y) with respect to the 29 ^th Floor Premises prior to October 1, 2015, and (z) with respect to the 28 ^th Floor Premises prior to the 28 ^th Floor Rent Commencement Date, but subject in any event to any applicable abatement period set forth in Section 4 of this Amendment.

(ii) If the Building Insurance Expenses for any Comparative Insurance Year shall be greater than the Base Year Insurance Expenses, Tenant shall pay to Landlord, as additional rent for such Comparative Insurance Year, in the manner hereinafter provided, an amount equal to the Tenant’s Share of the excess of the Building Insurance Expenses for such Comparative Insurance Year over the Base Year Insurance Expenses (such amount being hereinafter called the “ Insurance Expense Payment ”); provided , however , that Tenant shall not be obligated to make any Insurance Expense Payment (x) with respect to the 31 ^st Floor Premises prior to February 1, 2015, (y) with respect to the 29 ^th Floor Premises prior to October 1, 2015, and (z) with respect to the 28 ^th Floor Premises prior to the 28 ^th Floor Rent Commencement Date, but subject in any event to any applicable abatement period set forth in Section 4 of this Amendment.

(iii) If the Building Energy Expenses for any Comparative Insurance Year shall be greater than the Base Year Energy Expenses, Tenant shall pay to Landlord, as additional rent for such Comparative Energy Year, in the manner hereinafter provided, an amount equal to the Tenant’s Share of the excess of the Building Energy Expenses for such Comparative Energy Year over the Base Year Energy Expenses (such amount being hereinafter called the “ Energy Expense Payment ”); provided , however , that Tenant shall not be obligated to make any Energy Expense Payment (x) with respect to the 31 ^st Floor Premises prior to February 1, 2015, (y) with respect to the 29 ^th Floor Premises prior to October 1, 2015, and (z) with respect to the 28 ^th Floor Premises prior to the 28 ^th Floor Rent Commencement Date, but subject in any event to any applicable abatement period set forth in Section 4 of this Amendment.

(f) Within one (1) year following the expiration of each Comparative Expense Year, Comparative Insurance Year and Comparative Energy Year and after receipt of necessary information and computations from Landlord’s certified public accountant, Landlord shall submit to Tenant a statement or statements, as hereinafter described, setting forth the Expenses for the preceding Comparative Expense Year, and the Expense Payment, if any, due to Landlord from Tenant for such Comparative Expense Year; a statement setting forth the Base Year Insurance Expenses and the Insurance Expense Payment, if any, due to Landlord from Tenant for such Insurance Comparative Expense Year; and a statement setting forth the Base Year Energy Expenses and the Energy Expense Payment, if any, due to Landlord from Tenant for such Energy Comparative Expense Year. The rendition of any such statement to Tenant shall constitute prima facie proof of the accuracy thereof and, if such statement shows an Expense Payment, Insurance Expense Payment and/or Energy Expense Payment due from Tenant to Landlord with respect to the preceding Comparative Expense Year, Comparative Insurance Year and/or Comparative Energy Year, then (i) Tenant shall make payment of any unpaid portion thereof within thirty (30) days after receipt of such statement; and (ii) Tenant shall also pay Landlord, as additional rent within thirty (30) days after receipt of such statement, an amount equal to the product obtained by multiplying the Expense Payment, Insurance Expense Payment and/or Energy Expense Payment for the Comparative Expense Year, the Comparative Insurance Year, or the Comparative Energy Year, as the case may be, by a fraction, the denominator of which shall be 12 and the numerator of which shall be the number of months of the current Comparative Expense Year, Comparative Insurance Year or Comparative Energy Year, as the case may be, which shall have elapsed prior to the first day of the month immediately following the rendition of such statement; and (iii) Tenant shall also pay to Landlord, as additional rent, commencing as of the first day of the month immediately following the rendition of such statement and on the first day of each month thereafter until a new statement is rendered an amount equal to 1/12th of the total Expense Payment for the preceding Comparative Expense Year, 1/12th of the total Insurance Expense Payment for the preceding Insurance Comparative Expense Year and/or 1/12th of the total Energy Expense Payment for the preceding Comparative Energy Year. The aforesaid monthly payments based on the total Expense Payment for the preceding Comparative Expense Year, the total Insurance Expense Payment for the preceding Comparative Insurance Year or the total Energy Expense Payment for the preceding Comparative Energy Year, as the case may be, shall from time to time be adjusted to reflect, if Landlord can reasonably so estimate, known increases in rates or cost for the current Comparative Expense Year, the current Comparative Insurance Year or the current Comparative Energy Year, as the case may be, applicable to the categories involved in computing Expenses, Building Insurance Expenses or Building Energy Expenses, whenever such increases become known prior to or during such current Comparative Expense Year, the current Comparative Insurance Year or the current Comparative Energy Year, as the case may be. The payments required to be made under

(ii) and (iii) above shall be credited toward the Expense Payment, the Insurance Expense Payment or the Energy Expense Payment due from Tenant for the then current Comparative Expense Year, the then current Comparative Insurance Year or the then current Comparative Energy Year, as the case may be, subject to adjustment as and when the statement for such Comparative Expense Year, Comparative Insurance Year or Comparative Energy Year is rendered by Landlord.

(g)(i) The statements of the Expenses, the Building Insurance Expenses and the Building Energy Expenses to be furnished by Landlord as provided above shall be certified by Landlord, and shall be prepared in reasonable detail and based on information and computations made for Landlord by Landlord’s accountant or manager, it being agreed that said accountant or manager may rely on Landlord’s allocations and estimates wherever operating cost allocations or estimates are needed for this Exhibit C . The statements thus furnished to Tenant shall constitute a final determination as between Landlord and Tenant of the Expenses, Building Insurance Expenses and Building Energy Expenses for the periods represented thereby, unless Tenant within forty-five (45) days after they are furnished shall give notice to Landlord that it disputes their accuracy or their appropriateness, which notice shall specify the particular respects in which the statement is inaccurate or inappropriate. Pending the resolution of any such dispute, Tenant shall pay the additional rent to Landlord in accordance with the statements furnished by Landlord.

(ii) Landlord shall grant Tenant (together with its legal counsel or an independent certified public accountant retained by Tenant) reasonable access to so much of Landlord’s books and records as may be required for the purposes of verifying the Expenses, the Building Insurance Expenses and the Building Energy Expenses incurred for the Comparative Expense Year, the Comparative Insurance Year or the Comparative Energy Year then just ended, as the case may be, (hereinafter, an “ Audit ”) during normal business hours at the place where they are regularly maintained, for a period of forty-five (45) days from the date notice is given by Tenant under Paragraph (g)(i) provided and on the express condition that: (a) notice is given by Tenant in a timely fashion under Paragraph (g)(i) , (b) all additional rent are paid by Tenant to Landlord in accordance with the statements furnished to Tenant under this Section, (c) the person examining Landlord’s books and records (or the employer thereof) is not a person who is paid based in whole or in part on the amount of any reduction of the payment resulting from the examination or any other so called “contingency fee” basis, and (d) Tenant, its legal counsel and its accountants shall execute a confidentiality agreement prior to the time access to Landlord’s books and records is given. If Tenant’s Audit discloses that the Expenses, Building Insurance Expenses or Building Energy Expenses billed to Tenant were overstated by Landlord by more than five percent (5%), then the parties shall seek to resolve such difference. If they are unable to do so, either may submit such dispute to arbitration for resolution.

(h) In no event shall the fixed annual rent under the Lease be reduced by virtue of this Exhibit C .

(i) Landlord’s and Tenant’s obligation to make the adjustments referred to in this Exhibit C shall survive any expiration or termination of this Lease.

(j) Any delay or failure of Landlord in billing any escalation hereinabove provided shall not constitute a waiver of or in way impair the continuing obligation of Tenant to pay such escalation hereunder.

EXHIBIT D

Landlord’s 28 ^th Floor Premises Work

Landlord shall cause to be performed the following work with respect to the 28 ^th Floor Premises at Landlord’s expense, using Building standard materials. All other work in or for the 28 ^th Floor Premises (or any other portion of the demised premises) shall be performed by or on behalf of Tenant at Tenant’s expenses and in accordance with Article 6 of the Lease. Landlord reserves the right to make reasonable substitutions and/or modifications to the following to the extent necessary to comply with base-building design and/or legal requirements.

1.	Demolition : Landlord shall provide for the demolition of the 28 ^th Floor Premises substantially similar to the condition of the 29 ^th Floor Premises as of the Effective Date.

2.	Fireproofing : Landlord shall fireproof, or caused to be fireproofed, any exposed structural steel where required by applicable law.

3.	Connections : Landlord shall provide existing standpipe and fire sprinkler connections.

4.	Electrical : Landlord shall provide existing electrical panels in the base building electric closet with a capacity of 6 watts connected load per usable square foot in the Premises (exclusive of Building-wide HVAC).

5.	Class E System : Landlord shall provide for adequate connection points, in Landlord’s reasonable discretion, for the Building fire alarm system, warden stations, Class E connections, smoke detectors, speakers and strobes.

6.	HVAC : Landlord shall provide for HVAC trunk duck that extends 1-2’ into the 28 ^th Floor Premises out of the mechanical room, in a location reasonably determined by Landlord.

Windows : Landlord shall insure that all exterior windows are in good order and repair and properly sealed and reasonably free of fog or condensation; provided , however , that Landlord’s completion of the work described in this Paragraph 7 of Exhibit D shall not be a condition of the occurrence of the 28 ^th Floor Commencement Date and may be performed by Landlord subsequent to the occurrence of the 28 ^th Floor Commencement Date.

EXHIBIT E-1

27 ^th Floor Offering Space

(Attached hereto)

EXHIBIT E-2

32 ^nd Floor Offering Space

(Attached hereto)

EXHIBIT F

30 ^th Floor Premises

(Attached hereto)

EXHIBIT G

Calculation of Increase in Cancellation Payment if Tenant has exercised the 30 ^th Floor Option

Prior to the giving of the Cancellation Notice

The sum of (i) five (5) months of fixed annual rent at the initial rate payable under the Lease for the 30 ^th Floor Premises, and (ii) the following unamortized costs incurred by Landlord in connection with leasing the 30 ^th Floor Premises to Tenant (calculated as of the Cancellation Date): leasing and/or broker’s commissions, legal fees, rent abatement and free rent (if any) and work allowance (if any). Such costs shall be amortized on a straight-line basis over the term of the Lease for the 30 ^th Floor Premises, commencing on the date on which rent shall commence for the 30 ^th Floor Premises and ending on the Extended Term Expiration Date, with interest calculated thereon at the rate of eight percent (8%) per annum.

EXHIBIT H

38 ^th Floor Premises

(Attached hereto)

EXHIBIT I

Form of SNDA

(Attached hereto)

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

(1250 Broadway)

THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this “ Agreement ”), dated as of , 2014, is made by and among LANDESBANK BADEN-WÜRTTEMBERG NEW YORK BRANCH, a banking branch licensed by the Banking Department of New York State, having an address at 280 Park Avenue, 31 ^st Floor, West Building, New York, New York 10017, as Administrative Agent (“ Lender ”), Tenant (as defined below) and Borrower (as defined below).

DEFINITIONS :

Borrower : JT MH 1250 Owner LP, a Delaware limited partnership, having an office located c/o Murray Hill Properties LLC, 1140 Avenue of the Americas, New York, New York 10036.

Tenant : Varonis Systems, Inc., a Delaware corporation, having an office located in the Leased Space (as defined below).

Property : that certain parcel of real property commonly known by the street address 1250 Broadway, New York, New York, designated as Block 833, Lot 11 on the Tax Map of the City of New York, and as more particularly described in Exhibit A annexed hereto and made a part hereof, together with all fixtures located thereon or appurtenant thereto.

Landlord : the landlord named in the Lease and its successors and assigns from time to time, except a “Successor Landlord” (defined in Appendix I annexed hereto and made a part hereof).

Lease : that certain lease, dated December 19, 2011, as amended by that certain First Modification of Lease Agreement dated June 18, 2014, by and between JT MH 1250 Owner LP, as landlord, and Tenant, as tenant, for a term that commenced on January 1, 2012 and will expire on February 28, 2026.

Leased Space : office space on the 29 ^th and 31st floors of the Property leased to Tenant pursuant to the Lease.

Loan : a certain loan from Lender, as administrative agent, and the other lenders signatory to the applicable loan agreement from time to time, to Borrower, as borrower, including any advances and increases, secured by, among other things, a first lien on the Property.

Mortgage : a certain Mortgage and Consolidated, Amended and Restated Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of May 14, 2008, as amended or consolidated from time to time given by Borrower to Lender, as administrative agent, as security for the Loan, which instrument is recorded in the Office of the City Register of the City of New York (the “ Land Records ”) under Document ID: 2008051800024004.

Assignment : a certain Assignment of Rents and Leases dated as of May 14, 2008, as amended from time to time, made by Borrower to Lender, as administrative agent, as additional security for the Loan, which instrument is recorded in the Land Records under Document ID: 2008051800024005.

Rent : all rent, additional rent and other sums payable by Tenant under the Lease.

Notice Addresses :


Lender:	Landesbank Baden-Württemburg New York Branch,
	as Administrative Agent
	280 Park Avenue
	31 ^st Floor, West Building
	New York, New York 10017
	Attn:	Real Estate Finance Department,
		Chase Cassidy
	Telecopy: (212) 584-1769

with a copy to:	Shearman & Sterling LLP
	599 Lexington Avenue
	New York, New York 10022
	Attention: Robert W. Fagiola, Esq. (2197-209)
	Telecopy: (646) 848-7606

Tenant:	Varonis Systems, Inc.
	1250 Broadway, 31st Floor
	New York, NY 10001
	Attn: General Counsel
	Telecopy: 212-695-7010

with a copy to:	Pepper Hamilton LLP
	3000 Two Logan Square
	Eighteenth and Arch Streets
	Philadelphia, PA 19103
	Attn: Norman B. Berlin, Esquire
	Telecopy: 215-689-4609

*Lender and Tenant hereby incorporate by reference all of the terms and conditions of Appendix I annexed hereto and made a part hereof.*

This Agreement: (a) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof; (b) may be executed in counterparts, which taken together shall comprise a single instrument; and (c) may be amended only by a writing signed by the parties hereto. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Lease.

[signature page follows]

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Subordination, Non-Disturbance and Attornment Agreement as of the date and year first above written.


LENDER :

LANDESBANK BADEN-WÜRTTEMBERG
NEW YORK BRANCH, as administrative agent

By:

TENANT:

VARONIS SYSTEMS, INC., a Delaware corporation

By:
	Name:	Gili Iohan
	Title:	Chief Financial Officer

BORROWER :

JT MH 1250 Owner LP, a Delaware limited partnership

By:	JT MH 1250 Owner GP, LLC Delaware limited liability company, its general partner

	By:
		Name:
		Title:


STATE OF NEW YORK	)
	)	ss.:
COUNTY OF NEW YORK	)

On the day of in the year 2014 before me, the undersigned, personally appeared Leonard J. Crann, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed this instrument.

Signature and Office of individual taking acknowledgement


STATE OF NEW YORK	)
	)	ss.:
COUNTY OF NEW YORK	)

On the day of in the year 2014 before me, the undersigned, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed this instrument.

Signature and Office of individual taking acknowledgement


STATE OF NEW YORK	)
	)	ss.:
COUNTY OF NEW YORK	)

Signature and Office of individual taking acknowledgement

APPENDIX I

RECITALS :

A. Landlord and Tenant have executed the Lease, pursuant to which Landlord leased to Tenant, and Tenant leased from Landlord, the Leased Space.

B. Tenant and Lender desire to agree on the relative priorities of their interests in the Property and their rights and obligation upon the occurrence of certain events, as described herein.

AGREEMENT :

NOW, THEREFORE, for good and sufficient consideration, the parties agree as set forth below.

Tenant and Lender agree that, until the Mortgage is released or otherwise satisfied of record:

The Lease and all of Tenant’s rights thereunder are and will remain subject and subordinate to the Mortgage and to any and all future advances of the Loan secured thereby and to any other mortgage, deed of trust or other security instrument on the Property now or in the future held by Lender, and Tenant will not subordinate the Lease to any other lien against the Property without Lender’s prior written consent;

Except for any security deposit and those payments to be made by Tenant under the Lease based on Landlord’s estimate of real estate taxes, operating expenses and other escalations payable by Tenant under the terms of the Lease, Tenant will not pay Rent more than one (1) month in advance and will not claim any offset against Rent;

Upon receipt of notice from Lender, Tenant will pay the Rent as and when due under the Lease to Lender and the payments will be credited against the Rent due under the Lease; and

Tenant does not have, and will not acquire, any right or option to purchase any portion of, or interest in, the Property.

As long as Tenant is not in default in respect of any the terms and conditions of this Agreement and is not in default of any of its obligations under the Lease beyond any applicable grace or cure period, Tenant and Lender agree as follows:

If Lender commences a judicial or nonjudicial foreclosure or other proceeding to enforce the Mortgage, or exercises any power of sale (an “ Action ”), Lender will not name Tenant as a party to such Action unless joinder is required under applicable law, and in such event: (i) Lender will not seek affirmative relief from Tenant; (ii) the Lease will not be terminated; and (iii) neither Tenant’s possession of the Leased Space nor its quiet enjoyment thereof will be disturbed;

If Lender or any other entity (a “ Successor Landlord ”) acquires the Property through an Action or by deed in lieu of foreclosure (an “ Acquisition ”), Successor Landlord will not disturb Tenant’s possession of the Leased Space or its quiet enjoyment thereof, and the Lease

will continue in full force and effect with Successor Landlord and Tenant bound by the Lease; and

If, notwithstanding the foregoing, the Lease is terminated as a result of an Action, a lease between Successor Landlord and Tenant will be deemed created on the same terms as the Lease, except that the term of the replacement Lease will be the then-unexpired term of the Lease, subject to any renewal or expansion option rights. Successor Landlord and Tenant will execute such a replacement Lease in accordance with the foregoing at the written request of either party.

In the event of an Acquisition, Tenant will recognize and attorn to Successor Landlord as the landlord under the Lease for the balance of the term thereof. Tenant’s attornment will be self-operative, and no further instrument shall be required to effectuate the same, except that at Successor Landlord’s request, Tenant will execute instruments as are reasonably satisfactory to Successor Landlord to confirm such attornment.

Successor Landlord will not be:

liable for any act or omission of Landlord occurring prior to the date of the Acquisition, except for any repair and maintenance obligations of a continuing nature imposed on the landlord under the Lease;

required to credit to Tenant’s account any Rent for any rental period beyond the then-current rental period or for any security deposit, unless such deposit has actually been received by Successor Landlord;

bound by any assignment, surrender, termination, cancellation, amendment or modification of the Lease made after the date hereof without its written consent, except assignments made in strict conformance with the applicable provisions of the Lease;

subject to any credits, offsets, claims, counterclaims or defenses that Tenant may have against Landlord arising prior to the date of the Acquisition, except to the extent that the default or other action or failure to act which gives rise to such credit, offset, claim, counterclaim or defense continues after the Acquisition and then only to the extent accrued during such post Acquisition period;

liable for any damages Tenant may suffer as a result of any misrepresentation, breach of warranty or act of or failure to act by any party other than Successor Landlord; or

obligated to make any payment, or to give any credit or allowance, to Tenant, including, without limitation, for any improvements, alterations, demolition or other work in the Leased Space or the Property (other than to repair and restore following a casualty or condemnation to the extent required under the Mortgage), or to undertake or complete construction of any improvements in, or alterations of, the Leased Space or the Property, or to pay any leasing commissions arising out of the Lease.

Lender will have the right, but not the obligation, to cure any default by Borrower under the Lease. Tenant will notify Lender in writing of any default by Borrower in respect of any of the terms and conditions of the Lease that would entitle Tenant to terminate the Lease or receive an abatement of the Rent. Any notice of termination by reason of Borrower’s default will not be effective unless Tenant has so notified Lender of such default and Lender has had a thirty (30)-

day cure period (or such longer period as may be necessary if Borrower’s default is not susceptible to cure within thirty (30) days, but in any event not longer than one hundred twenty (120) days in the aggregate), commencing on the latest to occur of the date on which: (a) the cure period under the Lease expires; and (b) Lender receives the notice required by this paragraph. Any notice of abatement will not be effective unless Tenant has notified Lender of the default entitling Tenant to such abatement and Lender has had a thirty (30)-day cure period (or such longer period as may be necessary if the default is not susceptible to cure within thirty (30) days) commencing on the date on which Lender receives the notice required by this paragraph, but in any event not longer than one hundred twenty (120) days in the aggregate.

Upon not less than ten (10) days’ prior request from Lender, Tenant will execute, acknowledge and deliver to Lender an estoppel certificate containing such true and accurate information as may be reasonably required to be contained therein pursuant to the Lease and any other information reasonably requested by Lender.

All notices, requests or consents required or permitted to be given under this Agreement must be in writing and sent by certified mail, return receipt requested or by nationally recognized overnight delivery service providing evidence of the date of delivery, with all charges prepaid, addressed to the appropriate party at its respective Notice Address.

Tenant acknowledges and agrees that this Agreement constitutes notice to Tenant of the existence of the Mortgage and that, as of the date thereof, all of the Rents and Leases relating to the Property have been assigned by Borrower to Lender as additional security for the Loan.

Any claim by Tenant against Successor Landlord under the Lease or this Agreement shall be satisfied solely out of Successor Landlord’s interest in the Property and the rent, issue and profit derived therefrom, and Tenant will not seek recovery against or out of any other assets of Successor Landlord. Successor Landlord will have no liability or responsibility for any obligations under the Lease that arise subsequent to any transfer of the Property by Successor Landlord.

This Agreement is governed by, and will be construed in accordance with, the internal laws of the state or commonwealth in which the Property is located.

LENDER AND TENANT HEREBY EXPRESSLY WAIVE TRIAL BY JURY IN ANY PROCEEDING BROUGHT BY, OR COUNTERCLAIM ASSERTED BY, LENDER OR TENANT RELATING TO THIS AGREEMENT.

In the event of any conflict between the terms of the Lease and the provisions of this Agreement, the provisions of this Agreement shall control.

This Agreement binds and inures to the benefit of Lender and Tenant and their respective successors, assigns, heirs, administrators, executors, agents and representatives.

EXHIBIT A

LEGAL DESCRIPTION OF PROPERTY

ALL THAT CERTAIN plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Manhattan, City, County and State of New York, bounded and described as follows:

BEGINNING at the corner formed by the intersection of the northerly side of West 31st Street with the easterly side of Broadway;

RUNNING THENCE easterly along the northerly side of West 31st Street, 121 feet 3 1/2 inches;

THENCE northerly and at right angles to the last mentioned course, 98 feet 9 inches to the center line of the block between West 31st and 32nd Streets;

THENCE westerly along the center line of the block, 7 feet 5/8th of an inch to a point in a line drawn at right angles to the southerly side of West 32nd Street and distant 189 feet 10 inches easterly from the corner formed by the intersection of the southerly side of West 32nd Street and the easterly side of Broadway, measured along said southerly side of West 32nd Street;

THENCE northerly along the said last mentioned line, 98 feet 9 inches to the southerly side of West 32nd Street;

THENCE westerly along the southerly side of West 32nd Street, 189 feet 10 inches to the corner formed by the intersection of the southerly side of West 32nd Street and the easterly side of Broadway;

THENCE southerly along the easterly side of Broadway, 211 feet 5 5/8 inches to the point or place of BEGINNING.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Yakov Faitelson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Varonis Systems, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Gili Iohan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Varonis Systems, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(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.

Exhibit 32.1

CERTIFICATION OF CEO 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 Varonis Systems, Inc. (the “Company”) for the quarterly period ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Yakov Faitelson, as Chief Executive Officer and President of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


By:		/s/ Yakov Faitelson
		Yakov Faitelson
		Chief Executive Officer and President

Date: August 6, 2014

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2

CERTIFICATION OF CFO 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 Varonis Systems, Inc. (the “Company”) for the quarterly period ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Gili Iohan, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


By:		/s/ Gili Iohan
		Gili Iohan
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date: August 6, 2014