NEW RELIC INC (Form: 10-Q, Received: 08/12/2015 17:45:19)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

¨	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: 001-36766

New Relic, Inc.

(Exact name of registrant as specified in its charter)

Delaware

26-2017431

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

188 Spear Street, Suite 1200

San Francisco, California 94105

(Address of principal executive offices, including zip code)

(650) 777-7600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x 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). Yes x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of July 31, 2015, there were 47,486,749 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

NEW RELIC, INC.

Form 10-Q Quarterly Report

TABLE OF CONTENTS


		Page

Special Note Regarding Forward-Looking Statements			2

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)		3

	Condensed Consolidated Balance Sheets as of June 30, 2015 and March 31, 2015		3

	Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2015 and 2014		4

	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended June 30, 2015 and 2014		5

	Condensed Consolidated Statements of Cash Flows for the Three Months ended June 30, 2015 and 2014		6

	Notes to Condensed Consolidated Financial Statements		7

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

Item 3.	Quantitative and Qualitative Disclosure About Market Risk		23

Item 4.	Controls and Procedures		24

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		25

Item 1A.	Risk Factors		25

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

Item 3.	Defaults Upon Senior Securities		40

Item 4.	Mine Safety Disclosures		40

Item 5.	Other Information		40

Item 6.	Exhibits		40

	Signatures		41

	Exhibit Index		42

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “shall,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•

our future financial performance, including our revenue, cost of revenue, gross profit, gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain profitability;

•

the sufficiency of our cash and cash equivalents to meet our working capital, capital expenditure, and liquidity needs;

•

our ability to attract and retain customers to use our products, to optimize the pricing for our products, and to expand our sales to our customers;

•

the evolution of technologies affecting our products and markets;

•

our ability to innovate and provide a superior user experience and our intentions and strategy with respect thereto;

•

our ability to successfully expand in our existing markets and into new markets, including international markets;

•

the attraction and retention of key personnel;

•

our ability to effectively manage our growth and future expenses;

•

our ability to maintain, protect, and enhance our intellectual property;

•

worldwide economic conditions and their impact on spending; and

•

our ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations.

We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEW RELIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(unaudited)


	June 30,			March 31,
	2015			2015
Assets
Current assets:
Cash and cash equivalents	$	70,228		$	105,257
Short-term investments		124,800			95,503
Accounts receivable, net of allowance for doubtful accounts of $375 and $282, respectively		18,357			13,813
Prepaid expenses and other current assets		4,741			4,299

Total current assets		218,126			218,872
Property and equipment, net		38,057			35,397
Restricted cash		4,623			4,623
Goodwill		2,053			2,053
Intangible assets, net		2,046			2,300
Other assets		1,560			1,466

Total assets	$	266,465		$	264,711

Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	5,175		$	4,969
Accrued compensation and benefits		6,889			6,288
Other current liabilities		3,841			3,623
Deferred revenue		38,515			29,185

Total current liabilities		54,420			44,065
Deferred rent, non-current		4,530			4,638
Other liabilities, non-current		1,201			1,138

Total liabilities		60,151			49,841
Commitments and contingencies (Note 6)
Convertible preferred stock:
Convertible preferred stock, $0.001 par value; 10,000 shares authorized at June 30, 2015 and March 31, 2015; no shares issued and outstanding at June 30, 2015 and March 31, 2015;		—			—
Stockholders’ equity:
Common stock, $0.001 par value; 100,000 shares authorized at June 30, 2015 and March 31, 2015; 47,733 shares and 47,377 shares issued at June 30, 2015 and March 31, 2015; and 47,473 shares and 47,117 shares outstanding at June 30, 2015 and March 31, 2015;		48			47
Treasury stock - at cost (260 shares)		(263	)		(263	)
Additional paid-in capital		353,258			346,671
Accumulated other comprehensive income (loss)		(10	)		15
Accumulated deficit		(146,719	)		(131,600	)

Total stockholders’ equity		206,314			214,870

Total liabilities, convertible preferred stock and stockholders’ equity	$	266,465		$	264,711

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,
	2015			2014
Revenue	$	38,145		$	22,613
Cost of revenue		7,866			4,032

Gross profit		30,279			18,581
Operating expenses:
Research and development		8,754			4,912
Sales and marketing		28,683			18,616
General and administrative		7,984			5,360

Total operating expenses		45,421			28,888

Loss from operations		(15,142	)		(10,307	)
Other income (expense):
Interest income		141			5
Interest expense		(14	)		(15	)
Other income (expense), net		(2	)		134

Loss before income taxes		(15,017	)		(10,183	)
Income tax provision		102			—

Net loss	$	(15,119	)	$	(10,183	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.32	)	$	(0.65	)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		47,190			15,756

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended June 30,
	2015			2014
Net loss	$	(15,119	)	$	(10,183	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities, net of tax		(25	)		—

Comprehensive loss	$	(15,144	)	$	(10,183	)

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net loss:	$	(15,119	)	$	(10,183	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,301			1,561
Stock-based compensation expense		4,659			1,931
Other		418			(44	)
Changes in operating assets and liabilities:
Accounts receivable		(4,721	)		(2,189	)
Prepaid expenses and other assets		(384	)		(190	)
Accounts payable		(387	)		(908	)
Accrued compensation and benefits and other liabilities		827			(155	)
Deferred revenue		9,332			2,770
Deferred rent		(70	)		8

Net cash used in operating activities		(2,144	)		(7,399	)
Cash flows from investing activities:
Purchases of property and equipment		(2,671	)		(2,385	)
Down payment for property and equipment		—			(32	)
Increase in restricted cash		—			(28	)
Purchases of short-term investments		(43,146	)		—
Proceeds from sale and maturity of short-term investments		13,625			—
Capitalized software development costs		(2,209	)		(1,946	)

Net cash used in investing activities		(34,401	)		(4,391	)
Cash flows from financing activities:
Proceeds from issuances of preferred stock, net of issuance costs		—			97,247
Payments of costs related to initial public offering		—			(1,087	)
Proceeds from issuance of common stock		1,516			182

Net cash provided by financing activities		1,516			96,342

Net increase (decrease) in cash and cash equivalents		(35,029	)		84,552
Cash and cash equivalents, beginning of period		105,257			19,453

Cash and cash equivalents, end of period	$	70,228		$	104,005

Supplemental disclosure of cash flow information:
Noncash investing and financing activities:
Property and equipment purchased but not paid yet	$	1,028		$	1,451
Accrued initial public offering costs	$	—		$	227

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Description of Business and Summary of Significant Accounting Policies

Description of Business —New Relic, Inc. (the “Company” or “New Relic”) was incorporated in Delaware on February 20, 2008. The Company is a software-as-a-service provider of software analytics products which allow users to monitor software performance with .NET, Java, JavaScript, Node.js, PHP, Python, and Ruby applications deployed in a cloud or in a data center. New Relic’s software analytics products enable developers and operation teams to monitor, troubleshoot, and optimize their applications.

Basis of Presentation —These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015, as filed with the SEC on May 28, 2015 (the “Annual Report”). There have been no changes to the Company’s significant accounting policies described in the Annual Report that have had a material impact on its condensed consolidated financial statements and related notes.

In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending March 31, 2016. The condensed consolidated balance sheet as of March 31, 2015 included herein was derived from the audited financial statements as of that date.

Initial Public Offering —In December 2014, New Relic completed its initial public offering (“IPO”) in which the Company issued and sold 5,750,000 shares of common stock at a public offering price of $23.00 per share. The Company received aggregate proceeds of approximately $123.0 million from the sale of shares of common stock, net of underwriters’ discounts and commissions, but before deducting paid and unpaid offering expenses of approximately $3.1 million.

The sale of common stock in the IPO triggered the weighted average anti-dilution provisions set forth in the Company’s amended and restated certificate of incorporation. At the IPO price of $23.00 per share, the per share conversion rate for the Company’s Series F convertible preferred stock into common stock was approximately 1:1.02. The conversion rate for the Company’s Series A, Series B, Series C, Series D, and Series E convertible preferred stock was 1:1. As a result of the IPO, the 24,813,343 shares of the Company’s convertible preferred stock outstanding automatically converted into 24,885,778 shares of the Company’s common stock.

Use of Estimates —The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates.

Concentration of Risk —A customer accounted for 16% and 12% of the Company’s accounts receivable balance as of June 30, 2015 and March 31, 2015, respectively. There were no customers that individually exceeded 10% of the Company’s revenue during the three months ended June 30, 2015 and 2014.

Short-term Investments —Short-term investments consist of money market funds, certificates of deposit, commercial paper, U.S. treasury securities, U.S. agency securities, and corporate debt securities and are classified as available-for-sale securities. The Company has classified its investments as current based on the nature of the investments and their availability for use in current operations. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive loss, while realized gains and losses and other-than-temporary impairments are reported within the statement of operations. For the periods presented, realized and unrealized gains and losses on investments were not material. An impairment charge is recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemed to be other than temporary. The Company assesses whether a decline in value is temporary based on the length of time that the fair market value has been below cost, the severity of the decline and the intent and ability to hold or sell the investment. The Company did not identify any investments as other-than-temporarily impaired as of June 30, 2015 and March 31, 2015.

Business Combinations —The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition

date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that the Company identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s condensed consolidated statements of operations. There has been no such adjustment as of June 30, 2015.

Goodwill —Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is evaluated for impairment annually in the third quarter of the Company’s fiscal year, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows. Since inception through June 30, 2015, the Company did not have any goodwill impairment.

Intangible Assets —Intangible assets consist of identifiable intangible assets, primarily developed technology, resulting from the Company’s acquisitions. Acquired intangible assets are recorded at cost, net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives.

Recent Accounting Pronouncements —In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the recognition and reporting of revenue that establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The guidance allows for the use of either the full or modified retrospective transition method, and the standard will be effective for the Company in its fiscal year beginning April 1, 2018; early adoption is permitted for the fiscal year beginning April 1, 2017. The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements, as well as which transition method the Company intends to use.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The Update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for the Company in the fiscal year beginning April 1, 2016; early adoption is permitted. The Company is currently evaluating the impact of this new standard on its disclosures within the notes to the condensed consolidated financial statements.

2.	Business Combination

In October 2014, the Company closed the acquisition of Few Ducks, S.L., (“Ducksboard”), a provider of real-time dashboards for tracking business metrics from a broad set of application sources, pursuant to which the Company acquired all of the capital stock of Ducksboard for 121,493 shares of the Company’s common stock, of which 108,234 shares have been issued and up to 13,259 shares will be released on the twelve month anniversary of the closing date, and $2.3 million in cash resulting in an aggregate preliminary purchase price of $4.2 million. Of the total purchase price, $2.1 million was allocated to goodwill, $2.8 million to identifiable intangible assets, and $0.7 million to net liabilities assumed. The addition of the Ducksboard technology complements the Company’s visualization expertise and the Company believes it will readily expand the sources of data that are available to customers via the Company’s Software Analytics data cloud. The Company accounted for the acquisition of Ducksboard as a purchase of a business. Goodwill generated from the acquisition is attributable to expected synergies from future growth and potential future monetization opportunities, and is not deductible for tax purposes. Pro forma revenue and results of operations have not been presented because the historical results of Ducksboard were not material to the Company’s condensed consolidated financial statements in any period presented.

In connection with the acquisition, the Company may also issue 128,507 shares of its common stock to certain employees of Ducksboard, contingent upon their continuous employment with the Company. From the date of acquisition, compensation expense is recorded ratably over the respective service period of three years.

3.	Fair Value Measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2015 and March 31, 2015 based on the three-tier fair value hierarchy (in thousands):


	Fair Value Measurements as of
	June 30, 2015
	Level 1		Level 2		Level 3		Total
Description:
Money market funds	$	36,123	$	—	$	—	$	36,123
Commercial paper		—		10,747		—		10,747
Corporate notes and bonds		—		38,030		—		38,030
U.S. treasury securities		2,297		—		—		2,297
U.S. government agencies		—		73,726		—		73,726
Restricted cash - money market funds		4,623		—		—		4,623

Total	$	43,043	$	122,503	$	—	$	165,546

Included in cash and cash equivalents							$	36,123

Included in short-term investments							$	124,800

Included in restricted cash							$	4,623


	Fair Value Measurements as of
	March 31, 2015
	Level 1		Level 2		Level 3		Total
Description:
Money market funds	$	56,455	$	—	$	—	$	56,455
Certificates of deposit		—		1,800		—		1,800
Commercial paper		—		30,288		—		30,288
Corporate notes and bonds		—		38,715		—		38,715
U.S. treasury securities		500		—		—		500
U.S. government agencies		—		33,199		—		33,199
Restricted cash - money market funds		4,623		—		—		4,623

Total	$	61,578	$	104,002	$	—	$	165,580

Included in cash and cash equivalents							$	65,454

Included in short-term investments							$	95,503

Included in restricted cash							$	4,623

There were no transfers between fair value measurement levels during the three months ended June 30, 2015.

Level 3 instruments consisted solely of the Company’s preferred stock warrant liability. Prior to the Company’s IPO, outstanding warrants to purchase shares of the Company’s Series A and Series D convertible preferred stock were classified as other liabilities. The initial liability recorded was adjusted for changes in the fair values of the Company’s preferred stock warrants during each reporting period and was recorded as a component of other income (expense), net in the statement of operations. The Company estimated the fair values of these warrants using the Black-Scholes option-pricing model, based on the inputs for the estimated fair value of the underlying convertible preferred stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates, expected dividend rates and expected volatility of the price of the underlying convertible preferred stock. These estimates were based on subjective assumptions. During the three months ended June 30, 2014, the Company recognized a gain in the amount of $0.1 million, which was recorded as other income in the Company’s condensed consolidated statements of operations. Upon the closing of the IPO in December 2014, the Company ceased recording any further related periodic fair value adjustments.

Gross unrealized gains or losses for cash equivalents and available-for-sale marketable securities as of June 30, 2015 and March 31, 2015 were not material. As of June 30, 2015 and March 31, 2015, there were no securities that were in an unrealized loss position for more than 12 months.

The following table classifies the Company’s available-for-sale short-term investments by contractual maturities as of June 30, 2015 and March 31, 2015 (in thousands):


	June 30,		March 31,
	2015		2015
Due in one year	$	76,465	$	53,287
Due in one to two years		48,335		42,216

Total	$	124,800	$	95,503

For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

4.	Property and Equipment

Property and equipment, net, consisted of the following (in thousands):


	June 30,			March 31,
	2015			2015
Computers, software, and equipment	$	3,554		$	2,985
Site operation equipment		8,308			6,383
Furniture and fixtures		875			868
Leasehold improvements		21,246			20,513
Capitalized software development costs		23,872			21,402

Total property and equipment		57,855			52,151
Less: accumulated depreciation and amortization		(19,798	)		(16,754	)

Total property and equipment, net	$	38,057		$	35,397

Depreciation and amortization expense related to property and equipment was $3.0 million and $1.6 million for the three months ended June 30, 2015 and 2014, respectively.

5.	Goodwill and Purchased Intangibles Assets

There were no changes to the carrying amount of goodwill for the three months ended June 30, 2015.

Purchased intangible assets subject to amortization as of June 30, 2015 consist of the following (in thousands):


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Useful Life
								(In years)
Developed technology	$	2,400	$	(600	)	$	1,800		2.25
Customer relationships		100		(39	)		61		1.25
Other intangible assets		300		(115	)		185		1.25

	$	2,800	$	(754	)	$	2,046

Purchased intangible assets subject to amortization as of March 31, 2015 consist of the following (in thousands):


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Useful Life
								(In years)
Developed technology	$	2,400	$	(400	)	$	2,000		2.50
Customer relationships		100		(25	)		75		1.50
Other intangible assets		300		(75	)		225		1.50

	$	2,800	$	(500	)	$	2,300

Amortization expense of purchased intangible assets for the three months ended June 30, 2015 was $0.3 million. No amortization expense was recorded for the three months ended June 30, 2014.

Estimated future amortization expense as of June 30, 2015 is as follows (in thousands):


2016 (remaining 9 months)	$	746
2017		900
2018		400
2019 and thereafter		—

	$	2,046

6.	Commitments and Contingencies

Leases —The Company leases office space under non-cancelable operating lease agreements, which expire from 2015 through 2023.

In June 2015, the Company entered into an eight-year lease with respect to office space within a building located in San Francisco, California, pursuant to which the Company will initially lease approximately 14,067 square feet on November 1, 2015 and then lease an additional approximately 42,201 square feet on June 1, 2016.

Deferred Rent —Certain of the Company’s operating leases contain rent holidays, allowances, and rent escalation provisions. For these leases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease from the date the Company takes possession of the office and records the difference between amounts charged to operations and amounts paid as deferred rent. These rent holidays, allowances, and rent escalations are considered in determining the straight-line expense to be recorded over the lease term. As of each of June 30, 2015 and March 31, 2015, $4.9 million was recorded as deferred rent.

Rent expense, net of sublease income, for operating leases was $1.3 million for each of the three months ended June 30, 2015 and 2014.

Future minimum lease payments under non-cancelable operating leases as of June 30, 2015 were as follows (in thousands):


Years Ending March 31,	Operating Leases
2016 (remaining 9 months)	$	4,771
2017		8,330
2018		10,206
2019		10,455
2020		10,745
Thereafter		22,951

Total minimum future lease payments	$	67,458

Purchase Commitments —As of June 30, 2015 and March 31, 2015, the Company had purchase commitments of $4.4 million and $3.6 million, respectively, for specific contractual services.

Legal Proceedings —From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business, and may be subject to third-party infringement claims.

On November 5, 2012, CA, Inc. filed suit against the Company in the United States District Court, Eastern District of New York for alleged patent infringement. CA, Inc.’s complaint against the Company claims that certain aspects of the Company’s products infringe certain patents held by CA, Inc. The case was reassigned to a new judge in March 2014 and a trial date is not currently set. The Company cannot at this time predict the likely outcome of this proceeding or estimate the amount or range of loss or possible loss that may arise from it. The Company has not accrued any loss related to the outcome of this case as of June 30, 2015.

In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. To date, the Company has not incurred any costs as a result of such obligations and has not accrued any liabilities related to such obligations in the condensed consolidated financial statements. In addition, the Company indemnifies its officers, directors, and certain key employees while they are serving in good faith in their respective capacities. The Company does not currently believe there is a reasonable possibility that a loss may have been incurred under these indemnification obligations. To date, there have been no claims under any such indemnification provisions.

7.	Common Stock and Stockholders’ Equity

Convertible preferred stock — Upon the completion of the IPO, all outstanding convertible preferred stock was converted into 24,885,778 shares of common stock and the Company’s certificate of incorporation was amended and restated to authorize the Company to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share.

Common stock authorized — Upon the completion of the IPO, the Company’s certificate of incorporation was amended and restated to increase the amount of common stock authorized for issuance from 55,000,000 to 100,000,000 common shares with a par value of $0.001 per share.

Employee Stock Purchase Plan — The Company’s board of directors adopted, and the Company’s stockholders approved, the Company’s 2014 Employee Stock Purchase Plan (“ESPP”), which became effective in December 2014. The ESPP initially reserved and authorized the issuance of up to 1,000,000 shares of common stock. The ESPP provides that the number of shares reserved and available for issuance under the ESPP will automatically increase each April, beginning on April 1, 2015, by the lesser of 500,000 shares, 1% of the number of the Company’s common stock shares issued and outstanding on the immediately preceding March 31, or such lesser number of shares as determined by the Company’s board of directors. As of June 30, 2015, there were 1,471,169 shares available for issuance under the ESPP.

2008 Equity Incentive Plan — The Company’s board of directors adopted the 2008 Equity Incentive Plan (the “2008 Plan”) in February 2008. The 2008 Plan was terminated in connection with the Company’s IPO, and accordingly, no shares are available for future issuance under this plan. The 2008 Plan continues to govern outstanding awards granted thereunder.

2014 Equity Incentive Plan — The Company’s board of directors adopted, and the Company’s stockholders approved, the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which became effective in December 2014. The 2014 Plan serves as the successor to the Company’s 2008 Plan. The 2014 Plan initially reserved and authorized the issuance of 5,000,000 shares of the Company’s common stock. Additionally, shares not issued or subject to outstanding grants under the 2008 Plan upon its termination became available under the 2014 Plan, resulting in a total of 5,184,878 available shares under the 2014 Plan as of the effective date of the 2014 Plan. Pursuant to the terms of the 2014 Plan, any shares subject to outstanding stock options or other stock awards under the 2008 Plan that (i) expire or terminate for any reason prior to exercise or settlement, (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award will become available for issuance pursuant to awards granted under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each April 1, beginning on April 1, 2015, by 5% of the outstanding number of shares of the Company’s common stock shares issued and outstanding on the immediately preceding March 31, or such lesser number of shares as determined by the Company board of directors. As of June 30, 2015, there were 6,745,182 shares available for issuance under the 2014 Plan.

The following table summarizes the Company’s stock option and RSU award activities for the three months ended June 30, 2015 (in thousands, except per share information):


	Options Outstanding									RSUs Outstanding
						Weighted- Average Remaining Contractual							Weighted- Average		Weighted- Average Remaining Contractual
	Number			Weighted- Average		Weighted- Average Remaining Contractual		Aggregate		Number			Grant Date		Weighted- Average Remaining Contractual		Aggregate
	of Shares			Exercise Price		Term (in years)		Intrinsic Value		of Shares			Fair Value		Term (in years)		Intrinsic Value
Outstanding - April 1, 2015		9,422		$	10.08		7.9	$	231,964		723		$	23.87		3.5	$	25,098
Stock options granted		391			30.78
RSU granted											522			30.93
Stock options exercised		(356	)		4.26				9,883
Stock options canceled/forfeited		(137	)		16.98
RSU canceled/forfeited											(16	)		25.54

Outstanding - June 30, 2015		9,320		$	11.07		7.5	$	224,810		1,229		$	26.85		3.6	$	43,253

Restricted Stock Awards —The Company granted restricted stock awards to two directors for an aggregate of 100,000 shares of its common stock in August 2013 and 40,000 shares of common stock in May 2014, each of which vests over four years, subject to the continued service relationship with the Company, or become fully vested upon a change of control. The grant date fair value of the restricted stock awards was $0.9 million or $9.37 per share for awards granted in August 2013, and $0.7 million or $16.93 per share for awards granted in May 2014. Stock-based compensation expense recognized related to these restricted stock awards was $0.1 million for each of the three months ended June 30, 2015 and 2014. The Company recognizes the expense using a straight-line basis over the requisite service periods of the award.

Stock Options Granted to Nonemployees —The Company granted 4,301 shares and 14,300 shares to nonemployee consultants during the three months ended June 30, 2015 and 2014, respectively, and recorded stock-based compensation expense of $0.2 million and $0.1 million, respectively.

Stock-Based Compensation Expense —Stock-based compensation expense for both employees and nonemployees was $4.7 million and $1.9 million for the three months ended June 30, 2015 and 2014, respectively. Cost of revenue, research and development, sales and marketing, and general and administrative expenses were as follows (in thousands):


	Three Months Ended June 30,
	2015		2014
Cost of revenue	$	251	$	93
Research and development		1,038		202
Sales and marketing		1,976		849
General and administrative		1,394		787

Total stock-based compensation expense	$	4,659	$	1,931

As of June 30, 2015, unrecognized stock-based compensation cost related to outstanding unvested stock options was $39.6 million, which is expected to be recognized over a weighted-average period of approximately 2.8 years. As of June 30, 2015, unrecognized stock-based compensation cost related to outstanding unvested stock awards was $33.3 million, which is expected to be recognized over a weighted-average period of approximately 3.4 years.

8.	Income Taxes

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely.

The Company recorded an income tax provision of $0.1 million for the three months ended June 30, 2015 related to foreign income taxes and state minimum taxes. Based on the available objective evidence during the three months ended June 30, 2015, the Company believes it is more likely than not that the tax benefits of U.S. losses incurred during the three months ended June 30, 2015 may not be realized. Accordingly, the Company did not record the tax benefits of U.S. losses incurred during the three months ended June 30, 2015. The primary difference between the effective tax rate and the local statutory tax rate relates to the valuation allowance on the Company’s U.S. losses, foreign tax rate differences, and amortization of a deferred charge associated with the intercompany transfer of intellectual property from prior periods.

As of June 30, 2015, the total amount of gross unrecognized tax benefits was $2.0 million, all of which would affect the Company’s effective tax rate if recognized before consideration of any valuation allowance. As of June 30, 2015, the Company had an immaterial amount related to the accrual of interest and penalties. During the three months ended June 30, 2015, the Company’s gross unrecognized tax benefits increased by $0.1 million, none of which would affect the Company’s effective tax rate if recognized. The Company does not have any tax positions as of June 30, 2015 for which it is reasonably possible that the total amount of gross unrecognized tax benefits will significantly increase or decrease within the next 12 months.

9.	Net Loss Per Share

Basic loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of employee share-based awards and warrants. Diluted net loss per common share is computed giving effect to all potential dilutive common shares, including common stock issuable upon exercise of stock options, and unvested restricted common stock. As the Company had net losses for each of the three months ended June 30, 2015 and 2014, all potential common shares were determined to be anti-dilutive.

The following table sets forth the computation of net loss per share attributable to common stockholders, basic and diluted (in thousands, except per share amounts):


	Three Months Ended June 30,
	2015			2014
Numerator:
Net loss	$	(15,119	)	$	(10,183	)

Denominator:
Weighted average shares used to compute net loss per share attributable to common stockholder, basic and diluted		47,190			15,756

Net loss per share—basic and diluted	$	(0.32	)	$	(0.65	)

The following outstanding options, unvested shares, warrants, and convertible preferred stock were excluded (as common stock equivalents) from the computation of diluted net loss per common share for the periods presented as their effect would have been antidilutive (in thousands):


	As of June 30,
	2015		2014
Convertible preferred stock		—		24,813
Options to purchase common stock		9,320		8,123
Common stock reserved for issuance in connection with acquisition		129		—
Restricted stock units		1,229		—
Warrants		—		49

		10,678		32,985

10.

Revenue by Geographic Location

The following table shows the Company’s revenue by geographic areas, as determined based on the billing address of its customers (in thousands):


	Three Months Ended June 30,
	2015		2014
United States	$	25,394	$	15,264
EMEA		7,407		4,182
APAC		2,944		1,749
Other		2,400		1,418

Total revenue	$	38,145	$	22,613

Substantially all of the Company’s long-lived assets were attributable to operations in the United States as of June 30, 2015 and March 31, 2015.

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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part II, Item 1A “Risk Factors” included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled “Special Note Regarding Forward-Looking Statements” in this report. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

Overview

We are defining a new category of enterprise software we call Software Analytics. Our cloud-based platform and suite of products enables organizations to collect, store, and analyze massive amounts of software data in real time. We design all our products to be highly intuitive and frictionless; they are easy to deploy, and customers can rapidly, often within minutes, realize benefits and results. Technology users can use our products to quickly find and fix performance problems as well as prevent future issues. Business users such as product managers can get answers to how their new product launch is being received, or how a pricing change impacted customer retention, without waiting for help from IT. Software developers can build better applications faster, as they can see how their software will perform and is actually performing for end-users.

Since our formation in 2007, we have invested in building an integrated platform that enables organizations to collect, store and analyze massive amounts of data from their software in real time. We launched our first product offering, New Relic APM (Application Performance Management) for Ruby, in 2008. Since then, we broadened our product offerings to support a wide variety of programming languages and frameworks, with Java in 2009, PHP and .NET in 2010, and Python in 2011. In 2011, we released New Relic Servers to provide server monitoring for the cloud and data centers. In 2013, we released New Relic Mobile to support mobile by providing native mobile application performance management for the iOS and Android mobile operating systems. We also launched support for Node.js, a programming language, and New Relic Plugins (formerly New Relic Platform) to enable third parties to integrate with our platform. In March 2014, we launched New Relic Insights to leverage big data analytics. During the quarter ended December 31, 2014, we released New Relic Browser to improve browser-side performance and New Relic Synthetics to enable our users to test their software through simulated usage.

We sell our products primarily through direct sales and marketing channels utilizing a wide range of online and offline sales and marketing activities. The majority of our users visit our website, create an account, and deploy our software. Upon deployment, most users experience our full-featured products with a 14-day or 30-day free trial, enabling them to realize the benefits of our products, after which they have the option to purchase one or more of our subscription plans. During and after the trial period, our direct sales team engages with the user to convert the user into a paid business account. Many users initially subscribe to one of our products to address a particular use case and broaden the usage of our products as they become more familiar with our products. Most of our customers to date have been small to medium-sized organizations, and many of our customers to date have made purchasing decisions without interacting with our sales or other personnel. For larger organizations, our sales team focuses on leveraging users in existing accounts to broaden our footprint across the organization.

We offer access to our platform and suite of products under subscription plans that also include service and support. We offer a variety of pricing plans based on the particular product purchased by an account, number of servers monitored, number of applications monitored, or number of mobile devices monitored. Our plans typically have terms of one year, although some of our customers commit for shorter or longer periods. We recognize revenue from subscription fees ratably over the service period. Most of our customers pay us on a monthly basis. As a result, our deferred revenue at any given period of time has historically been relatively low. As we sell more to larger organizations, we expect to invoice more of our customers on a less frequent basis, and, therefore, we expect our deferred revenue to increase over time. However, due to our mix of subscription plans and billing frequencies, we do not believe that changes in our deferred revenue in a given period are directly correlated with our revenue growth.

We have grown rapidly in recent periods, with revenue for the three months ended June 30, 2015 and 2014 of $38.1 million and $22.6 million, respectively, representing year-over-year growth of 69%. We expect that the rate of growth in our revenue will decline over the long term as our business scales, even if our revenue continues to grow in absolute terms. We have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net losses in each period since our inception, including net losses of $15.1 million and $10.2 million for the three months ended June 30, 2015 and 2014, respectively. Our accumulated deficit as of June 30, 2015 was $146.7 million.

Our employee headcount has increased to 738 employees as of June 30, 2015 from 498 as of June 30, 2014, and our number of paid business accounts from 9,764 to 12,440 over the same period, and we plan to continue to aggressively invest in the growth of our

business to take advantage of our market opportunity. We intend to continue to increase our investment in sales and marketing, as we further expand our sales teams, increase our marketing activities, and grow our international operations, particularly as we increase our sales to larger organizations. Internationally, we currently offer our products in Europe, Middle East, and Africa, or EMEA, Asia-Pacific, or APAC, and other non-U.S. locations, as determined based on the billing address of our customers, and our revenue from those regions constituted 19%, 8%, and 6%, respectively, of our revenue for the three months ended June 30, 2015, and 18%, 8%, and 6%, respectively, of our revenue for the three months ended June 30, 2014. We believe there is further opportunity to increase our international revenue overall and as a proportion of our revenue, and we are increasingly investing in our international operations and intend to invest in further expanding our footprint in international markets. To support the growth of our customer adoption, we also intend to increase our investment in our support organization and infrastructure. In addition, we plan to continue to invest in our research and development organization to enhance and further develop our products. While these areas represent significant opportunities for us, we also face significant risks and challenges that we must successfully address in order to sustain the growth of our business and improve our operating results. Due to our continuing investments to grow our business, in advance of and in preparation for our expected increase in sales and expansion of our paid business accounts, we are continuing to incur expenses in the near term from which we may not realize any long-term benefit. In addition, any investments that we make in sales and marketing or other areas will occur in advance of our experiencing any benefits from such investments, so it may be difficult for us to determine if we are efficiently allocating our resources in these areas. As a result, we have never achieved profitability and we do not expect to be profitable for the foreseeable future.

Further, our reported revenue, operating results, and cash flows for a given period may not be indicative of future results due to our limited operating history and fluctuations in the number of new employees, the rate of our expansion, the timing of expenses we incur to grow our business and operations, levels of competition, and market demand for our products.

Factors Affecting Our Performance

Market Adoption of Our Products. We are defining a new category of software, which we refer to as Software Analytics. Our success is dependent on the market adoption of this emerging category of software, which may not yet be well understood by the market. For the foreseeable future, we expect that our revenue growth will be primarily driven by the pace of adoption and penetration of our products and we will incur significant expenses associated with educating the market about the benefits of our products.

Increasing the Number of Paid Business Accounts. Our future growth is dependent on our ability to increase the number of accounts that pay us to use our products. Most users experience our products with a free trial after which they have the option to purchase one or more of our subscription plans. We believe that we have a significant competitive advantage as our users experience the ease of installation and the full set of features that our products deliver during the free trial period.

Retention and Expansion within Paid Business Accounts. A key factor in our success is the retention and expansion of our subscription agreements with our existing customers. In order for us to continue to grow our business, it is important to generate additional revenue from our existing customers, and we do this in several ways. As we improve our existing products and introduce new products, we believe that the demand for our products will generally grow. We also believe that there is a significant opportunity for us to increase the number of subscriptions we sell to our current customers as they become more familiar with our products and adopt our products to address additional business use cases.

Investment in Sales and Marketing. We expect to continue to invest aggressively in sales and marketing to drive additional revenue. Any investments that we make in sales and marketing will occur in advance of our experiencing any benefits from such investments, so it may be difficult for us to determine if we are efficiently allocating our resources. As we continue to focus sales and marketing investments more heavily towards large organizations, this may require more of our resources. In addition, we expect our sales cycle to be longer and less predictable with respect to larger customers, which may delay realization of future sales. We also intend to increase our sales and marketing investment in international markets, such as Europe, and those markets may take longer and be more costly to develop than the U.S. market.

Key Operating Metrics

We review the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions:

Number of Paid Business Accounts . We believe that our ability to increase our number of paid business accounts is one indicator of our market penetration, the growth of our business and our potential future prospects. We define the number of paid business accounts at the end of any particular period as the number of accounts at the end of the period as identified by a unique account identifier for which we have recognized revenue on the last day of the period indicated. A single organization or customer may have multiple paid business accounts for separate divisions, segments, or subsidiaries. We had 12,440 paid business accounts as of June 30, 2015.

Dollar-Based Net Expansion Rate. Our ability to generate revenue is dependent on our ability to maintain and grow our relationships with our existing customers. We track our performance in this area by measuring our dollar-based net expansion rate. Our dollar-based net expansion rate increases when customers increase their use of our products, use additional products, or upgrade to a higher subscription tier. Our dollar-based net expansion rate is reduced when customers decrease their use of our products, use fewer products, or downgrade to a lower subscription tier.

Our dollar-based net expansion rate compares our recurring subscription revenue from customers from one period to the next. We measure our dollar-based net expansion rate on a monthly basis because many of our customers change their subscriptions more frequently than quarterly or annually. To calculate our annual dollar-based net expansion rate, we first establish the base period monthly recurring revenue from all our customers at the end of a month. This represents the revenue we would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions. We then (i) calculate the actual monthly recurring revenue from those same customers at the end of that following month; then (ii) divide that following month’s recurring revenue by the base month’s recurring revenue to arrive at our monthly net expansion rate; then (iii) calculate a quarterly net expansion rate by compounding the net expansion rates of the three months in the quarter; and then (iv) calculate our annualized net expansion rate by compounding our quarterly net expansion rate over an annual period. Our annualized dollar-based net expansion rate for the three months ended June 30, 2015 was 129.6%.

The quarterly fluctuations in our dollar-based net expansion rate are primarily driven by transactions within a particular quarter in which certain paid business accounts from larger subscription customers either significantly upgrade or significantly downgrade their subscriptions and by increased sales to existing customers in particular quarters due to sales and marketing campaigns in a particular quarter. In addition, we believe that the composition of our customer base also has an impact on the net expansion rate, such that a relative increase in the number of paid business accounts from larger enterprises versus small to medium-sized organizations will tend to increase our quarterly net expansion rate and a relative increase in the number or paid business accounts from small to medium-sized organizations versus larger enterprises will tend to decrease the quarterly net expansion rate, as smaller businesses tend to cancel subscriptions more frequently than larger enterprises.

Key Components of Results of Operations

Revenue

We offer access to our products under subscription plans that include service and support for one or more of our products. For our paying customers, we offer a variety of pricing plans based on the particular product purchased by an account, number of servers monitored, number of applications monitored, or number of mobile devices monitored. Our plans typically have terms of one year, although some of our customers commit for shorter periods. We invoice most of our customers on a monthly basis. As a result, our deferred revenue has historically been relatively low. As we begin to sell more to larger organizations, we expect to invoice more of our customers on a less frequent basis, and therefore, we expect our deferred revenue to increase over time.

Cost of Revenue

Cost of revenue consists of expenses relating to data center operations, hosting-related costs, payment processing fees, depreciation and amortization, consulting costs, and salaries and benefits of operations and global customer support personnel. Salaries and benefits costs associated with our operations and global customer support personnel consist of salaries, benefits, bonuses, and stock-based compensation. We plan to continue increasing the capacity, capability, and reliability of our infrastructure to support the growth of our customer adoption and the number of products we offer.

Gross Profit and Margin

Gross profit is revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin has been, and will continue to be affected by, a number of factors, including the timing and extent of our investments in our operations and global customer support personnel, hosting-related costs, and the amortization of capitalized software. We expect that our gross margin will decline modestly over the long term, although we expect our gross margin to fluctuate from period to period as a result of these factors.

Operating Expenses

Personnel costs, which consist of salaries, benefits, bonuses, stock-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses. We also incur other non-personnel costs such as an allocation of our general overhead expenses.

Research and Development. Research and development expenses consist primarily of personnel costs and an allocation of our general overhead expenses. We continue to focus our research and development efforts on adding new features and products, and increasing the functionality and enhancing the ease of use of our existing products. We capitalize the portion of our software development costs that meets the criteria for capitalization.

We plan to continue to hire employees for our engineering, product management, and design teams to support our research and development efforts. As a result, we expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future. However, we expect our research and development expenses to decrease modestly as a percentage of our revenue over the long term, although our research and development expenses may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our research and development expenses.

Sales and Marketing. Sales and marketing expenses consist of personnel costs for our sales, marketing, and business development employees and executives. Commissions are expensed in the period when a customer contract is executed. Sales and marketing expenses also include the costs of our marketing and brand awareness programs.

We plan to continue investing in sales and marketing globally by increasing the number of our sales personnel, expanding our domestic and international marketing activities, building brand awareness, and sponsoring additional marketing events. We expect our sales and marketing expenses to continue to increase in absolute dollars and continue to be our largest operating expense category for the foreseeable future. However, we expect our sales and marketing expenses to decrease as a percentage of our revenue over the long term, although our sales and marketing expenses may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our sales and marketing expenses.

General and Administrative . General and administrative expenses consist primarily of personnel costs for our administrative, legal, human resources, information technology, finance and accounting employees, and executives. Also included are non-personnel costs, such as legal and other professional fees.

We plan to continue to expand our business both domestically and internationally, and we expect to increase the size of our general and administrative function to support the growth of our business. We also expect that we will continue to incur additional general and administrative expenses as a result of being a publicly traded company. As a result, we expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future. However, we expect our general and administrative expenses to decrease modestly as a percentage of our revenue over the long term, although our general and administrative expense may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our general and administrative expenses, such as litigation costs.

Other Expense, Net

Other expense, net consists primarily of the re-valuation of our convertible preferred stock warrant liability, interest income, interest expense, and foreign exchange gains and losses.

Results of Operations

The following tables summarize our consolidated statements of operations data for the periods presented and as a percentage of our revenue for those periods.


	Three Months Ended June 30,
	2015			2014
	(in thousands, except per share data)
Revenue	$	38,145		$	22,613
Cost of revenue (1)		7,866			4,032

Gross profit		30,279			18,581
Operating expenses:
Research and development (1)		8,754			4,912
Sales and marketing (1)		28,683			18,616
General and administrative (1)		7,984			5,360

Total operating expenses		45,421			28,888

Loss from operations		(15,142	)		(10,307	)
Other income (expense):
Interest income		141			5
Interest expense		(14	)		(15	)
Other income (expense), net		(2	)		134

Loss before income taxes		(15,017	)		(10,183	)
Income tax provision		102			—

Net loss	$	(15,119	)	$	(10,183	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.32	)	$	(0.65	)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		47,190			15,756

(1)	Includes stock-based compensation expense as follows:


	Three Months Ended June 30,
	2015		2014
	(in thousands)
Cost of revenue	$	251	$	93
Research and development		1,038		202
Sales and marketing		1,976		849
General and administrative		1,394		787

Total stock-based compensation expense	$	4,659	$	1,931


	Three Months Ended June 30,
	2015			2014
	(as a percentage of revenue)
Revenue		100	%		100	%
Cost of revenue (1)		21			18

Gross profit		79			82
Operating expenses:
Research and development (1)		23			22
Sales and marketing (1)		75			82
General and administrative (1)		21			24

Total operating expenses		119			128

Loss from operations		(40	)		(46	)
Other income (expense):
Interest income		—			—
Interest expense		—			—
Other income (expense), net		—			1

Loss before income taxes		(40	)		(45	)
Income tax provision		—			—

Net loss		(40	%)		(45	%)

(1)	Includes stock-based compensation expense as follows:


	Three Months Ended June 30,
	2015			2014
	(as a percentage of revenue)
Cost of revenue		1	%		—	%
Research and development		3			1
Sales and marketing		5			4
General and administrative		3			4

Total stock-based compensation expense		12	%		9	%

Revenue


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
United States	$	25,394	$	15,264	$	10,130		66	%
EMEA		7,407		4,182		3,225		77	%
APAC		2,944		1,749		1,195		68	%
Other		2,400		1,418		982		69	%

Total revenue	$	38,145	$	22,613	$	15,532		69	%

Revenue increased $15.5 million, or 69%, in the three months ended June 30, 2015 compared to the three months ended June 30, 2014. The increase was a result of an increase in the number of paid business accounts, which increased from 9,764 at June 30, 2014 to 12,440 at June 30, 2015, and an increase in product adoption from existing paid business accounts. Our revenue from EMEA increased $3.2 million, or 77%, in the three months ended June 30, 2015 compared to the three months ended June 30, 2014, and our revenue from APAC increased $1.2 million, or 68%, in the three months ended June 30, 2015 compared to the three months ended June 30, 2014 as a result of an increase in the number of paid business accounts and an increase in product adoption from existing paid business accounts located in these geographic regions.

Cost of Revenue


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
Cost of Revenue	$	7,866	$	4,032	$	3,834		95	%

Cost of revenue increased $3.8 million, or 95%, for the three months ended June 30, 2015 compared to the same period of 2014. The increase was primarily a result of an increase in personnel-related costs and hosting-related costs necessary to support our growth, an increase in amortization expense related to purchased intangibles and capitalized software development costs, and an increase in payment processing costs due to the increase in revenue. Personnel-related costs increased by $1.4 million, driven by higher headcount. Hosting-related costs, amortization expense, and payment processing fees increased by $2.4 million.

Research and Development


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
Research and development	$	8,754	$	4,912	$	3,842		78	%

Research and development expenses increased $3.8 million, or 78%, for the three months ended June 30, 2015 compared to the same period of 2014. The increase was primarily a result of an increase of $3.3 million in personnel-related costs, driven by higher headcount, a $0.1 million increase in depreciation, and a $0.3 million increase in spending on professional services.

Sales and Marketing


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
Sales and marketing	$	28,683	$	18,616	$	10,067		54	%

Sales and marketing expenses increased $10.1 million, or 54%, for the three months ended June 30, 2015 compared to the same period of 2014. The increase was primarily a result of an increase in personnel-related costs of $8.8 million, driven by higher headcount, and an increase in sales commissions due to revenue growth, and an increase of $1.0 million in marketing programs. The remaining increase was primarily due to a $0.3 million increase in depreciation, facilities and IT expenses.

General and Administrative


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
General and administrative	$	7,984	$	5,360	$	2,624		49	%

General and administrative expenses increased $2.6 million, or 49%, for the three months ended June 30, 2015 compared to the same period of 2014. The increase in general and administrative expenses was primarily a result of an increase in personnel-related costs of $2.2 million, driven by an increase in headcount, and an increase in outside services of $0.4 million due to the costs of compliance associated with being a publicly traded company.

Other Income, Net


	Three Months Ended June 30,				Change
	2015		2014		Amount		%
	(dollars in thousands)
Other income, net	$	125	$	124	$	1		1	%

Other income was $0.1 million for each of the three months ended June 30, 2015 and 2014.

Liquidity and Capital Resources


	Three Months Ended June 30,
	2015			2014
	(in thousands)
Cash used in operating activities	$	(2,144	)	$	(7,399	)
Cash used in investing activities		(34,401	)		(4,391	)
Cash provided by financing activities		1,516			96,342

Net increase (decrease) in cash and cash equivalents	$	(35,029	)	$	84,552

To date, we have financed our operations primarily through sales of equity securities. Since our inception, we have completed several rounds of equity financing through the sale of shares of our Series A through Series F convertible preferred stock for total cash proceeds to us of $193.2 million. In December 2014 we completed our IPO, resulting in aggregate proceeds of approximately $123.0 million from the sale of shares of common stock, net of underwriters’ discounts and commissions, but before deducting paid offering expenses of approximately $3.1 million. We believe that our existing cash and cash equivalents balance will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, the introduction of new and enhanced products, and the continued market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Cash Used in Operating Activities

During the three months ended June 30, 2015, operating activities used $2.1 million in cash as a result of a net loss of $15.1 million, adjusted by non-cash charges of $8.4 million and a change of $4.6 million in our operating assets and liabilities. The change in our operating assets and liabilities was primarily the result of a $9.3 million increase in deferred revenue as a result of increased sales of subscriptions and a $0.8 million increase in accrued compensation and benefits and other liabilities due to increased headcount. This was partially offset by a $4.7 million increase in accounts receivable due to increased sales of subscriptions, a $0.4 million decrease in accounts payable due to decreased expenditures, and a $0.4 million increase in prepaid expenses and other assets.

During the three months ended June 30, 2014, operating activities used $7.4 million in cash as a result of a net loss of $10.2 million, adjusted by non-cash charges of $3.5 million and a change of $0.7 million in our operating assets and liabilities. The change in our operating assets and liabilities was primarily the result of a $2.2 million increase in accounts receivable due to increased sales of subscriptions, a $0.9 million decrease in accounts payable due to decreased expenditures, a $0.2 million increase in prepaid expenses and other assets, and a $0.2 million decrease in accrued compensation and benefits and other liabilities. This was partially offset by a $2.8 million increase in deferred revenue as a result of increased sales of subscriptions.

Cash Used in Investing Activities

Cash used in investing activities during the three months ended June 30, 2015 was $34.4 million, primarily as a result of purchases of short-term investments of $43.1 million, purchases of property and equipment of $2.7 million, and increases in capitalization of software development costs of $2.2 million. This was partially offset by proceeds from the maturity of short-term investments of $13.6 million.

Cash used in investing activities during the three months ended June 30, 2014 was $4.4 million, primarily as a result of purchases of property and equipment of $2.4 million and increases in capitalization of software development costs of $1.9 million.

Cash Provided by Financing Activities

Cash provided by financing activities during the three months ended June 30, 2015 was $1.5 million, which was the result of proceeds from the exercise of stock options.

Cash provided by financing activities during the three months ended June 30, 2014 was $96.3 million, primarily as the result of proceeds from our sale of preferred stock, net of issuance costs, of $97.2 million and proceeds from the exercise of stock options of $0.2 million. This was partially offset by payments of costs related to our IPO of $1.1 million.

Contractual Obligations and Commitments

Our principal contractual commitments primarily consist of obligations under leases for office space. Except as set forth in Note 6 — Commitments and Contingencies contained in the “Notes to Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q, there were no material changes in our commitments under contractual obligations, as disclosed in our audited consolidated financial statements for the year ended March 31, 2015 in our Annual Report.

Off-Balance Sheet Arrangements

As of June 30, 2015 and March 31, 2015, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Critical Accounting Policies

We prepare our condensed consolidated financial statements in accordance with GAAP. In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates.

There have been no significant changes in our critical accounting policies and estimates during the three months ended June 30, 2015 as compared to the critical accounting policies and estimates described in our Annual Report.

Recently Issued and Accounting Pronouncements

In May 2014, the FASB issued new guidance related to the recognition and reporting of revenue that establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The guidance allows for the use of either the full or modified retrospective transition method, and the standard will be effective for us in our fiscal year beginning April 1, 2018; early adoption is permitted for our fiscal year beginning April 1, 2017. We are currently evaluating the impact of this new standard on our condensed consolidated financial statements, as well as which transition method we intend to use.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The Update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for us in the fiscal year beginning April 1, 2016; early adoption is permitted. We are currently evaluating the impact of this new standard on our disclosures within the notes to the condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

Our subscription agreements are primarily denominated in U.S. dollars. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statements of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions. As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in currency 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.

Interest Rate Risk

We had cash and cash equivalents of $70.2 million as of June 30, 2015, consisting of bank deposits and money market funds. These interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant. We also had no outstanding debt for any of the periods presented. We have an agreement to maintain cash balances at a financial institution of no less than $4.6 million as collateral for two letters of credit in favor of our landlords. The letters of credit carry a fixed interest rate of 1%.

We had short-term investments of $124.8 million as of June 30, 2015, consisting of commercial paper, corporate notes and bonds, U.S. treasury securities, and U.S. agency securities. Our investments in marketable securities are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures . Our management has carried out an evaluation under the supervision and with the participation of our principal executive officer and principal financial officer of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Limitations on the Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

Changes in Internal Control over Financial Reporting. There were no changes to our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On November 5, 2012, CA, Inc. filed an action against us in the U.S. District Court for the Eastern District of New York alleging that we willfully infringe certain of its U.S. patents. CA, Inc. asserts that a portion of our application performance management software – the .NET and Java agents – infringes certain claims of those patents. Among other things, CA, Inc. has sought permanent injunctive relief against us and damages in an amount to be determined at trial. Discovery is complete in the case, and partial dispositive motions have been served and argued by both parties although the court has not yet ruled on those motions. The case was reassigned to a new judge in March 2014 and a trial date is not currently set.

We intend to continue to contest this lawsuit vigorously. If this matter has an adverse outcome, it may have an impact on our financial position, results from operations, or cash flows. Should CA, Inc. prevail on its claims, we could be required to pay substantial damages for past sales of such products, enjoined from using and selling such products if a license or other right to continue selling our products is not made available to us, and required to pay substantial ongoing royalties and comply with unfavorable terms if such a license is made available to us. Any of these outcomes could result in a material adverse effect on our business. However, we cannot at this time predict the likely outcome of this proceeding or estimate the amount or range of loss or possible loss that may arise from it. Even if we were to prevail, litigation is costly and time-consuming, and could divert the attention of our management and key personnel from our business operations and dissuade potential customers from purchasing our products, either of which could materially harm our business.

During the course of litigation, we anticipate announcements of the results of hearings and motions, and other interim developments related to the litigation, which our competitors could try to use to their competitive advantage by creating uncertainty amongst our customers. If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline.

In addition, from time to time, we are involved in legal proceedings and are subject to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, or results of operations. This description includes any material changes to and supersedes the description of the risk factors disclosed in Part I, Item 1A of our Annual Report. We have marked with an asterisk (*) those risks described below that reflect material substantive changes from the risks disclosed in Part I, Item 1A of our Annual Report.

The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and accompanying notes.

We have a history of losses and we expect our revenue growth rate to continue to decline. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. *

We have incurred net losses in each fiscal period since our inception, including net losses of $15.1 million and $10.2 million in the three months ended June 30, 2015 and 2014, respectively. We had an accumulated deficit of $146.7 million at June 30, 2015. We expect to continue to expend substantial financial and other resources on, among other things:

•

investments in our research and development team, and the development of new products, features, and functionality;

•

sales and marketing, including expanding our direct sales organization and marketing programs, particularly for larger customers;

•

expansion of our operations and infrastructure, both domestically and internationally;

•

hiring of additional employees; and

•

general administration, including legal, accounting, and other expenses related to being a public company.

These investments may not result in increased revenue or growth of our business. We also expect that our revenue growth rate will continue to decline over time. Accordingly, we may not be able to generate sufficient revenue to offset our expected cost increases and to achieve and sustain profitability. If we fail to achieve and sustain profitability, our operating results and business would be harmed.

We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and increases the risk of your investment.

We were founded in 2007 and launched our first commercial product in 2008. This limited operating history limits our ability to forecast our future operating results and subjects us to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as determining appropriate investments of our limited resources, market adoption of our existing and future products, competition from other companies, acquiring and retaining customers, hiring, integrating, training and retaining skilled personnel, developing new products, determining prices for our products, unforeseen expenses, and challenges in forecasting accuracy. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks successfully, our operating and financial results and our business could suffer.

We have experienced significant growth in recent periods and expect our growth to continue. If we are not able to manage this growth and expansion, or if our business does not grow as we expect, our operating results may suffer. *

We have experienced significant growth in our customer adoption and have expanded and intend to continue to significantly expand our operations, including domestic and international employee headcount. This growth has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure.

To manage this growth effectively, we must continue to improve our operational, financial, and management systems and controls by, among other things:

•

effectively attracting, training, and integrating a large number of new employees, particularly members of our sales and marketing teams and employees and consultants in jurisdictions outside of the United States;

•

further improving our key business systems, processes, and information technology infrastructure, including our data center, to support our business needs;

•

enhancing our information, training, and communication systems to ensure that our employees are well-coordinated and can effectively communicate with each other and our customers; and

•

improving our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results.

If we fail to manage our expansion, implement and transition to our new systems, implement improvements, or maintain effective internal controls and procedures, our costs and expenses may increase more than we plan and we may lose the ability to increase our customer adoption, enhance our existing solutions, develop new solutions, satisfy our customers, respond to competitive pressures, or otherwise execute our business plan. If we are unable to manage our growth, our operating results likely will be harmed.

Our quarterly results may fluctuate, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

Our quarterly financial results may fluctuate widely as a result of the risks and uncertainties described in this report, many of which are outside of our control. If our financial results fall below the expectations of investors or any securities analysts who follow our stock, the price of our common stock could decline substantially.

We believe that quarter-to-quarter comparisons of our revenue, operating results, and cash flows may not be meaningful and should not be relied upon as an indication of future performance. If our revenue or operating results fall below the expectations of investors or securities analysts in a particular quarter, or below any guidance we may provide, the price of our common stock could decline.

Our business depends on our customers purchasing additional subscriptions and products from us and renewing their subscriptions. Any decline in our customer expansions and renewals would harm our future operating results. *

Our future success depends in part on our ability to sell more subscriptions and additional products to our current customers. If our customers do not purchase additional subscriptions and products from us, our revenue may decline and our operating results may be harmed.

In addition, in order for us to maintain or improve our operating results, it is important that our customers enter into paid subscriptions and renew their subscriptions when the contract term expires. The large majority of our customers start their accounts on a free trial and have no obligation to begin a paid subscription. Our customers that enter into paid subscriptions have no obligation to renew their subscriptions after the expiration of their subscription period, which is typically one month to one year. In addition, our customers may renew for lower subscription amounts or for shorter contract lengths. Some of our customers have elected not to renew their agreements with us and we cannot accurately predict future net expansion rates. Moreover, many of our legacy customers with annual subscriptions have the right to cancel their agreements with three-months’ notice prior to the expiration of the subscription term.

Our customer expansions and renewals may decline or fluctuate as a result of a number of factors, including: customer usage, customer satisfaction with our products and customer support, our prices, the prices of competing products, mergers and acquisitions affecting our customer base, consolidation of affiliates’ multiple paid business accounts into a single paid business account, the effects of global economic conditions, or reductions in our customers’ spending levels generally. These factors may also increase as our customer base grows to encompass larger enterprises.

If we are not able to develop enhancements to our products, increase adoption and usage of our products, and introduce new products that achieve market acceptance, our business could be harmed.

Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing products, increase adoption and usage of our products, and introduce new products. The success of any enhancement or new products depends on several factors, including timely completion, adequate quality testing, introduction, and market acceptance. Any new products that we develop may not be introduced in a timely or cost- effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue. If we are unable to successfully enhance our existing products to meet customer requirements, increase adoption and usage of our products, or develop new products, our business and operating results will be harmed.

If customers do not expand their use of our products beyond the current predominant use cases, our ability to grow our business and operating results may be adversely affected.

Most of our customers currently use our products to support application performance management functions, and the majority of our revenue to date has been from our application performance management products. Our ability to grow our business depends in part on our ability to persuade current and future customers to expand their use of our software to additional use cases, such as business analytics and customer usage analytics. If we fail to achieve market acceptance of our software, or if a competitor establishes a more widely adopted solution, our ability to grow our business and financial results will be adversely affected. In addition, as the amount of data stored for a given customer grows, that customer may have to agree to higher subscription fees for certain of our software or limit the amount of data stored in order to stay within the limits of its existing subscription. If their fees grow significantly, customers may react adversely to this pricing model, particularly if they perceive that the value of our software has become eclipsed by such fees or otherwise.

We have limited experience with respect to determining the optimal prices for our products.

We expect that we may need to change our pricing model from time to time. As new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. Moreover, as we continue to target selling our products to larger organizations, these larger organizations may demand substantial price concessions. As a result, in the future we may be required to reduce our prices, which could adversely affect our business.

Failure to effectively expand our marketing and sales capabilities could harm our ability to increase our customer adoption and achieve broader market acceptance of our products. *

Our ability to increase our customer adoption and achieve broader market acceptance of our products will depend to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force, both domestically and internationally. We also dedicate significant resources to sales and marketing programs, including Internet and other online advertising. For example, during the three months ended June 30, 2015, sales and marketing expenses represented 75% of our revenue. The effectiveness of our online advertising has varied over time and may vary in the future due to competition. Moreover, we have historically had success selling our products to small and medium-sized businesses and we have only within the last couple years focused on selling our products to larger organizations. We have expanded and are continuing to expand our marketing and sales capabilities to target larger organizations but there is no guarantee that we will be successful continuing to attract and maintain these larger organizations as customers, and even if we are successful, these efforts may divert our resources away from and negatively impact our ability to attract and maintain small and medium-sized businesses as customers. All of these efforts have required and will continue to require us to invest significant financial and other resources. If we are unable to hire, develop, and retain talented sales personnel, if our sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to increase our customer adoption and achieve broader market acceptance of our products could be harmed.

If we are unable to continue to increase the sales of our solutions to large enterprises while mitigating the risks associated with serving such customers, our business, financial position, and results of operations may suffer.

Historically, we have focused substantially less of our sales efforts on large enterprises, and only within the last couple years have we begun to build out our team to support transactions with these types of customers. Our growth strategy is dependent, in part, upon the continued increase of sales to such enterprises. Sales to large customers involve risks that may not be present or that are present to a lesser extent with sales to smaller entities, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales. Large enterprise customers often begin to deploy our products on a limited basis, but nevertheless demand extensive configuration, integration services, and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough across their organization to justify our substantial upfront investment. In addition, our ability to improve our sales of products to large enterprises is dependent on us continuing to attract and retain sales personnel with experience in selling to large organizations. Also, because security breaches with respect to larger, high-profile enterprises are likely to be heavily publicized, there is increased reputational risk associated with serving such customers. If we are unable to continue to increase sales of our products to large enterprise customers while mitigating the risks associated with serving such customers, our business, financial position, and results of operations may suffer.

Because users are able to configure our platform to collect and store personal information of their employees and end-users, privacy concerns could result in additional cost and liability to us or inhibit sales of our products.

Our operations involve protection of our intellectual property, along with the storage and transmission and processing of our customers’ proprietary data, which customers might choose to have include some personally identifiable information, and security breaches, computer malware, and computer hacking attacks could expose us to a risk of loss of this information, loss of business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and significant costs for remediation and incentives offered to customers or other business partners in an effort to maintain business relationships after a breach and other liabilities.

Cyber-attacks and other malicious Internet-based activity continue to increase generally. If our security measures are perceived as weak or actually compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, our customers may curtail or stop using our products, our reputation could be damaged, our business may be harmed, and we could incur significant liability. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our customer adoption and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security systems or gain unauthorized access to our customers’ data.

If we are not able to detect and indicate activity on our platform that might be nefarious in nature, our customers could suffer harm. In such cases, we could face exposure, particularly if the customer suffered actual harm. We cannot assure you that any limitations of liability provisions in our contracts for a security lapse or breach would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our expansion rates, financial condition, operating results, and reputation.

Changes in privacy laws, regulations, and standards may cause our business to suffer.

Personal privacy and data security have become significant issues in the United States, Europe, and in many other jurisdictions where we offer our products. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting data privacy and the use of the Internet as a commercial medium. Industry organizations also regularly adopt and advocate for new standards in this area. In the United States, these include rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. 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 but not limited to the Data Protection Directive, or the Directive, established in the European Union and data protection legislation of the individual member states subject to the Directive. The Directive may be replaced in time with the pending European General Data Protection Regulation which may impose additional obligations and risk

upon our business. In many jurisdictions, enforcement actions and consequences for noncompliance are also rising. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. One example of such self-regulatory standards to which we may be contractually bound is the Payment Card Industry Data Security Standard, or PCI DSS. Further, to the extent we accept and handle credit card numbers, we may be subject to various aspects of the PCI DSS. In the event we fail to be compliant with the PCI DSS, fines and other penalties could result. Further, our customers may require us to comply with more stringent privacy and data security requirements. Because the interpretation and application of many privacy and data protection laws along with mandatory industry standards are 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 products. If so, in addition to the possibility of fines, lawsuits, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and foreign countries. If we are not able to adjust to changing laws, regulations, and standards related to the Internet, our business may be harmed.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs, requirements, or preferences, our products may become less competitive.

The software industry is subject to rapid technological change, evolving industry standards and practices, and changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop and sell new products that satisfy our customers and provide enhancements and new features for our existing products that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected. If new technologies emerge that are able to deliver competitive products and applications at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.

Our platform must also integrate with a variety of network, hardware, mobile, and software platforms, and technologies, and we need to continuously modify and enhance our products to adapt to changes and innovation in these technologies. If developers widely adopt new software platforms, we would have to develop new versions of our products to work with those new platforms. This development effort may require significant engineering, marketing, and sales resources, all of which would affect our business and operating results. Any failure of our products to operate effectively with future infrastructure platforms and technologies could reduce the demand for our products. If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our operating results may be negatively affected.

We are dependent upon lead generation strategies to drive our sales and revenue, including free trials of our products. If these marketing strategies fail to continue to generate sales opportunities, our ability to grow our revenue will be adversely affected.

We are dependent upon lead generation strategies, including our marketing strategy of offering free trials of our products, to generate sales opportunities. These strategies may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue. Many users never convert from the trial version to the paid version of our products. To the extent that users do not become, or we are unable to successfully attract, paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.

The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The market for application performance monitoring is rapidly evolving, significantly fragmented, and highly competitive, with relatively low barriers to entry in some segments. Our competitors fall into four primary categories:

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software performance providers such as AppDynamics, Inc., Dynatrace LLC, and Splunk Inc.;

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diversified technology companies such as Hewlett-Packard Company, International Business Machines Corporation, Microsoft Corporation, and Oracle Corporation;

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large enterprise software and service companies such as BMC Software, Inc., CA, Inc., Riverbed Technology, Inc., and SAP SE; and

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companies offering analytics products competing with our New Relic Insights product, including Google Inc. and Webtrends Inc.

Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets, and significantly greater resources than we do, and have the operating flexibility to bundle competing products and services with other software offerings at little or no perceived incremental cost, including offering them at a lower price as part of a larger sale. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices or with greater depth than our products. Our current and potential competitors may develop and market new technologies with comparable functionality to our products, and this could lead to us having to decrease prices in order to remain competitive.

With the introduction of new technologies, the evolution of our products and new market entrants, we expect competition to intensify in the future. Moreover, as we expand the scope of our solutions, we may face additional competition. Additionally, some potential customers, particularly large enterprises, may elect to develop their own internal products. If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could also adversely affect our ability to compete effectively. If we are unable to maintain our current pricing due to the competitive pressures, our margins will be reduced and our operating results will be negatively affected. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our solutions to achieve or maintain more widespread market acceptance, any of which could harm our business.

Because we recognize revenue from our subscriptions over the subscription term, downturns or upturns in new sales and renewals may not be immediately reflected in our operating results and may be difficult to discern.

We generally recognize revenue from customers ratably over the terms of their subscriptions. A portion of the revenue we report in each quarter is derived from the recognition of revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any single quarter may have a small impact on our revenue for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements.

Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.

Our continued growth depends in part on the ability of our existing and potential customers to access our products at any time and within an acceptable amount of time. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our products simultaneously, denial of service attacks, or other security related incidents. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our products becomes more complex and our user traffic increases. If our products are unavailable or if our users are unable to access our products within a reasonable amount of time or at all, our business would be negatively affected. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.

In addition, we currently serve our customers from a third-party data center hosting facility located in Chicago, Illinois. The continuous availability of our products depends on the operations of that facility, on a variety of network service providers, on third-party vendors, and on our own site operations staff. We depend on our third-party facility provider’s ability to protect this facility against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, and similar events. If there are any lapses of service or damage to the facility, we could experience lengthy interruptions in our products as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery arrangements, which, to date, have not been tested in an actual crisis, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability, and cause us to issue credits or cause customers not to renew their subscriptions, any of which could harm our business.

Defects or disruptions in our products could diminish demand for our products, harm our financial results, and subject us to liability.

Our customers use our products for important aspects of their businesses, and any errors, defects, or disruptions to our products or other performance problems with our products could hurt our brand and reputation and may damage our customers’ businesses. We provide regular product updates, which may contain undetected errors when first introduced or released. In the past, we have

discovered software errors, failures, vulnerabilities, and bugs in our products after they have been released and new errors in our existing products may be detected in the future. Real or perceived errors, failures, or bugs in our products could result in negative publicity, loss of or delay in market acceptance of our products, loss of competitive position, delay of payment to us, lower renewal rates, 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. In addition, we may not carry insurance sufficient to compensate us for the any losses that may result from claims arising from defects or disruptions in our products. As a result, we could lose future sales and our reputation and our brand could be harmed.

Our ongoing and planned investments in data center hosting facilities are expensive and complex, may result in a negative impact on our cash flows, and may negatively impact our financial results.

We have made and will continue to make substantial investments in new equipment to support growth at our data center hosting facility, provide enhanced levels of products to our customers, and reduce future costs of subscription revenue. In addition, we may need to add additional data centers or similar resources to support our growth. Ongoing or future improvements to our cloud infrastructure may be more expensive than we anticipate, and may not yield the expected savings in operating costs or the expected performance benefits. We may not be able to maintain or achieve cost savings from our investments, which could harm our financial results.

We may need to change our current operations infrastructure in order for us to achieve profitability and scale our operations efficiently, which makes our future prospects even more difficult to evaluate. For example, in order to grow sales to commercial and enterprise customers in a financially sustainable manner, we may need to further customize our offering and modify our go-to-market strategy to reduce our operating and customer acquisition costs. If we fail to implement these changes on a timely basis or are unable to implement them effectively, our business may suffer.

Because our long-term growth strategy involves further expansion of our sales to customers outside the United States, our business will be susceptible to risks associated with international operations.

A component of our growth strategy involves the further expansion of our operations and customer adoption internationally. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. We have limited operating experience in international markets, and we cannot assure you that our expansion efforts into international markets will be successful. Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter. Our current international operations and future initiatives will involve a variety of risks, including:

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changes in a specific country’s or region’s political or economic conditions;

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unexpected changes in regulatory requirements, taxes, or trade laws;

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regional data security and privacy laws and regulations and the unauthorized use of, or access to, commercial and personal information, particularly in the European Union;

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differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

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challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs;

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difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;

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increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;

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currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;

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limitations on our ability to repatriate earnings;

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laws and business practices favoring local competitors, or general preferences for local vendors;

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limited or insufficient intellectual property protection;

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exposure to liabilities under anti-corruption, export controls and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, and similar laws and regulations in other jurisdictions; and

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adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash or create other collection difficulties.

Our limited experience operating our business internationally increases the risk that recent and any potential future expansion efforts will not be successful. If substantial time and resources invested to expand our international operations do not result in a successful outcome, our operating results and business will suffer.

If we lose key members of our management team or are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.

Our success and future growth depend largely upon the continued services of our executive officers and other key employees in the areas of research and development, marketing, sales, services, and general administrative functions. From time to time, there may be changes in our executive management team or other key employees resulting from the hiring or departure of these personnel. Our executive officers and other key employees are employed on an at-will basis, which means that these personnel could terminate their employment with us at any time. The loss of one or more of our executive officers, especially our Chief Executive Officer, Lewis Cirne; our President and Chief Operating Officer, Chris Cook; and our Chief Revenue Officer, Hilarie Koplow-McAdams; or the failure by our executive team to effectively work with our employees and lead our company could harm our business. We also are dependent on the continued service of our existing software engineers because of the complexity of our products.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel in the San Francisco Bay Area and the Portland area, where our headquarters and the majority of our research and development personnel are located, respectively, and in other locations where we maintain offices, is intense, especially for engineers experienced in designing and developing software and SaaS applications and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, or experiences significant volatility, it may adversely affect our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

If we fail to enhance our brand, or to do so in a cost-effective manner, our ability to expand our customer adoption will be impaired and our financial condition may suffer.

We believe that our development of the New Relic brand is critical to achieving widespread awareness of our existing and future Software Analytics solutions, and, as a result, is important to attracting new customers and maintaining existing customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts, including our ability to do so in a cost-effective manner, and on our ability to provide reliable and useful products at competitive prices. In the past, our efforts to build our brand have involved significant expenses. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success, and our business may be harmed.

We believe that our corporate culture has been a critical component to our success. We have invested substantial time and resources in building our team. As we grow and mature as a public company, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to recruit and retain personnel and effectively focus on and pursue our corporate objectives.

We may be sued by third parties for alleged infringement of their proprietary rights.

There is considerable patent, copyright, trademark, trade secret, and other intellectual property development activity in our industry. Our success depends in part on not infringing upon the intellectual property rights of others. From time to time, our competitors or other third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. For example, we are currently party to a suit brought against us by CA, Inc. that alleges, among other things, that we have infringed on certain patents held by CA, Inc. See Part II, Item 1 “Legal Proceedings.” In the future, we may receive claims that our products and underlying technology infringe or violate the claimant’s intellectual property rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products, or require that we comply with other unfavorable terms.

Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results. We expect that the occurrence of infringement claims is likely to grow as the market for Software Analytics products grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand. *

Our success depends to a significant degree on our ability to protect our proprietary technology and our brand. We rely on a combination of trademarks, trade secret laws, patent, copyrights, service marks, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we obtain may be challenged by others or invalidated through administrative process or litigation. As of June 30, 2015, we only had one pending patent application and no issued patents. Despite the pending patent application, we may be unable to obtain any patent protection for our technology. In addition, any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Effective patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our products is available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information will likely increase. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products, impair the functionality of our products, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our products, or injure our reputation.

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

We use open source software in our products and expect to continue to use open source software in the future. We may face claims from others claiming ownership of, or seeking to enforce the terms of, an open source license, including by demanding 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 platform, any of which would have a negative effect on our business and operating results. In addition, if the license terms for the open source software we utilize change, we may be forced to reengineer or discontinue our products or incur additional costs. We cannot be certain that we have not incorporated open source software in our products in a manner that is inconsistent with our policies.

We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits or refunds for prepaid amounts related to unused subscriptions or face contract terminations, which could adversely affect our revenue.

Some of our customer agreements provide service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our products, we may be contractually obligated to provide these customers with service credits or refunds for prepaid amounts related to unused subscriptions, or we could face contract terminations. Our revenue could be significantly affected if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any extended service outages could adversely affect our reputation, revenue, and operating results.

If the market for our technology delivery model and SaaS develops more slowly than we expect, our growth may slow or stall, and our operating results would be harmed.

The market for SaaS business software is less mature than traditional on-premise software applications, and the adoption rate of SaaS business software may be slower among subscribers in industries with heightened data security interests or business practices requiring highly-customizable application software. Our success will depend to a substantial extent on the widespread adoption of SaaS business software in general, but we do not know to what extent the trend of adoption of SaaS solutions will continue in the future. In particular, many organizations have invested substantial personnel and financial resources to integrate legacy software into their businesses over time, and some have been reluctant or unwilling to migrate to SaaS. It is difficult to predict customer adoption rates and demand for our products, the future growth rate and size of the SaaS business software market, or the entry of competitive applications. The expansion of the SaaS business software market depends on a number of factors, including the cost, performance, and perceived value associated with SaaS, as well as the ability of SaaS providers to address data security and privacy concerns. If SaaS business software does not continue to achieve market acceptance, or there is a reduction in demand for SaaS business software caused by a lack of customer acceptance, technological challenges, weakening economic conditions, data security or privacy concerns, governmental regulation, competing technologies and products, or decreases in information technology spending, it would result in decreased revenue and our business would be adversely affected.

Our future performance depends in part on support from third-party software developers.

We provide software that enables third-party software developers to build plugins that integrate with our products. We operate a community website for sharing these third-party plugins. This presents certain risks to our business, including:

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third-party developers may not continue developing or supporting the plugins that they share on our community website;

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we cannot provide any assurance that these plugins meet the same quality standards that we apply to our own development efforts, and, to the extent they contain bugs, defects, or security risks, they may create disruptions in our customers’ use of our software or negatively affect our brand;

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we do not currently provide support for plugins developed by third-party software developers, and users may be left without support and potentially cease using our products if the third-party software developers do not provide support for these plugins; and

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these third-party software developers may not possess the appropriate intellectual property rights to develop and share their plugins.

Many of these risks are not within our control to prevent, and our brand may be damaged if these plugins do not perform to our customers’ satisfaction and that dissatisfaction is attributed to us.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs. If additional capital is not available, we may have to delay, reduce, or cease operations.

We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to respond to business opportunities, including the need to develop new products or enhance our existing products, enhance our operating infrastructure, possible acquisitions of complementary businesses and technologies, a decline in the level of subscriptions for our products, or unforeseen circumstances. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any debt financing obtained by us could involve restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities, or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to support our business and to respond to business challenges could be significantly limited, and our business, operating results, financial condition, and prospects could be harmed.

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Our estimates and forecasts relating to the size and expected growth of our market may prove to be inaccurate. Even if the market in which we compete meets our size estimates and forecasted growth, our business could fail to grow at similar rates, if at all.

We are subject to the tax laws of various jurisdictions, which are subject to unanticipated changes and to interpretation, which could harm our future results.

We are subject to income taxes in the United States and foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses as a result of acquisitions, the valuation of deferred tax assets and liabilities, and changes in federal, state, or international tax laws and accounting principles. Further, each jurisdiction has different rules and regulations governing sales and use, value added, and similar taxes, and these rules and regulations are subject to varying interpretations that change over time. Certain jurisdictions in which we did not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of SaaS-based companies. Any tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations. Moreover, imposition of such taxes on us going forward will effectively increase the cost of our products to our customers and might adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

In addition, the application of the tax laws of various jurisdictions, including the United States, to our international business activities is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our business does not achieve the intended tax consequences. As we operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations. *

As of June 30, 2015, we had U.S. federal and state net operating losses of approximately $131.0 million and $58.6 million, respectively, which may be utilized against future income taxes. In general, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through and aggregation rules) increases by more than 50% over such stockholders’ lowest percentage ownership during the testing period (generally three years). Purchases of our common stock in amounts greater than specified levels, which are beyond our control, could create a limitation on our ability to utilize our NOLs for tax purposes in the future. Limitations imposed on our ability to utilize NOLs could cause U.S. federal and state income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs. Furthermore, we may not be able to generate sufficient taxable income to utilize our NOLs before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our NOLs. In addition, at the state level there may be periods during which the use of NOLs is suspended or otherwise limited, which would accelerate or may permanently increase state taxes owed.

Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.

We have in the past and may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement or expand our products, enhance our technical capabilities, or otherwise offer growth opportunities. Any acquisition may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not the acquisitions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. Acquisitions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Any acquisitions we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, we may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business, and financial condition may suffer or we may be exposed to unknown risks or liabilities.

We may face exposure to foreign currency exchange rate fluctuations.

We may in the future conduct transactions in currencies other than the U.S. dollar or the functional operating currency of the transactional entities. While we have historically transacted in U.S. dollars with substantially all of our customers and vendors, we have transacted in foreign currencies and may transact in foreign currencies in the future. In addition, any international subsidiaries will maintain net assets that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results due to transactional and translational remeasurement that is reflected in our earnings. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

Weakened global economic conditions may harm our industry, business, and results of operations. *

Our overall performance depends in part on worldwide economic conditions. Global financial developments and downturns seemingly unrelated to us or the information technology industry may harm us. The United States and other key international economies have been impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, and overall uncertainty with respect to the economy. The revenue growth and potential profitability of our business depends on demand for software applications and products generally, and application performance monitoring and our other Software Analytics offerings specifically. In addition, our revenue is dependent on the number of users of our products and the degree of adoption of such users with respect to our Software Analytics products. Historically, during economic downturns there have been reductions in spending on information technology systems as well as pressure for extended billing terms and other financial concessions, which would limit our ability to grow our business and negatively affect our operating results. These conditions affect the rate of information technology spending and could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions, or affect renewal rates, all of which could harm our operating results.

Natural disasters and other events beyond our control could harm our business.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics, and other events beyond our control. We rely on our network and third-party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational support, hosted products, and sales activities. The west coast of the United States contains active earthquake zones. Although we maintain crisis management and disaster response plans, in the event of a major earthquake, hurricane, or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.

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 federal securities laws, and, for so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “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 of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of our IPO, (ii) the first fiscal year after our annual gross revenue are $1.0 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive because we may 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.

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, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations. Compliance with these rules and regulations increase 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.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

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 intend to invest substantial 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.

Being a public company and these new rules and regulations have made it more expensive for us to obtain director and officer liability insurance, and in the future we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

As a result of disclosure of information in our filings with the SEC, our business and financial condition have become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.

As a public company, we are obligated to implement and maintain proper and effective internal control over financial reporting. 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.

We will be required, pursuant to the Exchange 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 March 31, 2016. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

We are currently evaluating our internal controls, identifying and remediating deficiencies in those internal controls, and documenting the results of our evaluation, testing, and remediation. 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 that we are unable to remediate before the end of the same fiscal year in which the material weakness is identified, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm, when required, is unable to attest to management’s report 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.

As a public company, we are required to disclose material changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act 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. To comply with the existing and anticipated requirements of being a public company, we are undertaking various actions, such as implementing additional internal controls and procedures and hiring accounting or internal audit staff.

Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control. *

The market price of our common stock is subject to wide fluctuations in response to various factors, some of which are beyond our control. Since shares of our common stock were sold in our IPO in December 2014 at a price of $23.00 per share, the reported high and low sales prices of our common stock has ranged from $38.65 to $29.66, through June 30, 2015. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, factors that could cause fluctuations in the market price of our common stock include the following:

•

actual or anticipated fluctuations in our operating results;

•

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 and publication of other news 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 by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

•

changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•

price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole;

•

changes in accounting standards, policies, guidelines, interpretations, or principles;

•

actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•

developments or disputes concerning our intellectual property or our products, or third-party proprietary rights;

•

announced or completed acquisitions of businesses or technologies by us or our competitors;

•

new laws or regulations or new interpretations of existing laws, or regulations applicable to our business;

•

changes in our board of directors or management;

•

sales of shares of our common stock by us, our officers, directors, or other stockholders;

•

lawsuits filed or threatened against us; and

•

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

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. 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. A decline in the value of our common stock, including as a result of one or more factors set forth above, may result in substantial losses for our stockholders.

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

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares. Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. The holders of an aggregate of approximately 25.0 million shares of our common stock as of June 30, 2015 have rights, subject to certain 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 stockholders. We have also registered shares of common stock that we may issue under our employee equity incentive plans. Accordingly, these shares may be able to be sold freely in the public market upon issuance as permitted by any applicable vesting requirements.

Our directors, officers, and principal stockholders beneficially own in the aggregate approximately 58.6% of our outstanding voting stock and are able to exert significant control over matters subject to stockholder approval. *

As of June 30, 2015, our directors, officers, greater than 5% stockholders, and their respective affiliates beneficially owned in the aggregate approximately 58.6% of our outstanding voting stock, including 23.7% held by our founder, Chief Executive Officer, and director, Lewis Cirne. As a result, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine any matter that would require majority stockholder approval. For example, these stockholders may be able to control elections of directors or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock 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. If industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•

authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;

•

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•

specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer;

•

establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

•

establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

•

prohibit cumulative voting in the election of directors;

•

provide that our directors may be removed only for cause;

•

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

•

require the approval of our board of directors or the holders of at least seventy-five percent (75%) of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.

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. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends

for the foreseeable future. In addition, our ability to pay cash dividends on our common stock may be prohibited or limited by the terms of any future debt financing arrangements. Any return to stockholders will therefore be limited to the increase, if any, of our stock price, which may never occur.

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

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Registered Securities

On December 17, 2014, we closed our IPO of 5,750,000 shares of our common stock, including 750,000 shares of common stock from the full exercise of the option to purchase additional shares granted to the underwriters, at a price to the public of $23.00 per share. The offer and sale of all of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-200078), which was declared effective by the SEC on December 11, 2014.

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 on December 12, 2014 pursuant to Rule 424(b)(4). Pending the uses described, we have invested the net proceeds from the offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this Quarterly Report on Form 10-Q, in each case as indicated therein.

SIGNATURES

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


		NEW RELIC, INC.

Date: August 12, 2015

	By:	/s/ Mark Sachleben
		Mark Sachleben
		Chief Financial Officer
		(Principal Financial and Accounting Officer and Duly Authorized Signatory)

Exhibit Index

Exhibit
No.

Description if Exhibit

Incorporated by Reference

Filed
Herewith

Form

File No.

Exhibit

File Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant.

10-K

001-36766

3.1

May 28, 2015

3.2

Amended and Restated Bylaws of the Registrant.

S-1

333-200078

3.4

November 10, 2014

10.1

Office Lease by and between the Registrant and Pacific Mission Corporation, dated as of June 17, 2015.

10.2+

Separation Agreement between the Registrant and Patrick Moran, dated as of May 11, 2015.

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1(1)

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

+	Indicates a management contract or compensatory plan or arrangement.

(1)

The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing.

Exhibit 10.1

123 MISSION STREET

OFFICE LEASE

Pacific Mission Corporation,

a Delaware corporation

Landlord

and

New Relic, Inc.,

a Delaware corporation

Tenant

DATED AS OF: June 17, 2015

TABLE OF CONTENTS


Paragraph			Page

	1.	Premises		1
	2.	Certain Basic Lease Terms		1
	3.	Term; Delivery of Possession of Premises		3
	4.	Premises “As Is”		3
	5.	Monthly Rent		5
	6.	Letter of Credit		7
	7.	Additional Rent: Increases in Operating Expenses and Tax Expenses		8
	8.	Use of Premises; Compliance with Law		13
	9.	Alterations and Restoration		15
	10.	Repair		16
	11.	Abandonment		17
	12.	Liens		17
	13.	Assignment and Subletting		18
	14.	Indemnification		22
	15.	Insurance		23
	16.	Mutual Waiver of Subrogation Rights		25
	17.	Utilities		25
	18.	Personal Property and Other Taxes		28
	19.	Rules and Regulations		28
	20.	Surrender; Holding Over		28
	21.	Subordination and Attornment		29
	22.	Financing Condition		30
	23.	Entry by Landlord		30
	24.	Insolvency or Bankruptcy		30
	25.	Default and Remedies		31
	26.	Damage or Destruction		34
	27.	Eminent Domain		35
	28.	Landlord’s Liability; Sale of Building		36
	29.	Estoppel Certificates		37
	30.	Right of Landlord to Perform		37
	31.	Late Charge		37
	32.	Attorneys’ Fees; Waiver of Jury Trial		37
	33.	Waiver		38
	34.	Notices		38
	35.	Notice of Surrender		39
	36.	Defined Terms and Marginal Headings		39
	37.	Time and Applicable Law		39
	38.	Successors		39
	39.	Entire Agreement; Modifications		40
	40.	Light and Air		40
	41.	Name of Building		40
	42.	Severability		40
	43.	Authority		40
	44.	No Offer		41


Paragraph			Page

	45.	Real Estate Brokers		41
	46.	Consents and Approvals		41
	47.	Reserved Rights		41
	48.	Financial Statements		42
	49.	Substitution of Premises		42
	50.	Nondisclosure of Lease Terms		42
	51.	Hazardous Substance Disclosure		42

EXHIBITS:

A - Outline of Premises

B - Rules and Regulations

C - Form of Letter of Credit

LEASE

THIS LEASE is made as of the 17th day of June, 2015, between P ACIFIC M ISSION C ORPORATION , a Delaware corporation (“ Landlord ”), and N EW R ELIC , I NC ., a Delaware corporation (“ Tenant ”).

1. Premises .

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, on the terms and conditions set forth herein, the space outlined on the attached Exhibit A (the “ Premises ”). The Premises are located on the floor(s) specified in Paragraph 2 below of the building located at 123 Mission Street, at the intersection of Main and Mission Streets, San Francisco, California (the “ Building ”). For purposes of this Lease, the term “ Land ” shall mean, collectively, the parcels of land currently designated as Assessor’s Parcel Nos. 14, 15, 16, 17 and 18 of Block 3717, City and County of San Francisco, California, together with all appurtenant rights and easements. The Building, its garage, the Land and the other improvements on the Land are referred to herein as the “ Real Property .”

Tenant’s lease of the Premises shall include the right to use, in common with others and subject to the other provisions of this Lease, the public lobbies, entrances, stairs, elevators and other public portions and common areas of the Building. All of the windows and outside walls of the Premises and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment or other utilities or Building facilities are reserved solely to Landlord and Landlord shall have rights of access through the Premises for the purpose of operating, maintaining and repairing the same. Subject to the terms and conditions of this Lease, Tenant shall have access to and use of the Premises and the common areas of the Building and the Real Property twenty-four (24) hours per day, seven (7) days per week.

2. Certain Basic Lease Terms .

As used herein, the following terms shall have the meaning specified below:

Floor(s) on which the Premises are located: 11 ^th , 12 ^th , 14 ^th , 15 ^th . The Premises are currently designated as Suite 1100, 1200, 1400, 1500. Landlord and Tenant agree that for the purpose of this Lease, the Premises shall be deemed to contain 14,067 rentable square feet of space per floor, totaling 56,268 total rentable square feet of space. The Building shall be deemed to contain 346,435 rentable square feet of space.

Landlord’s delivery of Premises: Landlord shall deliver the Premises to Tenant with Landlord’s Code Compliance Work completed and otherwise in the condition required under Paragraph 4 as follows: (i) Landlord shall deliver Suite 1100 on August 1, 2015 (the “ Suite 1100 Delivery Date ”), and (ii) Landlord shall deliver Suites 1200, 1400 and 1500 on April 1, 2016 (the “ Remainder Delivery Date ”).

Lease term: Subject to Landlord’s timely delivery of the respective portions of the Premises as set forth in Paragraph 2.b., Suite 1100 shall commence on November 1, 2015 (the “ Commencement Date ”), and end on October 31, 2023 (the “ Expiration Date ”) for a term of eight (8)

years. Suites 1200, 1400 and 1500 shall commence on June 1, 2016 (the “ Additional Suites Commencement Date ”) and end coterminous with Suite 1100.

Monthly Rent: Subject to adjustment as set forth in Paragraph 3.b., the respective sums set forth as follows:


Period for Suite 1100	Monthly Rent			Rate Per Sq. Ft. (Per Annum)
11/01/15-10/31/16	$	72,679.50		$	62.00
11/01/16-10/31/17	$	74,859.89		$	63.86
11/01/17-10/31/18	$	77,105.68		$	65.78
11/01/18-10/31/19	$	79,418.85		$	67.75
11/01/19-10/31/20	$	81,801.42		$	69.78
11/01/20-10/31/21	$	84,255.46		$	71.88
11/01/21-10/31/22	$	86,783.12		$	74.03
11/01/22-10/31/23	$	89,386.62		$	76.25

Period for Suites 1200, 1400, 1500	Monthly Rent			Rate Per Sq. Ft. (Per Annum)
06/01/16-10/31/16*	$	0.00	*	$	0.00	*
11/01/16-10/31/17	$	224,579.66		$	63.86
11/01/17-10/31/18	$	231,317.05		$	65.78
11/01/18-10/31/19	$	238,256.56		$	67.75
11/01/19-10/31/20	$	245,404.25		$	69.78
11/01/20-10/31/21	$	252,766.38		$	71.88
11/01/21-10/31/22	$	260,349.37		$	74.03
11/01/22-10/31/23	$	268,159.85		$	76.25

*	The Monthly Rent for the first five (5) months of the Lease term following the Additional Suites Commencement Date is subject to abatement upon the terms and conditions of Section 5.f. of the Lease.

Security Deposit: $3.4 Million Dollars in the form of a Letter of Credit, subject to reduction as set forth in Paragraph 6.

Tenant’s Share: As of the Commencement Date for Suite 1100 of the Premises, 4.06%; as of the Additional Suites Commencement Date for Suites 1200, 1400 and 1500 of the Premises, 16.24%.

Base Year: The calendar year 2016.

Base Tax Year: The fiscal tax year ending June 30, 2016.

Real estate broker(s): Savills Studley (Tenant’s broker) and Avison Young (Landlord’s broker).

3. Term; Delivery of Possession of Premises .

a. The term of this Lease shall commence on the Commencement Date (as defined in Paragraph 2.b.) as to Suite 1100 and on the Additional Suites Commencement Date as to Suites 1200, 1400 and 1500 and, unless sooner terminated pursuant to the terms hereof or at law, shall expire on the Expiration Date (as defined in Paragraph 2.b.).

b. If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant in the condition required under Paragraph 4 on the Suite 1100 Delivery Date, as to Suite 1100, and the Remainder Delivery Date, as to Suites 1200, 1400 and 1500, respectively, then, as Tenant’s sole and exclusive remedy, Tenant shall be granted and receive a credit in an amount equal to one (1) day of Monthly Rent and Additional Rent due under this Lease for each day of delay beyond the thirtieth (30th) day following the Suite 1100 Delivery Date and the Remainder Delivery Date, respectively, in delivering the relevant portion of the Premises in the condition required under Paragraph 4. Except as specifically provided in the Paragraph 3.b. above, if Landlord fails to timely deliver the relevant portions of the Premises on the Suite 1100 Delivery Date or the Remainder Delivery Date, respectively, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom. Except as specifically provided herein, no delay in delivery of possession of the Premises shall operate to extend the term of this Lease or amend Tenant’s obligations under this Lease.

c. Intentionally omitted.

4. Premises “As Is”; Initial Alterations; Landlord’s Allowance .

a. Premises As Is . Tenant shall accept the Premises in their “as is” state and condition and, except for (i) completion by Landlord of the Code Compliance Work (as defined below) prior to the Suite 1100 Delivery Date and the Remainder Delivery Date, respectively, (ii) Landlord’s ongoing maintenance and alterations and improvements, and (iii) Landlord’s payment of the Landlord’s Allowance, Landlord shall have no obligation to make or pay for any improvements or renovations in or to the Premises or to otherwise prepare the Premises for Tenant’s occupancy. Prior to the Suite 1100 Delivery Date, Landlord, at no cost to Tenant (through payment of Operating Expenses or otherwise), shall complete any and all code compliance work (including, without limitation, path of travel, ADA, fire and life safety, and Title 24) (“ Code Compliance Work ”) as such pertains to the common areas of the Building that serve the Premises; provided that Landlord shall have no obligation to perform any Code Compliance Work with respect to the restrooms, elevator lobbies and any other areas that might otherwise be deemed to be common areas to the extent such restrooms, lobbies and other areas are located on Floors 11, 12, 14 and 15 inasmuch as Tenant is leasing such floors in their entirety and will have sole responsibility for any Code Compliance Work related thereto. Following Landlord’s delivery of the relevant portions of the Premises, Tenant shall have the right to complete initial alterations, additions and improvements to the Premises to prepare the Premises for Tenant’s occupancy and use thereof (the “ Initial Alterations ”) pursuant to the terms and conditions of this Lease. Construction of the Initial Alterations shall be subject to Landlord’s approval in accordance with Paragraph 9 hereof and otherwise governed by Paragraph 9 hereof, except as expressly set forth in Paragraph 4.b. below. The general contractor selected by Tenant in accordance with Paragraph 9 hereof to construct the Initial Alterations in referred to hereinafter as “ Contractor ”.

b. Landlord’s Allowance . Landlord shall contribute toward the cost of the design, construction and installation of the Initial Alterations (including, without limitation, Construction Management Fee) an aggregate amount not to exceed Two Million Two Hundred Fifty Thousand Seven Hundred Twenty and 00/100 Dollars ($2,250,720.00) (which equals $40.00 per rentable square foot of the Premises) (the “ Landlord’s Allowance ”). Except as set forth in the preceding provision, no portion of Landlord’s Allowance may be applied to the cost of personal property, equipment, trade fixtures, furniture (including work stations and modular office furniture, regardless of the method of attachment to wall and/or floors), voice, data or cabling, signage, Monthly Rent, Additional Rent, moving expenses or other amounts payable by Tenant pursuant to this Lease.

To the extent that the cost of construction of the Initial Alterations (including the Construction Management Fee) exceeds the funds available therefor from Landlord’s Allowance, then Tenant shall pay all such excess (the “ Excess Cost ”). At such time as the Initial Allowance Disbursement (as defined below) has been entirely disbursed, Tenant shall commence payment of the then-estimated Excess Costs, if any, for the Initial Alterations to the Contractor; provided that Tenant shall not be required to fund any portion of the Excess Costs that is then unknown, which portion shall be payable by Tenant, if at all, following full disbursement by Landlord of the Landlord’s Allowance.

Landlord shall disburse the first One Million Six Hundred Eighty-Eight Thousand Forty Dollars ($1,688,040.00) of the Landlord’s Allowance (“ Initial Allowance Disbursement ”) directly to Tenant within thirty (30) days after Landlord’s receipt of monthly progress payment requests from Tenant which requests shall include (A) invoices of Contractor, subcontractors or suppliers, as applicable, furnished to Landlord by Tenant covering work actually performed to date, construction in place to date and materials delivered to the site to date (as may be applicable), describing in reasonable detail such work, construction and/or materials, (B) conditional lien waivers executed by Contractor plus subcontractors or suppliers supplying work or materials in any amount, for their portion of the work covered by the requested disbursement, and (C) unconditional lien waivers executed by Contractor and the persons or entities performing the work or supplying the materials covered by Landlord’s previous disbursements for the work or materials covered by such previous disbursements (all such waivers to be in the forms prescribed by California Civil Code Section 3262). No payment will be made for materials or supplies not incorporated into the construction, regardless of whether the materials or supplies are located on the Premises. Landlord may withhold the amount of any and all retentions provided for in original contracts or subcontracts until the earlier to occur of (i) expiration of the applicable lien periods or (ii) Landlord’s receipt of unconditional lien waivers and full releases upon final payment (in the form prescribed by California Civil Code Section 3262) from the Contractor and all subcontractors and suppliers involved in the Initial Alterations as provided above in this paragraph. Once the Initial Allowance Disbursement has been made and Tenant has paid the then-estimated Excess Costs as required above, Landlord shall disburse the remainder of the Landlord’s Allowance on the same terms and conditions set forth above in this paragraph. As provided above, once the Landlord’s Allowance has been fully disbursed, Tenant shall pay any remaining Excess Costs associated with the Initial Alterations.

Notwithstanding anything to the contrary contained herein, in no event shall Landlord be obligated to disburse any portion of Landlord’s Allowance during any period that an Event of Default continues (but the foregoing shall not relieve Landlord from its obligation to make such disbursement after such Event of Default shall be cured).

c. Construction . Landlord and Tenant acknowledge that a contractor approved by Landlord as set forth in Paragraph 9 (“ Approved Contractor ”) shall construct the Initial Alterations, and further acknowledge and agree that Tenant shall be required to use Landlord-approved

MEP subcontractors in connection with construction of the Initial Alterations. With respect to construction of the Initial Alterations, Tenant shall pay Landlord a construction management fee of Thirty Three Thousand Seven Hundred Sixty and 80/100ths Dollars ($33,760.80) (the “ Construction Management Fee ”) but shall not be required to pay any Alteration Operations Fee with respect to the Initial Alterations as set forth in Paragraph 9.

d. Changes . Intentionally omitted.

e. Tenant Delays . Intentionally omitted.

f. Early Entry . Following Landlord’s delivery of the relevant portion of the Premises in the condition required under Paragraph 4, Tenant shall have the right to enter the Premises for the purposes Tenant’s design, engineering, permitting and construction activities as well as for installation of furniture, fixtures, electronic communication equipment, telephones or other equipment or special improvements, including millwork. The provisions of this Lease, including without limitation Paragraphs 15 and 16 of this Lease, entitled “Indemnification” and “Insurance”, respectively, shall apply in full during the period of such early entry, and Tenant shall be solely responsible for all such furniture, fixtures and equipment and for any loss or damage thereto from any cause whatsoever; however Monthly Base Rent and Additional Rent shall be not be payable during such early entry period until the dates set forth in Paragraph 2.d.

g. Building Services During Early Entry . Tenant may use the Building’s freight elevator and loading dock, on a non-exclusive basis during Business Hours, and in accordance with the Building’s rules and procedures (including scheduling and sharing requirements), free of charge during the period of early entry granted pursuant to Paragraph 4.f. above. If Tenant desires use of the freight elevator or loading dock during other than Business Hours, then Tenant may reserve such use in compliance with the Building’s rules and procedures and shall pay Landlord a reasonable amount for providing any elevator personnel or security services in connection with such use. Any such security services shall be solely for the benefit of Landlord’s property, and in no event shall Landlord be liable to Tenant for, and Tenant hereby releases Landlord and its agents and contractors from, liability for, any theft, loss or damage of or to Tenant’s property during the period of such early entry

h. As-Is . Except as provided above in this Paragraph 4, Landlord shall deliver the Premises to Tenant in their as-is condition, and Landlord shall have no obligation to make or pay for any alterations, additions, improvements or renovations thereto to prepare the same for Tenant’s occupancy; provided, however, that the foregoing shall not relieve Landlord from its ongoing maintenance and repair obligations pursuant to this Lease.

5. Monthly Rent .

a. Commencing as of the Commencement Date, and continuing thereafter on or before the first day of each calendar month during the term hereof, Tenant shall pay to Landlord, as monthly rent for the Premises, the Monthly Rent specified in Paragraph 2 above (“ Monthly Rent ”). If Tenant’s obligation to pay Monthly Rent hereunder commences on a day other than the first day of a calendar month, or if the term of this Lease terminates on a day other than the last day of a calendar month, then the Monthly Rent payable for such partial month shall be appropriately prorated on the basis of a thirty (30) day month. Monthly Rent and the Additional Rent specified in Paragraph 7 shall be paid

by Tenant to Landlord, in advance, without deduction, offset, prior notice or demand (except as set forth in this Lease), in immediately available funds of lawful money of the United States of America, or by good check as described below, to the lockbox location designated by Landlord, or to such other person or at such other place as Landlord may from time to time designate in thirty (30) days prior writing to Tenant. Payments made by check must be drawn either on a California financial institution or on a financial institution that is a member of the federal reserve system. Notwithstanding the foregoing, Tenant shall pay to Landlord at least thirty (30) days prior to the Commencement Date for Suite 1100 of the Premises an amount equal to the Monthly Rent payable for the first full calendar month of the Lease term after Tenant’s obligation to pay Monthly Rent shall have commenced hereunder, which amount shall be applied to the Monthly Rent first due and payable hereunder.

b. All amounts payable by Tenant to Landlord under this Lease, or otherwise payable in connection with Tenant’s occupancy of the Premises, in addition to the Monthly Rent hereunder and Additional Rent under Paragraph 7, shall constitute rent owed by Tenant to Landlord hereunder.

c. Any rent not paid by Tenant to Landlord when due shall bear interest from the date due to the date of payment by Tenant at an annual rate of interest (the “ Interest Rate ”) equal to the lesser of (i) twelve percent (12%) per annum or (ii) the maximum annual interest rate allowed by law on such due date for business loans (not primarily for personal, family or household purposes) not exempt from the usury law, provided that the first one (1) time (and only the first one (1) time) in any twelve (12) consecutive month period during the term of this Lease that Tenant fails to pay rent when due, such rent payment shall bear interest only if (and at such time that) such failure is not cured within two (2) days after receipt by Tenant of notice from Landlord that such rent was not timely paid.

d. No security or guaranty which may now or hereafter be furnished to Landlord for the payment of rent due hereunder or for the performance by Tenant of the other terms of this Lease shall in any way be a bar or defense to any of Landlord’s remedies under this Lease or at law.

e. Notwithstanding anything to the contrary in this Lease: (i) in no event may any rent under this Lease be based in whole or in part on the income or profits derived from the Premises, except for percentage rent based on gross (not net) receipts or sales; (ii) if the holder of a Superior Interest (as defined in Paragraph 21 below) succeeds to Landlord’s interest in the Lease (“ Successor Landlord ”) and the Successor Landlord is advised by its counsel that all or any portion of the rent payable under this Lease is or may be deemed to be “unrelated business income” within the meaning of the Internal Revenue Code or regulations issued thereunder, such Successor Landlord may, at its option, unilaterally amend the calculation of rent so that none of the rent payable to Landlord under the Lease will constitute “unrelated business income,” but the amendment will not increase Tenant’s payment obligations or other liability under this Lease or reduce the Landlord’s obligations under this Lease and (iii) upon the Successor Landlord’s request, Tenant shall execute any document such holder deems necessary to effect the foregoing amendment to this Lease.

f. Provided Tenant is not in default under this Lease (beyond expiration of applicable notice and cure periods), Tenant shall not be obligated to pay Monthly Rent for the Premises for the first five (5) months of the Lease term following the Additional Suites Commencement Date (such abated amount, collectively, is the “ Abated Rent ”). Tenant shall be and remain obligated during each of such months to pay all Additional Rent otherwise due under this Lease, including, without limitation, pursuant to Article 7 below. In the event of a default by Tenant under this Lease which results in either the early termination of this Lease and/or Tenant vacating and/or being evicted from the Premises, then as

part of the recovery permitted Landlord hereunder, Landlord shall be entitled to a recovery of the Abated Rent conditionally abated pursuant to this Section 5.f., i.e., such Abated Rent shall in such case not be deemed to have been forgiven or abated, but shall become immediately due and payable as unpaid rent which had been earned at the date of default.

6. Letter of Credit.

Tenant shall deliver to Landlord on the later to occur of (i) completion of Landlord’s assignment of this Lease in connection with Landlord’s reorganization, (ii) concurrently with its execution of this Lease, as security for the performance of Tenant’s covenants and obligations under this Lease, an original irrevocable standby letter of credit, (iii) within ten (10) Business Days of Landlord’s written request therefor if Landlord elects not to complete its reorganization; or (iv) the Suite 1100 Delivery Date (the “ Letter of Credit ”) in the amount of Three Million Four Hundred Thousand Dollars ($3,400,000.00), naming Landlord as beneficiary, which Landlord may draw upon to cure any Event of Default under the Lease (or any breach under this Lease where there exist circumstances under which Landlord is enjoined or otherwise prevented by operation of law from giving to Tenant a written notice which would be necessary for such failure of performance to constitute an Event of Default under this Lease), or to compensate Landlord for any damage Landlord incurs as a result of such Event of Default and to which Landlord is entitled under the terms and conditions of this Lease. Any such draw on the Letter of Credit shall not constitute a waiver of any other rights of Landlord with respect to such Event of Default, breach or failure to perform. The Letter of Credit shall be issued by a major commercial bank reasonably acceptable to Landlord, have an expiration date not earlier than the sixtieth (60th) day after then applicable expiration date under this Lease (or, in the alternative, have a term of not less than one (1) year and be automatically renewable for an additional one (1) year period unless notice of non-renewal is given by the issuer to Landlord not later than sixty (60) days prior to the expiration thereof) and shall provide that Landlord may make partial and multiple draws thereunder, up to the face amount thereof. In addition, the Letter of Credit shall provide that, in the event of Landlord’s assignment or other transfer of its interest in this Lease, the Letter of Credit shall be freely transferable by Landlord without charge and without recourse to the assignee or transferee of such interest and the bank shall confirm the same to Landlord and such assignee or transferee. The Letter of Credit shall provide for payment to Landlord upon the issuer’s receipt of a sight draft from Landlord together with a statement by Landlord that the requested sum is due and payable from Tenant to Landlord in accordance with the provisions of this Lease, shall be in the form attached hereto as Exhibit C , and to the extent different from the form attached hereto as Exhibit C , otherwise be in form and content reasonably satisfactory to Landlord. If the Letter of Credit has an expiration date earlier than sixty (60) days after the then applicable expiration date under this Lease, then throughout the term of this Lease (including any renewal or extension of the term) Tenant shall provide evidence of renewal of the Letter of Credit to Landlord at least fifteen (15) Business Days prior to the date the Letter of Credit expires. If Landlord draws on the Letter of Credit pursuant to the terms hereof, Tenant shall within five (5) Business Days after notice thereof from Landlord replenish the Letter of Credit or provide Landlord with an additional or amended letter of credit conforming to the requirements of this paragraph so that the amount available to Landlord from the Letter of Credit(s) provided hereunder is the amount specified in this Lease. Tenant’s failure to deliver any replacement, additional or extension of the Letter of Credit, or evidence of renewal of the Letter of Credit, within the time specified under this Lease shall be an Event of Default. If Landlord liquidates any portion of the Letter of Credit pursuant to this Paragraph 6, Landlord shall hold the funds received from the Letter of Credit as a cash security deposit for Tenant’s performance under this Lease, subject to reduction of the Security Deposit as provided below. Landlord shall not be required to segregate such security deposit from its other funds and no interest shall accrue or be payable to Tenant with respect thereto. If Tenant is not in default at the expiration or termination of this Lease, within sixty (60) days thereafter Landlord

shall return to Tenant the Letter of Credit or the balance of the security deposit then held by Landlord, as applicable; provided, however, that in no event shall any such return be construed as an admission by Landlord that Tenant has performed all of its covenants and obligations hereunder. Tenant hereby unconditionally and irrevocably waives the benefits and protections of California Civil Code Section 1950.7, and, without limitation of the scope of such waiver, acknowledges that Landlord may use all or any part of the Letter of Credit or the proceeds thereof to compensate Landlord for damages resulting from termination of this Lease and the tenancy created hereunder (including, without limitation, damages recoverable under California Civil Code Section 1951.2) to the extent Landlord is entitled to such damages under the terms and conditions of this Lease.

Notwithstanding the foregoing, provided that no Event of Default, or a default that subsequently matures into an Event of Default (or any monetary breach under this Lease where there exist circumstances under which Landlord is enjoined or otherwise prevented by operation of law from giving to Tenant a written notice which would be necessary for such monetary breach to constitute an Event of Default under this Lease), by Tenant under this Lease has occurred on or prior to November 1, 2018, the Letter of Credit amount required hereunder shall reduce by an amount equal to two (2) months’ Monthly Rent (based on the Monthly Rent due at the time of the reduction). Thereafter, if the same conditions apply on each anniversary of November 1, 2018, the Letter of Credit amount required hereunder shall reduce each year by an amount equal to one (1) month’s Monthly Rent (based on the Monthly Rent due at the time of the reduction). If Tenant is entitled to any reduction in the amount of the Letter of Credit, Landlord shall cooperate with Tenant as soon as reasonably practicable following Tenant’s request to replace or amend the then existing Letter of Credit to reflect such reduced amount required hereunder; provided, however, that in no event shall any such reduction be construed as an admission by Landlord that Tenant has performed all of its covenants and obligations under this Lease.

7. Additional Rent: Increases in Operating Expenses and Tax Expenses.

a. Operating Expenses . Tenant shall pay to Landlord, at the times hereinafter set forth, Tenant’s Share, as specified in Paragraph 2.f. above, of any increase in the Operating Expenses (as defined below) incurred by Landlord in each calendar year subsequent to the Base Year specified in Paragraph 2.g. above, over the Operating Expenses incurred by Landlord during the Base Year. The amounts payable under this Paragraph 7.a. and Paragraph 7.b. below are termed “ Additional Rent ” herein.

The term “ Operating Expenses ” shall mean the total costs and expenses incurred by Landlord in connection with the management, operation, maintenance and repair of the Real Property, including, without limitation, the following costs: (1) salaries, wages, bonuses and other compensation (including hospitalization, medical, surgical, retirement plan, pension plan, union dues, life insurance, including group life insurance, welfare and other fringe benefits, and vacation, holidays and other paid absence benefits) relating to employees of Landlord or its agents at the level of property manager or below (the “ Reimbursable Employees ”) to the extent engaged in the operation, repair, or maintenance of the Real Property; (2) payroll, social security, workers’ compensation, unemployment and similar taxes with respect to such Reimbursable Employees to the extent allocable to such Reimbursable Employees’ work at the Real Property, and the cost of providing disability or other benefits imposed by law or otherwise, with respect to such Reimbursable Employees to the extent allocable to such Reimbursable Employee’s work at the Real Property; (3) the cost of uniforms (including the cleaning, replacement and pressing thereof) provided to such employees and specifically worn at the Real Property; (4) premiums and other charges incurred by Landlord with respect to fire, other casualty, rent and liability insurance, any other insurance as is deemed necessary or advisable in the reasonable judgment of

Landlord, or any insurance required by the holder of any Superior Interest (as defined in Paragraph 21 below), and, after the Base Year, costs of repairing an insured casualty to the extent of the deductible amount under the applicable insurance policy (provided, however, that if the cost of any such insurance for the Base Year is greater than the cost of such insurance in subsequent year(s) of the Lease term due to unusual increases or fluctuations in the rate or scope of such insurance in the Base Year and such unusual increases or fluctuations are not present in the applicable subsequent year(s), Operating Expenses for the Base Year may be adjusted, for purposes of determining the Operating Expenses payable by Tenant in the applicable subsequent year(s), to reflect what the cost of such insurance would have been in the Base Year had the normal rates and scope of service applied); (5) water charges and sewer rents or fees applicable to the common areas of the Real Property (provided, however, that if the cost of any such service for the Base Year is greater than the cost of such service in subsequent year(s) of the Lease term due to unusual increases or fluctuations in the rate or scope of such service in the Base Year and such unusual increases or fluctuations are not present in the applicable subsequent year(s), Operating Expenses for the Base Year may be adjusted, for purposes of determining the Operating Expenses payable by Tenant in the applicable subsequent year(s), to reflect what the cost of such service would have been in the Base Year had the normal rates and scope of service applied); (6) license, permit and inspection fees for the Real Property and operation thereof; (7) sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Real Property and Building systems and equipment; (8) telephone, telegraph, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance, or repair of the Real Property; (9) management fees and expenses, Tenant’s monthly payment of which shall not exceed three percent (3%) of the then current Monthly Rent and Additional Rent; (10) costs of repairs to and maintenance of the Real Property, including building systems and appurtenances thereto and normal repair and replacement of worn-out equipment, facilities and installations, but excluding capital replacements or the replacement of major building systems (except to the extent provided in (16) and (17) below); (11) fees and expenses for janitorial, window cleaning, guard, extermination, water treatment, rubbish removal, plumbing and other services and inspection or service contracts for elevator, electrical, mechanical, HVAC and other building equipment and systems or as may otherwise be necessary or proper for the operation, repair or maintenance of the common areas of the Real Property; (12) costs of supplies, tools, materials, and equipment to the extent used in connection with the operation, maintenance or repair of the Real Property; (13) accounting, legal and other professional fees and expenses to the extent specific to the operation of the Real Property; (14) fees and expenses for maintaining the exterior of the Building and the sidewalks, landscaping and other common areas of the Real Property; (15) costs and expenses for electricity, chilled water, air conditioning, water for heating, gas, fuel, steam, heat, lights, power and other energy related utilities required in connection with the operation, maintenance and repair of the common areas of the Real Property (provided, however, that if the cost of any energy related utility for the Base Year is greater than the cost of such utility in subsequent year(s) of the Lease term due to unusual increases or fluctuations in the rate for such utility in the Base Year and such unusual increases or fluctuations are not present in the applicable subsequent year(s), Operating Expenses for the Base Year may be adjusted, for purposes of determining the Operating Expenses payable by Tenant in the applicable subsequent year(s), to reflect what the cost of such utility would have been in the Base Year had normal rates applied); (16) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord after the Base Year in order to comply with any local, state or federal law, ordinance, rule, regulation, code or order of any governmental entity or insurance requirement (collectively, “ Legal Requirement ”) with which the Real Property was not required to comply during the Base Year, or to comply with any amendment or other change to the enactment or interpretation of any Legal Requirement from its enactment or interpretation during the Base Year, provided, that Operating Expenses shall not include any costs to comply with Legal Requirements in effect at the time the Building was originally constructed to the extent Landlord elected to delay its compliance with such Legal Requirements; (17) the

cost of any capital improvements made by Landlord to the Building or capital assets acquired by Landlord after the Base Year for the protection of the health and safety of the occupants of the Real Property or that are designed to reduce other Operating Expenses; (18) the cost of furniture, draperies, carpeting, landscaping and other customary and ordinary items of personal property (excluding paintings, sculptures and other works of art) provided by Landlord for use in common areas of the Building or the Real Property or in the Building office (to the extent that such Building office is dedicated to the operation and management of the Real Property); provided, however, that leasing or rental costs of a rotating or other art program for the common areas of the Building or the Real Property shall be included in Operating Expenses; and (19) any expenses and costs resulting from substitution of work, labor, material or services in lieu of any of the above itemizations, or for any additional work, labor, services or material resulting from compliance with any Legal Requirement applicable to the Real Property or any parts thereof; and (20) Building office rent or rental value for a building office not in excess of two thousand (2,000) rentable square feet and at an aggregate rent not in excess of the fair market value of such space, as the same may change from year to year. With respect to the costs of items included in Operating Expenses under (16) and (17), such costs shall be amortized over the useful life, as reasonably determined by Landlord based upon generally accepted accounting principles, together with interest on the unamortized balance at a rate per annum equal to three (3) percentage points over the six-month United States Treasury bill rate in effect at the time such item is constructed or acquired, or at such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such item, but in either case not more than the maximum rate permitted by law at the time such item is constructed or acquired.

Operating Expenses shall not include the following: (i) depreciation or amortization on the Building or equipment or systems therein; (ii) debt service; (iii) rental under any ground or underlying lease; (iv) interest (except as expressly provided in this Paragraph 7.a.); (v) Tax Expenses (as defined in Paragraph 7.b. below); (vi) attorneys’ fees and expenses incurred in connection with lease negotiations with prospective Building tenants, enforcement of any lease or defense of Landlord’s title to or interest in the Premises, the Building or the Real Property; (vii) the cost (including any amortization thereof) of any improvements or alterations which would be properly classified as capital expenditures according to generally accepted accounting practices (except to the extent expressly included in Operating Expenses pursuant to this Paragraph 7.a.); (viii) the cost of decorating, improving for tenant occupancy, painting or redecorating portions of the Building to be demised to tenants or otherwise exclusively occupied by tenants; (ix) executive salaries above the level of property manager; (x) advertising; (xi) real estate broker’s or other leasing commissions; (xii) repairs, alterations, additions, improvements or replacements made to rectify or correct any defect in the original design, materials or workmanship of the Premises, prior to construction of the Initial Alterations, the Building or the Real Property; (xiii) costs incurred due to violation by Landlord or any other tenant in the Premises, the Building or the Real Property of the terms and conditions of any lease, or cost, penalties or fines incurred due to violation by Landlord of any Legal Requirements which are the obligation of Landlord; (xiv) the cost of any service provided to Tenant or other occupants of the Premises, the Building or the Real Property for which Landlord is entitled to be reimbursed, or the cost of any services provided to any building or facility not a part of the Real Property; (xv) interest, penalties or other costs arising out of Landlord’s failure to make timely payments of its obligations unless such failure occurs as a result of Tenant’s failure to timely pay Tenant’s Share of Operating Expenses; (xvi) costs, expenses, depreciation or amortization for repairs and replacements required to be made by Landlord without inclusion in Operating Expenses; or (xvii) costs related to maintaining the legal existence of the entity which comprises Landlord. In addition, there shall be deducted from Operating Expenses any amounts received by Landlord during the term of this Lease to the extent the amounts are reimbursement for expenses which (A) previously were included in Operating Expenses under this Lease, (B) are included in Operating Expenses during the term of this Lease for the year in which the insurance proceeds are received or (C) are included as Operating Expenses in a subsequent year of the term of this Lease.

b. Tax Expenses . Tenant shall pay to Landlord as Additional Rent under this Lease, at the times hereinafter set forth, Tenant’s Share, as specified in Paragraph 2.e. above, of any increase in Tax Expenses (as defined below) incurred by Landlord in each calendar year subsequent to the Base Tax Year specified in Paragraph 2.f. above, over Tax Expenses incurred by Landlord during the Base Tax Year. Notwithstanding the foregoing, if any reassessment, reduction or recalculation of any item included in Tax Expenses during the term results in a reduction of Tax Expenses, then for purposes of calculating Tenant’s Share of increases in Tax Expenses from and after the calendar year in which such adjustment occurs, Tax Expenses for the Base Tax Year shall be adjusted to reflect such reduction. Landlord shall pay, or cause the payment of, all Taxes before any fine, penalty, interest or cost may be added thereto, become due or be imposed by operation of law for the nonpayment or late payment thereof. In no event shall Tenant be liable for any discount forfeited or penalty incurred as a result of late payment by Landlord unless such late payment occurs as a result of Tenant’s failure to timely pay Tenant’s Share of Tax Expenses. Following Tenant’s written request, Landlord shall provide complete copies of tax bills.

The term “ Tax Expenses ” shall mean all taxes, assessments (whether general or special), excises, transit charges, housing fund assessments or other housing charges, improvement districts, levies or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind, which are assessed, levied, charged, confirmed or imposed on the Real Property, on Landlord with respect to the Real Property, on the act of entering into leases of space in the Real Property, on the use or occupancy of the Real Property or any part thereof, with respect to services or utilities consumed in the use, occupancy or operation of the Real Property, on any improvements, fixtures and equipment and other personal property of Landlord located in the Real Property and used in connection with the operation of the Real Property, or on or measured by the rent payable under this Lease or in connection with the business of renting space in the Real Property, including, without limitation, any gross income tax or excise tax levied with respect to the receipt of such rent, by the United States of America, the State of California, the City and County of San Francisco, any political subdivision, public corporation, district or other political or public entity or public authority, and shall also include any other tax, fee or other excise, however described, which may be levied or assessed in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other Tax Expense. Tax Expenses shall include reasonable attorneys’ and professional fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Tax Expenses. If it shall not be lawful for Tenant to reimburse Landlord for any increase in Tax Expenses as defined herein, the Monthly Rent payable to Landlord prior to the imposition of such increases in Tax Expenses shall be increased to net Landlord the same net Monthly Rent after imposition of such increases in Tax Expenses as would have been received by Landlord prior to the imposition of such increases in Tax Expenses.

Tax Expenses shall not include (i) income, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other charge which would otherwise constitute a Tax Expense; or (ii) any business licenses tax or tax or increase which may be levied on profits, gross receipts, sales or renewals or any tax or charge upon the Base Rent or other charges payable by Tenant under the Lease except to the extent that such license tax, tax or increase is in lieu of any Tax Expenses then currently payable by Tenant under the terms of this Lease.

c. Adjustment for Occupancy Factor . Notwithstanding any other provision herein to the contrary, in the event the Building is not fully occupied during any calendar year during the term after the Base Year, an adjustment shall be made by Landlord in computing Operating Expenses for such year so that the Operating Expenses shall be computed for such year as though the Building had been fully occupied during such year. In addition, if any particular work or service includable in Operating Expenses is not furnished to a tenant who has undertaken to perform such work or service itself, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would have been incurred if Landlord had furnished such work or service to such tenant. The parties agree that statements in this Lease to the effect that Landlord is to perform certain of its obligations hereunder at its own or sole cost and expense shall not be interpreted as excluding any cost from Operating Expenses or Tax Expenses if such cost is an Operating Expense or Tax Expense pursuant to the terms of this Lease.

d. Intention Regarding Expense Pass-Through . It is the intention of Landlord and Tenant that the Monthly Rent paid to Landlord throughout the term of this Lease shall be absolutely net of all increases, respectively, in Tax Expenses and Operating Expenses over, respectively, Tax Expenses for the Base Tax Year and Operating Expenses for the Base Year, and the foregoing provisions of this Paragraph 7 are intended to so provide.

e. Notice and Payment . On or before the first day of each calendar year during the term hereof subsequent to the Base Year, or as soon as practicable thereafter, Landlord shall give to Tenant notice of Landlord’s estimate of the Additional Rent, if any, payable by Tenant pursuant to Paragraphs 7.a. and 7.b. for such calendar year subsequent to the Base Year. On or before the first day of each month during each such subsequent calendar year which is at least thirty (30) days following Tenant’s receipt of Landlord’s estimate of Additional Rent, Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated Additional Rent; provided, however, that if Landlord’s notice is not given prior to the first day of any calendar year Tenant shall continue to pay Additional Rent on the basis of the prior year’s estimate until the month which is at least thirty (30) days after Landlord’s notice is given. If at any time (but not more than once per calendar year) it appears to Landlord that the Additional Rent payable under Paragraphs 7.a. and/or 7.b. will vary from Landlord’s estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon the revised estimate. On the first monthly payment date which is at least thirty (30) days after any new estimate is delivered to Tenant, Tenant shall also pay any accrued cost increases, based on such new estimate.

f. Annual Accounting . Within one hundred fifty (150) days after the close of each calendar year subsequent to the Base Year, or as soon after such one hundred fifty (150) day period as practicable, Landlord shall deliver to Tenant a statement of the Additional Rent payable under Paragraphs 7.a. and 7.b. for such year and such statement shall be final and binding upon Landlord and Tenant (except that the Tax Expenses included in such statement may be modified by any subsequent adjustment or retroactive application of Tax Expenses affecting the calculation of such Tax Expenses and set forth in this Lease). Landlord’s annual statement delivered to Tenant pursuant to this Paragraph 7.f. of the Lease shall be based on the results of an audit of the operations of the Building prepared for the applicable year by a nationally recognized certified public accounting firm selected by Landlord, and upon Tenant’s request, Landlord shall promptly deliver to Tenant a copy of the auditor’s statement on which Landlord’s annual statement is based. If the annual statement shows that Tenant’s payments of Additional Rent for such calendar year pursuant to Paragraph 7.e. above exceeded Tenant’s obligations for the calendar year, Landlord shall credit the excess to the next succeeding installments of estimated Additional Rent or, if this Lease has expired or otherwise terminated, Landlord shall pay such excess to

Tenant within thirty (30) days of delivery of the annual statement to Tenant. Subject to Tenant’s audit rights, if the annual statement shows that Tenant’s payments of Additional Rent for such calendar year pursuant to Paragraph 7.e. above were less than Tenant’s obligation for the calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of such statement.

g. Proration for Partial Lease Year . If this Lease terminates on a day other than the last day of a calendar year, the Additional Rent payable by Tenant pursuant to this Paragraph 7 applicable to the calendar year in which this Lease terminates shall be prorated on the basis that the number of days from the commencement of such calendar year to and including such termination date bears to three hundred sixty (360).

h. Electricity furnished to the Premises . Notwithstanding anything to the contrary in Paragraph 17 of the Lease or in this Paragraph 8, electricity furnished to the Premises shall not be included in Operating Expenses, and shall instead be separately paid for by Tenant as hereafter provided. In addition to the Monthly Rent, Additional Rent, and other charges payable under the Lease for the Premises, commencing on the relevant Commencement Date for each portion of the Premises and for the balance of the Lease term, Tenant shall pay for all electricity supplied to the Premises as measured by electrical submeters dedicated to the Premises (the “ Submetering Equipment ”). Landlord shall operate, maintain and repair the Submetering Equipment throughout the term of the Lease at its sole cost and expense. The data from all Submetering Equipment readings documenting Tenant’s electrical use shall be shared on a monthly basis with Tenant. Tenant shall pay Landlord for all electricity supplied to the Premises, as rent on a monthly basis, within thirty (30) days after Landlord’s delivery of an invoice and reasonable supporting documentation to Tenant. The electricity shall be billed to and paid by Tenant at Landlord’s actual cost thereof (calculated at the average rate per kilowatt hour charged to landlord for electricity supplied to the Building). The parties acknowledge that the electricity paid for by Tenant pursuant to this Paragraph does not include electricity required to supply basic HVAC Service to the Premises pursuant to Paragraph 17a(ii) of the Lease, and the cost thereof shall be included in Operating Expenses.

8. Use of Premises; Compliance with Law .

a. Use of Premises . The Premises shall be used solely for general office purposes for the business of Tenant as described in Paragraph 2.g. above and for no other use or purpose.

Tenant shall not do or suffer or knowingly permit Tenant’s Parties (as defined below) to do anything in or about the Premises or the Real Property, nor bring or keep anything therein, which would in any way subject Landlord, Landlord’s agents or the holder of any Superior Interest (as defined in Paragraph 21) to any liability, increase the premium rate of or decrease in the coverage of any fire, casualty, liability, rent or other insurance relating to the Real Property or any of the contents of the Building, or cause a cancellation of, or give rise to any defense by the insurer to any claim under, or conflict with, any policies for such insurance. If any act or omission of Tenant results in any such increase in premium rates, Tenant shall pay to Landlord upon demand the amount of such increase. Tenant shall not do or suffer or permit anything to be done in or about the Premises or the Real Property which will materially obstruct or interfere with the rights of other tenants or occupants of the Building or injure them, or use or suffer or permit the Premises to be used for any unlawful purpose or other purpose in violation of Paragraph 8.a., nor shall Tenant cause, maintain, suffer or permit any nuisance in, on or about the Premises or the Real Property. Without limiting the foregoing, no loudspeakers or other similar device which can be heard outside the Premises shall, without the prior written approval of Landlord, be used in or about the Premises. Tenant shall not commit or suffer to be committed any waste in, to or about the

Premises. Landlord may from time to time conduct fire and life safety training for tenants of the Building, including evacuation drills and similar procedures. Tenant agrees to participate in such activities as reasonably requested by Landlord.

Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out or around the Premises) whose presence may give rise to a labor or other disturbance in the Building and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

b. Compliance with Law . Tenant shall not do or knowingly permit Tenant’s Parties to do in or about the Premises which will in any way conflict with any Legal Requirement (as defined in Paragraph 7.a.(16) above) now in force or which may hereafter be enacted. Tenant, at its sole cost and expense, shall promptly comply with all such present and future Legal Requirements relating to Tenant’s particular use of the Premises (as opposed to Tenant’s use of the Premises for general office purposes in a normal and customary manner), and shall perform all work to the Premises or other portions of the Real Property required to effect such compliance. Notwithstanding the foregoing, however, Tenant shall not be required to perform any changes to the Premises or other portions of the Real Property unless such changes are related to or affected or triggered by (i) Tenant’s Alterations (as defined in Paragraph 9 below) (ii) Tenant’s particular use of the Premises (as opposed to Tenant’s use of the Premises for general office purposes in a normal and customary manner), (iii) Tenant’s particular employees or employment practices, or (iv) the construction of the Initial Alterations. The judgment of any court of competent jurisdiction or the admission of Tenant in an action against Tenant, whether or not Landlord is a party thereto, that Tenant has violated any Legal Requirement shall be conclusive of that fact as between Landlord and Tenant. Tenant shall as soon as reasonably practicable furnish Landlord with any notices received from any insurance company or governmental agency or inspection bureau regarding any unsafe or unlawful conditions within the Premises or the violation of any Legal Requirement.

c. Hazardous Materials . Tenant shall not cause or knowingly permit the storage, use, generation, release, handling or disposal (collectively, “ Handling ”) of any Hazardous Materials (as defined below), in, on, or about the Premises or the Real Property by Tenant or any agents, employees, contractors, licensees, subtenants, customers, guests or invitees of Tenant (collectively with Tenant, “ Tenant Parties ”), except that Tenant shall be permitted to use normal quantities of office supplies or products (such as copier fluids or cleaning supplies) customarily used in the conduct of general business office activities (“ Common Office Chemicals ”), provided that the Handling of such Common Office Chemicals shall comply at all times with all Legal Requirements, including Hazardous Materials Laws (as defined below). Notwithstanding anything to the contrary contained herein, however, in no event shall Tenant permit any usage of Common Office Chemicals in a manner that may cause the Premises or the Real Property to be contaminated by any Hazardous Materials or in violation of any Hazardous Materials Laws. Tenant shall immediately advise Landlord in writing of (a) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any Hazardous Materials Laws relating to any Hazardous Materials affecting the Premises; and (b) all claims made or threatened in writing by any third party against Tenant, Landlord, the Premises or the Real Property relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from any Hazardous Materials on or about the Premises. Without Landlord’s prior written consent, Tenant shall not take any remedial action or enter into any agreements or settlements in response to the presence of any Hazardous Materials in, on, or about the Premises. Tenant shall be solely responsible for and shall indemnify, defend and hold Landlord and all other Indemnitees (as defined in Paragraph 14.b. below), harmless from and against all Claims (as defined in Paragraph 14.b. below), arising out of or in connection with, or otherwise relating to (i) any Handling of

Hazardous Materials by any Tenant Party in violation of this Paragraph 8.c. or Tenant’s breach of any other obligations under this Lease with respect to Hazardous Materials, or (ii) any removal, cleanup, or restoration work and materials necessary to return the Real Property or any other property of whatever nature located on the Real Property to their condition existing prior to the Handling of Hazardous Materials in, on or about the Premises by any Tenant Party in violation of this Paragraph 8.c. Tenant’s obligations under this paragraph shall survive the expiration or other termination of this Lease. For purposes of this Lease, “ Hazardous Materials ” means any explosive, radioactive materials, hazardous wastes, or hazardous substances, including without limitation asbestos containing materials, PCB’s, CFC’s, or substances defined as “hazardous substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987; or any other Legal Requirement regulating, relating to, or imposing liability or standards of conduct concerning any such materials or substances now or at any time hereafter in effect (collectively, “ Hazardous Materials Laws ”).

d. Applicability of Paragraph . The provisions of this Paragraph 8 are for the benefit of Landlord, the holder of any Superior Interest (as defined in Paragraph 21 below), and the other Indemnitees only and are not nor shall they be construed to be for the benefit of any tenant or occupant of the Building.

9. Alterations and Restoration .

a. Tenant shall not make or permit to be made any alterations, modifications, additions, decorations or improvements to the Premises, or any other work whatsoever that would directly or indirectly involve the penetration or removal (whether permanent or temporary) of, or require access through, in, under, or above any floor, wall or ceiling, or surface or covering thereof in the Premises (collectively, “ Alterations ”), except as expressly provided in this Paragraph 9. If Tenant desires any Alteration, including the Initial Alterations, Tenant must obtain Landlord’s prior written approval of such Alteration, which approval shall not be unreasonably withheld, conditioned or delayed. With respect to the Initial Alterations, Landlord shall respond to a written request for consent, delivered by Tenant together with reasonably complete documentation as to the scope and design of the Initial Alterations, within ten (10) Business Days; provided , however, that if Landlord shall fail to respond within such ten (10) Business Day period, Tenant shall so notify Landlord and if Landlord shall then fail to deliver a response to Tenant within three (3) Business Days of Landlord’s receipt of Tenant’s second notice, the Initial Alterations described in Tenant’s written request for consent shall be deemed approved. For all other Alterations, the process described in the preceding sentence shall apply, however the time periods shall be fifteen (15) Business Days and seven (7) Business Days, respectively.

All Alterations shall be made at Tenant’s sole cost and expense (including the expense of complying with all present and future Legal Requirements, including those regarding asbestos, if applicable, and any other work required to be performed in other areas within or outside the Premises directly arising out of the Alterations), subject to Landlord’s payment of the Landlord’s Allowance with respect to the Initial Alterations. Tenant shall either (i) arrange for Landlord to perform the work on terms and conditions acceptable to Landlord and Tenant, each in its sole discretion or (ii) bid the project out to contractors approved by Landlord in writing in advance (which approval shall not be unreasonably withheld, conditioned or delayed). Tenant shall provide Landlord with a copy of the information submitted to bidders at such time as the bidders receive their copy. Regardless of the contractors who perform the work pursuant to the above, Tenant shall pay Landlord on demand prior to or during the course of such construction amount (the “ Alteration Operations Fee ”) equal to three percent (3%) of the

total cost of the Alteration (and for purposes of calculating the Alteration Operations Fee, such cost shall include architectural and engineering fees, but shall not include permit fees) as compensation to Landlord for Landlord’s internal review of Tenant’s plans and general oversight of the construction (which oversight shall be solely for the benefit of Landlord and shall in no event be a substitute for Tenant’s obligation to retain such project management or other services as shall be necessary to ensure that the work is performed properly and in accordance with the requirements of this Lease). Landlord and Tenant confirm that no Alteration Operations Fee shall be payable with respect to the Initial Alterations in recognition of Tenant’s obligation to pay the Construction Management Fee as provided herein. Tenant shall also reimburse Landlord for Landlord’s expenses such as for electrical energy consumed in connection with the work, freight elevator operation, additional cleaning expenses, additional security services, fees and charges paid to third party architects, engineers and other consultants for review of the work and the plans and specifications with respect thereto and to monitor contractor compliance with Building construction requirements, and for other miscellaneous costs incurred by Landlord as result of the construction of Alterations, including the Initial Alterations.

All such work shall be performed diligently and in a first-class workmanlike manner and in accordance with plans and specifications approved by Landlord, and shall comply with all Legal Requirements and Landlord’s construction standards, procedures, conditions and requirements for the Building as in effect from time to time (including Landlord’s requirements relating to insurance and contractor qualifications) and provided in writing to Tenant upon request to Landlord. In no event shall Tenant employ any person, entity or contractor to perform work in the Premises whose presence may give rise to a labor or other disturbance in the Building. Any Alterations, including, without limitation, moveable partitions that are affixed to the Premises (but excluding moveable, free standing partitions) and all carpeting, shall at once become part of the Building and the property of Landlord. Tenant shall give Landlord not less than five (5) days prior written notice of the date the construction of the Alteration is to commence. Landlord may post and record an appropriate notice of nonresponsibility with respect to any Alteration and Tenant shall maintain any such notices posted by Landlord in or on the Premises.

b. At Landlord’s sole election, (which Landlord shall confirm to Tenant in writing upon request from Tenant at the time of Landlord’s consent to the relevant Alterations or within fifteen (15) days following other written request from Tenant), any or all Alterations made for or by Tenant shall be removed by Tenant from the Premises at the expiration or sooner termination of this Lease and the Premises shall otherwise be delivered to Landlord in good condition and repair, ordinary wear and tear excepted. If Landlord does not elect to require removal of all or any portion of the Alterations, Tenant shall have no right or obligation to remove all or any portion of any Alterations made during the term of this Lease (including, without limitation, the Initial Alterations). Any required removal of the Alterations and the restoration of the Premises to good condition and repair, ordinary wear and tear excepted, shall be performed by a general contractor selected by Tenant and reasonably approved by Landlord, in which event Tenant shall pay the general contractor’s fees and costs in connection with such work. Any separate work letter or other agreement which is hereafter entered into between Landlord and Tenant pertaining to Alterations shall be deemed to automatically incorporate the terms of this Lease without the necessity for further reference thereto.

10. Repair

a. By taking possession of the Premises, Tenant agrees that the Premises are in the condition required under this Lease, subject to completion of Landlord’s Code Compliance Work as required under Paragraph 4.a. Tenant, at Tenant’s sole cost and expense, shall keep the Premises and every part thereof (including the interior walls and ceilings of the Premises, those portions of the

Building systems located within and exclusively serving the Premises, and improvements and Alterations) in good condition and repair. Tenant waives all rights to make repairs at the expense of Landlord as provided by any Legal Requirement now or hereafter in effect. It is specifically understood and agreed that, except as specifically set forth in this Lease, Landlord has no obligation and has made no promises to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant. Tenant hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942 and of any similar Legal Requirement now or hereafter in effect.

b. Except as specifically provided in the immediately preceding paragraph, Landlord, subject to reimbursement through Operating Expenses permitted under this Lease, shall keep any and all portions of the Real Property and every part thereof, in good condition and repair.

11. Abandonment .

Tenant shall not abandon the Premises or any part thereof at any time during the term hereof without fulfilling its other obligations under this Lease (including as set forth in Paragraph 10). Abandonment by Tenant of the Premises without Tenant fulfilling its other obligations under this Lease shall constitute an Event of Default hereunder regardless of whether Tenant continues to pay Monthly Rent and Additional Rent under this Lease. Upon the expiration or earlier termination of this Lease, or if Tenant surrenders all or any part of the Premises or is dispossessed of the Premises by process of law, or otherwise, any movable furniture, equipment, trade fixtures, or other personal property belonging to Tenant and left on the Premises for five (5) Business Days following receipt by Tenant of notice of same from Landlord shall at the option of Landlord be deemed to be abandoned and, whether or not the property is deemed abandoned, Landlord shall have the right to remove such property from the Premises and charge Tenant for the removal and any restoration of the Premises as provided in Paragraph 9. Landlord may charge Tenant for the storage of Tenant’s property left on the Premises at such rates as Landlord may from time to time reasonably determine, or, Landlord may, at its option, store Tenant’s property in a public warehouse at Tenant’s expense. Notwithstanding the foregoing, neither the provisions of this Paragraph 11 nor any other provision of this Lease shall impose upon Landlord any obligation to care for or preserve any of Tenant’s property left upon the Premises, and Tenant hereby waives and releases Landlord from any claim or liability in connection with the removal of such property from the Premises and the storage thereof and specifically waives the provisions of California Civil Code Section 1542 with respect to such release. Landlord’s action or inaction with regard to the provisions of this Paragraph 11 shall not be construed as a waiver of Landlord’s right to require Tenant to remove its property, restore any damage to the Premises and the Building caused by such removal, and make any restoration required pursuant to Paragraph 9 above.

12. Liens .

Tenant shall not permit any mechanic’s, materialman’s or other liens arising out of work performed at the Premises by or on behalf of Tenant (other than work performed by Landlord for the benefit of Tenant) to be filed against the fee of the Real Property nor against Tenant’s interest in the Premises. At least ten (10) days prior to and during the performance of any such work by Tenant, as to which Tenant shall have provided no less than twenty (20) days’ prior written notice to Landlord, Landlord shall have the right to post and keep posted on the Premises any notices which it deems necessary for protection from such liens. If any such liens are filed and are not removed or stayed within ten (10) Business Days’ following written notice to Tenant, Landlord without waiving its rights based on such breach by Tenant and without releasing Tenant from any obligations hereunder, pay and satisfy the

same and in such event the sums so paid by Landlord shall be due and payable by Tenant immediately without notice or demand, with interest from the date paid by Landlord through the date Tenant pays Landlord, at the Interest Rate. Tenant agrees to indemnify, defend and hold Landlord and the other Indemnitees (as defined in Paragraph 14.b. below) harmless from and against any Claims (as defined in Paragraph 14.b. below) for mechanics’, materialmen’s or other liens in connection with any Alterations, repairs or any work performed, materials furnished or obligations incurred by or for Tenant (other than by Landlord for the benefit of Tenant).

13. Assignment and Subletting .

a. Landlord’s Consent . Landlord’s and Tenant’s agreement with regard to Tenant’s right to transfer all or part of its interest in the Premises is as expressly set forth in this Paragraph 13. Tenant agrees that, except upon Landlord’s prior written consent, which consent shall not (subject to Landlord’s rights under Paragraph 13.d. below) be unreasonably withheld, conditioned or delayed, neither this Lease nor all or any part of the leasehold interest created hereby shall, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, be assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant or Tenant’s legal representatives or successors in interest (collectively, an “ assignment ”) and neither the Premises nor any part thereof shall be sublet or be used or occupied for any purpose by anyone other than Tenant (collectively, a “ sublease ”); provided that an assignment or sublease may occur in a Permitted Transfer (as defined below) without Landlord’s consent but otherwise in compliance with the terms of this Paragraph 13. Any assignment or subletting without Landlord’s prior written consent, except for subleases pursuant to a Permitted Transfer, shall, at Landlord’s option, be void and shall constitute an Event of Default entitling Landlord to terminate this Lease and to exercise all other remedies available to Landlord under this Lease and at law.

The parties hereto agree and acknowledge that, among other circumstances for which Landlord may reasonably withhold its consent to an assignment or sublease, it shall be reasonable for Landlord to withhold its consent where: (i) the assignment or subletting would materially increase the operating costs for the Building or the burden on the Building services, or materially increase the foot traffic to/from the Premises, elevator usage or security concerns in the Building, (ii) the space will be used for a school or training facility, an entertainment, sports or recreation facility, retail sales to the public (unless Tenant’s permitted use is retail sales), a personnel or employment agency, an office or facility of any governmental or quasi-governmental agency or authority, a place of public assembly (including without limitation a meeting center, theater or public forum), any use by a foreign government or quasi-governmental agency or authority (including without limitation an embassy or consulate or similar office), or a facility for the provision of social, welfare or clinical health services or sleeping accommodations (whether temporary, daytime or overnight); (iii) the proposed assignee or subtenant is a current tenant of the Building or has been in negotiations with Landlord as a prospective tenant of the Building during the six (6) months preceding Tenant’s request for Landlord’s consent; (iv) the creditworthiness of a proposed assignee or subtenant is not substantially similar to the then current creditworthiness of Tenant; (v) Landlord determines that the character of the business that would be conducted by the proposed assignee or subtenant at the Premises, or the manner of conducting such business, would be materially inconsistent with the character of the Building as a first-class office building; (vi) the proposed assignee or subtenant is an entity or a parent, wholly-owned subsidiary or affiliate of an entity with whom Landlord or Landlord’s parent entity, wholly-owned subsidiary or affiliate is then currently in litigation; (vii) the assignment or subletting conflicts with any exclusive uses granted to other tenants of the Real Property prior to Tenant’s request for Landlord’s consent, or with the terms of

any easement, covenant, condition or restriction, or other agreement affecting the Real Property and entered into prior to Tenant’s request for Landlord’s consent; or (viii) the assignment or subletting would involve a change in use from that expressly permitted under this Lease. Landlord’s foregoing rights and options shall continue throughout the entire term of this Lease.

For purposes of this Paragraph 13 (but subject to assignments and subleases that are Permitted Transfers), the following events shall be deemed an assignment or sublease, as appropriate: (i) the issuance of equity interests (whether stock, partnership interests or otherwise) in Tenant or any entity controlling Tenant to any person or group of related persons, in a single transaction or a series of related or unrelated transactions, such that, following such issuance, such person or group (who did not previously have Control (as defined below)) shall have Control of Tenant, except that the offering or transfer of outstanding capital stock through the “over-the-counter” market or any recognized national or international securities exchange, shall not be included in determining whether Control has been transferred; (ii) a transfer of Control of Tenant or any entity controlling Tenant in a single transaction or a series of related or unrelated transactions (including, without limitation, by consolidation, merger, acquisition or reorganization), except that the offering or transfer of outstanding capital stock or other listed equity interests by persons or parties other than “insiders” within the meaning of the Securities and Exchange Act of 1934, as amended, through the “over-the-counter” market or any recognized national or international securities exchange, shall not be included in determining whether Control has been transferred; (iii) a reduction of Tenant’s assets to the point that this Lease is substantially Tenant’s only asset; or (iv) the agreement by a third party to assume, take over, or reimburse Tenant for any or all of Tenant’s obligations under this Lease in order to induce Tenant to lease space with such third party. “ Control ” shall mean direct or indirect ownership of fifty percent (50%) or more of all of the voting stock of a corporation or fifty percent (50%) or more of the legal or equitable interest in any other business entity, or the power to direct the operations of any entity (by equity ownership, contract or otherwise).

Notwithstanding any provision to the contrary, Landlord’s consent shall not be required with respect to (a) any assignment or sublease of all of any part of the Premises to a direct or indirect parent, subsidiary, affiliate or similarly related entity; (b) a merger, acquisition, reorganization or consolidation involving Tenant or any direct or indirect parent or affiliate of Tenant regardless of whether Tenant or such parent or affiliate is the surviving entity; (c) any assignment or sublease in connection with the sale of all or substantially all of the assets of Tenant; or (d) a Permitted Change of Control, provided the following conditions are met: (x) such merger, consolidation, or transfer of assets is not principally for the purpose of transferring Tenant’s leasehold estate, (y) such merger, consolidation, or transfer of assets does not adversely affect the legal existence of the Tenant hereunder, or if such entity ceases to exist after such merger or consolidation, then the assignee has assumed all obligations of Tenant under the Lease including those arising prior to the date of such merger or consolidation, and (z) such merger, consolidation, or transfer of assets of Tenant does not reduce the tangible net worth of Tenant after giving effect to such transfer (each, a “ Permitted Transfer ” and the party or entity involved, a “ Permitted Transferee ”). In no circumstance shall a Permitted Transferee have financial standing or creditworthiness less than that of Tenant. For purposes hereof, the term “ Permitted Change of Control ” shall mean the sale, transfer, assignment, pledge, encumbrance or hypothecation, directly or indirectly, of (i) the stock, partnership interests, limited liability company interests or other equity interests in Tenant or any direct or indirect parent of Tenant or (ii) any controlling interest in Tenant or any direct or indirect parent of Tenant. Tenant hereby agrees to give Landlord written notice thirty (30) days prior to any Permitted Transfer along with any documentation reasonably requested by Landlord related to the required conditions as provided above, and a copy of all assignment or sublease documentation entered into between Tenant and any Permitted Transferee with respect to an assignment of this Lease or a sublease of the Premises or any portion thereof.

If this Lease is assigned, whether or not in violation of the terms of this Lease, Landlord may collect rent from the assignee. If the Premises or any part thereof is sublet, whether or not in violation of this Lease, Landlord may, upon an Event of Default by Tenant hereunder, collect rent from the subtenant. In either event, Landlord shall apply the amount collected from the assignee or subtenant to Tenant’s monetary obligations hereunder.

The consent by Landlord to an assignment or subletting hereunder shall not relieve Tenant or any assignee or subtenant from obtaining Landlord’s express prior written consent to any other or further assignment or subletting. In no event shall any subtenant be permitted to assign its sublease or to further sublet all or any portion of its subleased premises without Landlord’s prior written consent, which consent may be withheld by Landlord it its sole and absolute discretion. Neither an assignment or subletting, whether in connection with a Permitted Transfer or otherwise, nor the collection of rent by Landlord from any person other than Tenant, nor the application of any such rent as provided in this Paragraph 13.a. shall be deemed a waiver of any of the provisions of this Paragraph 13.a. or release Tenant from its obligation to comply with the provisions of this Lease and Tenant shall remain fully and primarily liable for all of Tenant’s obligations under this Lease. If Landlord approves of an assignment or subletting hereunder and this Lease contains any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in the Building, such rights and/or options shall not run to the subtenant or assignee, it being agreed by the parties hereto that any such rights and options are personal to the Tenant originally named herein and may not be transferred. Notwithstanding the foregoing, in the case of a Permitted Transfer, such rights and/or options may be exercised by a Permitted Transferee so long as Tenant or a Permitted Transferee remains in actual physical possession and occupancy of fifty percent (50%) or more of the Premises at the time such rights and/or options are to be exercised.

b. Processing Expenses . Tenant shall pay to Landlord, as Landlord’s cost of processing each proposed assignment or subletting, including Permitted Transfers, an amount equal to the sum of (i) Landlord’s reasonable attorneys’ and other professional fees, plus (ii) the sum of One Thousand Dollars ($1,000.00) for the cost of Landlord’s administrative, accounting and clerical time (collectively, “ Processing Costs ”) and the amount of all direct and indirect costs and expenses incurred by Landlord arising from the assignee or sublessee taking occupancy of the subject space (including, without limitation, costs of freight elevator operation for moving of furnishings and trade fixtures, security service, janitorial and cleaning service, and rubbish removal service). Notwithstanding anything to the contrary herein, Landlord shall not be required to process any request for Landlord’s consent to an assignment or subletting or review any documentation submitted with respect to a Permitted Transfer until Tenant has paid to Landlord the amount of Landlord’s estimate of the Processing Costs and all other direct and indirect costs and expenses of Landlord and its agents arising from the assignee or subtenant taking occupancy.

c. Consideration to Landlord . In the event of any assignment or sublease (but not Permitted Transfers, to which the provisions of this Paragraph 13.c. shall not apply), whether or not requiring Landlord’s consent, Landlord shall be entitled to receive, as additional rent hereunder, fifty percent (50%) of any consideration paid by the assignee for the assignment or subtenant for the sublease plus fifty percent (50%) of the excess of the amount of rent paid for the assigned or sublet space by the assignee or subtenant over the amount of Monthly Rent under Paragraph 5 above and Additional Rent under Paragraph 7 above attributable to the assigned or sublet space for the corresponding month, less brokerage and leasing commissions, the costs of tenant improvements and other reasonable costs incurred by Tenant in connection with the relevant assignment or sublease (the “ Transfer Costs ”). To effect the foregoing, Tenant shall deduct from the monthly amounts received by Tenant from the assignee or

subtenant as rent or consideration, the Monthly Rent and Additional Rent payable by Tenant to Landlord for the subject space and the Transfer Costs (to the extent not previously deducted from the consideration paid by the assignee or subtenant for the assignment or sublease), and fifty percent (50%) of the then remaining sum shall be paid promptly to Landlord. If there is more than one sublease under this Lease, the amounts (if any) to be paid by Tenant to Landlord pursuant to this Paragraph 13.c., shall be separately calculated for each sublease and amounts due Landlord with regard to any one sublease may not be offset against rental and other consideration pertaining to or due under any other sublease.

d. Procedures . Except with respect to Permitted Transfers (to which this Paragraph 13.d. shall not apply), if Tenant desires to assign this Lease or any interest therein or sublet all or part of the Premises, Tenant shall give Landlord written notice thereof and the terms proposed, together with a current financial statement of such proposed assignee or subtenant and any other information reasonably requested by Landlord. Landlord shall have the prior right and option (to be exercised by written notice to Tenant given within fifteen (15) Business Days after receipt of Tenant’s notice) (i) to terminate this Lease in its entirety (in the case of any proposed assignment) or as it pertains to the portion of the Premises so proposed by Tenant to be sublet (in the case of any proposed sublet), whereupon Tenant shall be released from any further obligation or liability under this Lease (in the case of any proposed assignment) or as it pertains to the portion of the Premises so proposed by Tenant to be sublet (in the case of any proposed sublet) except to the extent that such liability, by its terms, survives the expiration or earlier termination of this Lease; or (ii) to approve or reasonably disapprove the proposed assignment or sublease. If Landlord fails to exercise any such option to terminate, this shall not be construed as or constitute a waiver of any of the provisions of Paragraphs 13.a., b., c. or d. herein. If Landlord exercises any option to terminate, any costs of demising the portion of the Premises affected by such subleasing or termination shall be borne by Landlord. In addition, subject to the provisions of Paragraph 13.c., Landlord shall have no liability for any real estate brokerage commission(s) or with respect to any of the costs and expenses that Tenant may have incurred in connection with its proposed assignment or subletting, and Tenant agrees to indemnify, defend and hold Landlord and all other Indemnitees harmless from and against any and all Claims (as defined in Paragraph 13.b. below), including, without limitation, claims for commissions, arising from such proposed assignment or subletting. Landlord’s foregoing rights and options shall continue throughout the entire term of this Lease.

e. Documentation . No permitted assignment or subletting by Tenant shall be effective until there has been delivered to Landlord a fully executed counterpart of the assignment or sublease which expressly provides that (i) the assignee or subtenant may not further assign this Lease or the sublease, as applicable, or sublet the Premises or any portion thereof, without Landlord’s prior written consent (which, in the case of a further assignment proposed by an assignee of this Lease, shall be pursuant to the terms of this Paragraph 13 and subject to Landlord’s rights under the provisions of this Paragraph 13, and in the case of a subtenant’s assignment of its sublease or further subletting of its subleased premises or any portion thereof, may be withheld in Landlord’s sole and absolute discretion), (ii) the assignee or subtenant will comply with all of the provisions of this Lease (to the extent applicable to the sublet space, in the case of a sublease), and Landlord may enforce the Lease provisions directly against such assignee or subtenant, (iii) in the case of an assignment, the assignee assumes all of Tenant’s obligations under this Lease arising on or after the date of the assignment, and (iv) in the case of a sublease, the subtenant agrees to be and remain jointly and severally liable with Tenant for the payment of rent pertaining to the sublet space in the amount set forth in the sublease, and for the performance of all of the terms and provisions of this Lease applicable to the sublet space. Further, each sublease shall contain the rent prohibition language set forth in Paragraph 13.f. below. In addition to the foregoing and except with respect to Permitted Transfers, no assignment or sublease by Tenant shall be effective until there has

been delivered to Landlord a fully executed counterpart of Landlord’s consent to assignment or consent to sublease form. The failure or refusal of a subtenant or assignee to execute any such instrument shall not release or discharge the subtenant or assignee from its liability as set forth above. No subtenant or assignee shall be permitted to occupy the Premises or any portion thereof unless and until such subtenant or assignee provides Landlord with certificates evidencing that such subtenant or assignee is carrying all insurance coverage required of such subtenant or assignee under this Lease.

f. Required Rent Prohibition Language . It shall be a condition to the approval of a sublease hereunder that the sublease include the following language: “Notwithstanding anything to the contrary in this Sublease: (i) in no event may any rent under this Sublease be based in whole or in part on the income or profits derived from the subleased premises, except for percentage rent based on gross (not net) receipts or sales; (ii) if the holder of a Superior Interest (as defined in Paragraph 21 of the Master Lease) succeeds to Landlord’s interest in the Master Lease (“Successor Landlord”) and the Successor Landlord is advised by its counsel that all or any portion of the rent payable under this Sublease is or may be deemed to be “unrelated business income” within the meaning of the Internal Revenue Code or regulations issued thereunder, such Successor Landlord may, at its option, unilaterally amend the calculation of rent under the Sublease so that none of the rent payable under the Sublease will constitute “unrelated business income,” but the amendment will not increase Subtenant’s payment obligations or other liability under the Sublease or reduce the Sublessor’s obligations under the Sublease and (iii) upon the Successor Landlord’s request, Tenant and Subtenant shall execute any document such holder deems necessary to effect the foregoing amendment to the Sublease.”

g. No Merger . Without limiting any of the provisions of this Paragraph 13, if Tenant has entered into any subleases of any portion of the Premises, the voluntary or other surrender of this Lease by Tenant, or a mutual cancellation by Landlord and Tenant, shall not work a merger, and shall terminate all or any existing subleases or subtenancies unless otherwise mutually agreed by Landlord and Tenant in their respective sole and absolute discretion.

14. Indemnification .

a. Landlord and the holders of any Superior Interests (as defined in Paragraph 21 below) shall not be liable to Tenant and Tenant hereby waives all claims against such parties for any loss, injury or other damage to person or property in or about the Premises or the Real Property from any cause whatsoever, including without limitation, water leakage of any character from the roof, walls, basement, fire sprinklers, appliances, air conditioning, plumbing or other portion of the Premises or the Real Property, or gas, fire, explosion, falling plaster, steam, electricity, or any malfunction within the Premises or the Real Property, or acts of other tenants of the Building; provided, however, that the foregoing waiver shall be inapplicable to any loss, injury or damage to the extent resulting directly from Landlord’s gross negligence or willful misconduct in connection with Landlord’s performance of its obligations under this Lease. Tenant acknowledges that from time to time throughout the term of this Lease, construction work may be performed in and about the Building and the Real Property by Landlord, contractors of Landlord, or other tenants or their contractors, and that such construction work may result in noise and disruption to Tenant’s business. In addition to and without limiting the foregoing waiver or any other provision of this Lease, so long as any and all such construction activity is undertaken in a manner that minimizes (to the extent reasonably practicable) noise or disruption to Tenant’s business or operations in, on our about the Premises (including, without limitation, access to and from the Premises), Tenant agrees that Landlord shall not be liable for, and Tenant expressly waives and releases Landlord and the other Indemnitees (as defined in Paragraph 14.b. below), including without limitation, any and all consequential damages or interruption or loss of business, income or profits, or claims of actual or constructive eviction or for abatement of rental, arising or alleged to be arising as a result of any such construction activity.

b. Tenant shall hold Landlord and the holders of any Superior Interest , and the constituent shareholders, partners or other owners thereof, and all of their agents, contractors, servants, officers, directors, employees and licensees (collectively with Landlord, the “ Indemnitees ”) harmless from and indemnify the Indemnitees against any and all claims, liabilities, damages, costs and expenses, including reasonable attorneys’ fees and costs incurred in defending against the same (collectively, “ Claims ”), to the extent arising from (a) the acts or omissions of Tenant or any other Tenant Parties (as defined in Paragraph 8.c. above) in, on or about the Real Property, or (b) any construction or other work undertaken by or on behalf of Tenant (but not undertaken by Landlord on behalf of Tenant) in, on or about the Premises, whether prior to or during the term of this Lease, or (c) any breach or Event of Default under this Lease by Tenant, or (d) any accident, injury or damage, howsoever and by whomsoever caused, to any person or property, occurring in, on or about the Premises; except to the extent such Claims are caused directly by (i) the gross negligence or willful misconduct of Landlord or its authorized representatives in connection with Landlord’s performance of its obligations under this Lease. In case any action or proceeding be brought against any of the Indemnitees by reason of any such Claim, Tenant, upon notice from Landlord, covenants to resist and defend at Tenant’s sole expense such action or proceeding by counsel reasonably satisfactory to Landlord. The provisions of this Paragraph 14.b. shall survive the expiration or earlier termination of this Lease with respect to any injury, illness, death or damage occurring prior to such expiration or termination.

c. Landlord shall hold Tenant and its agents, employees, contractors, licensees, subtenants and servants (collectively with Tenant, the “ Tenant Indemnitees ”) harmless from and indemnify the Tenant Indemnitees against any and all Claims, to the extent arising from any injury or death of any person occurring in the common areas of the Building, except to the extent such Claims arise from the negligence or willful misconduct of Tenant or any Tenant Party. In case any action or proceeding be brought against any of the Tenant Indemnitees by reason of any such Claim, Landlord, upon notice from Tenant, covenants to resist and defend at Landlord’s sole expense such action or proceeding by counsel reasonably satisfactory to Landlord. The provisions of this Paragraph 14.c. shall survive the expiration or earlier termination of this Lease with respect to any injury or death occurring prior to such expiration or earlier termination.

15. Insurance .

a. Tenant’s Insurance . Tenant shall, at Tenant’s expense, maintain during the term of this Lease (and, if Tenant occupies or conducts activities in or about the Premises prior to or after the term hereof, then also during such pre-term or post-term period): (i) commercial general liability insurance including contractual liability coverage, with minimum coverages of Three Million Dollars ($3,000,000.00) per occurrence combined single limit for bodily injury and property damage, One Million Dollars ($1,000,000.00) for products-completed operations coverage, One Hundred Thousand Dollars ($100,000.00) fire legal liability, One Million Dollars ($1,000,000.00) for personal and advertising injury (which coverage shall not be subject to the contractual liability exclusion), with a Five Million Dollars ($5,000,000.00) general aggregate limit, for injuries to, or illness or death of, persons and damage to property occurring in or about the Premises or otherwise resulting from Tenant’s operations in the Building, (ii) property insurance protecting Tenant against loss or damage by fire and such other risks as are insurable under then-available standard forms of “special form” (previously known as “all risk”) insurance policies (excluding earthquake and flood but including water damage), covering Tenant’s personal property and trade fixtures in or about the Premises or the Real Property, and any improvements

and/or Alterations made by or on behalf of Tenant in the Premises, for the full replacement value thereof without deduction for depreciation; (iii) workers’ compensation insurance in statutory limits; (iv) at least three months’ coverage for loss of business income and continuing expenses, providing protection against any peril included within the classification “special form” insurance, excluding earthquake and flood but including water damage; and (v) if Tenant operates owned, leased or non-owned vehicles on the Real Property, comprehensive automobile liability insurance with a minimum coverage of One Million Dollars ($1,000,000.00) per occurrence, combined single limit. The above described policies shall protect Tenant, as named insured, and, except for Tenant’s property insurance described in clause (ii) above and workers’ compensation insurance described in clause (iii) above, shall protect Landlord, the Indemnitees, and any other parties reasonably designated by Landlord from time to time, Landlord’s property manager for the Real Property and the holders of any Superior Interest, of which Tenant is given at least thirty (30) days’ notice, as additional insureds; shall insure Landlord’s and such other parties’ contingent liability with regard to acts or omissions of Tenant; shall specifically include all liability assumed by Tenant under this Lease (provided, however, that such contractual liability coverage shall not limit or be deemed to satisfy Tenant’s indemnity obligations under this Lease). Landlord reserves the right to increase the foregoing amount of liability coverage from time to time (but not more than one (1) time during each five (5) years of the Lease term) as Landlord reasonably determines is required to adequately protect Landlord and the other parties required to be additional insureds as set forth above from the matters insured thereby (provided, however, that Landlord makes no representation that the limits of liability required hereunder from time to time shall be adequate to protect Tenant). Tenant will use commercially reasonable efforts to cause any of its contractors, vendors, movers or other parties conducting activities in or about or occupying the Premises to obtain and maintain insurance as reasonably determined by Landlord and provided to Tenant in writing following Tenant’s request therefor, and as to which Landlord and such other parties required to be additional insureds as set forth above shall be additional insureds.

b. Policy Form . Each insurance policy required pursuant to this Paragraph 15 shall be issued by an insurance company licensed in the State of California and with a general policyholders’ rating of “A-” or better and a financial size ranking of “Class VIII” or higher in the most recent edition of Best’s Insurance Guide, and shall include all waiver of subrogation rights endorsements necessary to effect the provisions of Paragraph 16 below. Each insurance policy required pursuant to Paragraph 15.a. above, other than Tenant’s workers’ compensation insurance, shall (i) provide that it may not be cancelled or allowed to lapse other than for nonpayment unless thirty (30) days’ prior written notice to Landlord is first given, (ii) provide that no act or omission of Tenant shall affect or limit the obligations of the insurer with respect to any other insured, and (iii) provide that the policy and the coverage provided shall be primary, that Landlord, although an additional insured, shall nevertheless be entitled to recovery under such policy for any damage to Landlord or the other Indemnitees by reason of acts or omissions of Tenant or any items for which Tenant is required to insure as set forth above, and that any coverage carried by Landlord shall be noncontributory with respect to policies carried by Tenant. Each such insurance policy or a certificate thereof shall be delivered to Landlord by Tenant on or before the effective date of such policy and thereafter Tenant shall deliver to Landlord renewal certificates at within thirty (30) days of the expiration dates of the expiring policies. If Tenant fails to procure such insurance or to deliver such certificates, Landlord may after five (5) days’ written notice provided to Tenant, at its option, procure the same for Tenant’s account, and the cost thereof shall be paid to Landlord by Tenant upon demand.

c. No Implication . Nothing in this Paragraph 15 shall be construed as creating or implying the existence of (i) any ownership by Tenant of any fixtures, additions, Alterations, or improvements in or to the Premises or (ii) any right on Tenant’s part to make any addition, Alteration or improvement in or to the Premises.

d. Landlord’s Insurance . Landlord shall maintain all risk or special form property insurance covering the full replacement cost of the Real Property and commercial general liability insurance applicable to the Real Property, including contractual liability coverage, with minimum coverages of Three Million Dollars ($3,000,000.00) per occurrence combined single limit for bodily injury and property damage, One Million Dollars ($1,000,000.00) for products-completed operations coverage, One Hundred Thousand Dollars ($100,000.00) fire legal liability, One Million Dollars ($1,000,000.00) for personal and advertising injury (which coverage shall not be subject to the contractual liability exclusion), with a Five Million Dollars ($5,000,000.00) general aggregate limit, for injuries to, or illness or death of, persons and damage to property occurring in or about the Real Property, subject to customary deductibles for properties substantially similar to the Real Property. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem reasonably necessary in amounts and with deductibles customary for properties substantially similar to the Real Property, including but not limited to, rent loss insurance. The Real Property may be included in a blanket policy (in which case the cost of such insurance allocable to the Real Property will be determined by Landlord in its reasonable discretion based upon the total insurance cost calculations).

16. Mutual Waiver of Subrogation Rights .

Each party hereto hereby releases the other respective party and, in the case of Tenant as the releasing party, the other Indemnitees and the respective partners, shareholders, agents, employees, officers, directors and authorized representatives of such released party, from any claims such releasing party may have for damage to the Building, the Premises or any of such releasing party’s fixtures, personal property, improvements and alterations in or about the Premises, the Building or the Real Property that is caused by or results from risks insured against under any “special form” insurance policies actually carried by such releasing party or deemed to be carried by such releasing party; provided, however, that such waiver shall be limited to the extent of the net insurance proceeds payable by the relevant insurance company with respect to such loss or damage (or in the case of deemed coverage, the net proceeds that would have been payable). For purposes of this Paragraph 16, Tenant shall be deemed to be carrying any of the insurance policies required pursuant to Paragraph 15.a. but not actually carried by Tenant, and Landlord shall be deemed to carry standard fire and extended coverage policies on the Real Property. Each party hereto shall cause each such fire and extended coverage insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against the other respective party and the other released parties in connection with any matter covered by such policy.

17. Utilities .

a. Basic Services . Landlord shall furnish the following utilities and services (“ Basic Services ”) for the Premises: (i) during the hours of 8 A.M. to 6 P.M. (“ Business Hours ”) Monday through Friday (except public holidays) (“ Business Days ”), electricity for Building standard lighting and power suitable for the use of the Premises for ordinary general office purposes, (ii) during Business Hours on Business Days, heat and air conditioning required in Landlord’s judgment for the comfortable use and occupancy of the Premises for ordinary general office purposes, (iii) unheated water for the restroom(s) and drinking fountain(s) in the public areas serving the Premises, (iv) elevator service to the floor(s) of the Premises by nonattended automatic elevators for general office pedestrian usage and deliveries to occupants of the Building, and (v) on Business Days, janitorial services limited to emptying and removal of general office refuse, light vacuuming as needed and window washing as determined by Landlord. Notwithstanding the foregoing, however, Tenant may use water, heat, air conditioning, electric current, elevator and janitorial service in excess of that provided in Basic Services (“ Excess Services ,”

which shall include without limitation any power usage other than through existing standard 110-volt AC outlets; electricity in excess of the lesser of that described in clause (i) above or clause (ii) of Paragraph 17.c. below; electricity and/or water consumed by Tenant in connection with any dedicated or supplemental heating, ventilating and/or air conditioning, computer power, telecommunications and/or other special units or systems of Tenant; chilled, heated or condenser water; or water used for any purpose other than ordinary drinking and lavatory purposes), provided that the Excess Services desired by Tenant are reasonably available to Landlord and to the Premises (it being understood that in no event shall Landlord be obligated to make available to the Premises more than the pro rata share of the capacity of any Excess Service available to the Building or the applicable floor of the Building, as the case may be), and provided further that Tenant complies with the procedures established by Landlord from time to time for requesting and paying for such Excess Services and with all other provisions of this Paragraph 17. Landlord reserves the right to install in the Premises or the Real Property electric current and/or water meters (including, without limitation, any additional wiring, conduit or panel required therefor) to measure the electric current or water consumed by Tenant or to cause the usage to be measured by other reasonable methods (e.g., by temporary “check” meters or by survey).

b. Payment for Utilities and Services . The cost of Basic Services shall be included in Operating Expenses. In addition, Tenant shall pay to Landlord upon demand (i) the cost, at Landlord’s prevailing rate, of any Excess Services used by Tenant, (ii) the cost of installing, operating, maintaining or repairing any meter or other device used to measure Tenant’s consumption of utilities, (iii) the cost of installing, operating, maintaining or repairing any Temperature Balance Equipment (as defined in Paragraph 17.d. below) for the Premises and/or any equipment required in connection with any Excess Services requested by Tenant, and (iv) any cost otherwise incurred by Landlord in keeping account of or determining any Excess Services used by Tenant. Landlord’s failure to bill Tenant for any of the foregoing shall not waive Landlord’s right to bill Tenant for the same at a later time.

c. Utility Connections . Tenant shall not connect or use any apparatus or device in the Premises (i) using current in excess of 110 volts, or (ii) which would cause Tenant’s electrical demand load to exceed 1.0 watts per rentable square foot for overhead lighting or 2.0 watts per rentable square foot for convenience outlets, or (iii) which would exceed the capacity of the existing panel or transformer serving the Premises. Tenant shall not connect with electric current (except through existing outlets in the Premises or such additional outlets as may be installed in the Premises as part of initial improvements or Alterations approved by Landlord), or water pipes, any apparatus or device for the purpose of using electrical current or water.

Landlord will not permit additional coring or channeling of the floor of the Premises in order to install new electric outlets in the Premises unless Landlord is satisfied, on the basis of such information to be supplied by Tenant at Tenant’s expense, that coring and/or channeling of the floor in order to install such additional outlets will not weaken the structure of the floor.

d. Temperature Balance . If the temperature otherwise maintained in any portion of the Premises by the heating, air conditioning or ventilation system is affected as a result of (i) the type or quantity of any lights, machines or equipment (including without limitation typical office equipment) used by Tenant in the Premises, (ii) the occupancy of such portion of the Premises by more than one person per two hundred (200) square feet of rentable area therein, (iii) an electrical load for lighting or power in excess of the limits specified in Paragraph 17.c. above, or (iv) any rearrangement of partitioning or other improvements, then at Tenant’s sole cost, Landlord may install any equipment, or modify any existing equipment (including the standard air conditioning equipment) Landlord deems necessary to restore the temperature balance (such new equipment or modifications to existing equipment

termed herein “ Temperature Balance Equipment ”). Tenant agrees to keep closed, when necessary, draperies and/or window treatments which, because of the sun’s position, must be closed to provide for the efficient operation of the air conditioning system, and Tenant agrees to cooperate with Landlord and to abide by the regulations and requirements which Landlord may prescribe for the proper functioning and protection of the heating, ventilating and air conditioning system. Landlord makes no representation to Tenant regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for, or because of, any computer or communications rooms, machine rooms, conference rooms or other areas of high concentration of personnel or electrical usage, or any other uses other than or in excess of the fractional horsepower normally required for office equipment, and Landlord shall have no liability for loss or damage suffered by Tenant or others in connection therewith.

e. Interruption of Services . Landlord’s obligation to provide utilities and services for the Premises are subject to the Rules and Regulations of the Building, applicable Legal Requirements (including the rules or actions of the public utility company furnishing the utility or service), and shutdowns for maintenance and repairs, for security purposes, or due to strikes, lockouts, labor disputes, fire or other casualty, acts of God, or other causes beyond the control of Landlord. In the event of an interruption in, or failure or inability to provide any service or utility for the Premises for any reason, such interruption, failure or inability shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant, or, except as specifically provided below, entitle Tenant to any abatement or offset of Monthly Rent, Additional Rent or any other amounts due from Tenant under this Lease. Notwithstanding anything contained herein to the contrary, in the event that such interruption or cessation of utilities results from Landlord’s grossly negligent or willful act or omission (or the grossly negligent or willful act or omission of Landlord’s employees, agents or contractors) and renders the Premises untenantable, inaccessible or unsuitable for the ordinary conduct of Tenant’s business, then (i) Landlord shall use commercially reasonable good faith efforts to correct such interruption or cessation as soon as reasonably possible; (ii) if, despite such commercially reasonable good faith efforts by Landlord, such interruption or cessation persists for a period in excess of ten (10) consecutive days and Tenant is not occupying all of the affected portion of the Premises, then Tenant, as its sole remedy, shall be entitled to receive an abatement of Monthly Rent and Additional Rent payable hereunder during the period beginning on the eleventh (11th) consecutive day of such interruption or cessation; provided, however that in the event such interruption or cessation is not due to Landlord’s gross negligence or willful misconduct (or that of Landlord’s employees, agents or contractors), then such abatement shall only apply to the extent Landlord collects proceeds under the policy of rental-loss insurance, the cost of which has been included in Operating Expenses and the proceeds of which are allocable to the Premises. No abatement of rentals as hereinabove described will apply in the event such interruption of utilities is the result of any Alterations to the Premises, or any negligent act or omission of Tenant, its agents, employees or contractors, or any cause other than the negligent or willful act or omission of Landlord or its employees, agents or contractors. Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other applicable existing or future Legal Requirement permitting the termination of this Lease due to such interruption, failure or inability.

f. Governmental Controls . In the event any governmental authority having jurisdiction over the Real Property or the Building promulgates or revises any Legal Requirement or building, fire or other code or imposes mandatory or voluntary controls or guidelines on Landlord or the Real Property or the Building relating to the use or conservation of energy or utilities or the reduction of automobile or other emissions (collectively, “ Controls ”) or in the event Landlord is required or elects to make alterations to the Real Property or the Building in order to comply with such mandatory or

voluntary Controls, Landlord may, in its sole discretion, comply with such Controls or make such alterations to the Real Property or the Building related thereto. Such compliance and the making of such alterations shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant.

18. Personal Property and Other Taxes .

Tenant shall pay, before delinquency, any and all taxes, fees, charges or other governmental impositions levied or assessed against Landlord or Tenant (a) upon Tenant’s equipment, furniture, fixtures, improvements and other personal property (including carpeting installed by Tenant) located in the Premises, (b) by virtue of any Alterations made by Tenant to the Premises, and (c) upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. If any such fee, charge or other governmental imposition is paid by Landlord, Tenant shall reimburse Landlord for Landlord’s payment within thirty (30) days following receipt of demand therefor together with evidence in reasonable detail of Landlord’s payment of such sums.

19. Rules and Regulations .

Tenant shall comply with the rules and regulations set forth on Exhibit B attached hereto, as such rules and regulations may be modified or amended by Landlord from time to time in a nondiscriminatory manner and which modifications or amendments shall not apply to Tenant until Tenant receives notice of such modifications or amendments (the “ Rules and Regulations ”). Landlord shall not be responsible to Tenant for the nonperformance or noncompliance by any other tenant or occupant of the Building of or with any of the Rules and Regulations. In the event of any conflict between the Rules and Regulations and the balance of this Lease, the balance of this Lease shall control.

20. Surrender; Holding Over .

a. Surrender . Upon the expiration or other termination of this Lease, Tenant shall surrender the Premises to Landlord vacant and broom-clean, with all improvements and Alterations (except as provided below) in good condition and repair, except for reasonable wear and tear, damage from casualty or condemnation and any changes resulting from approved Alterations; provided, however, that prior to the expiration or termination of this Lease Tenant shall remove from the Premises any Alterations that Tenant is required by Landlord to remove under the provisions of this Lease, and all of Tenant’s personal property (including, without limitation, all voice and data cabling) and trade fixtures. If such removal is not completed at the expiration or other termination of this Lease, Landlord may remove the same at Tenant’s expense. Any damage to the Premises or the Building caused by such removal shall be repaired promptly by Tenant (including the patching or repairing of ceilings and walls) or, if Tenant fails to do so, Landlord may do so at Tenant’s expense. The removal of Alterations from the Premises shall be governed by Paragraph 9 above. Tenant’s obligations under this paragraph shall survive the expiration or other termination of this Lease. Upon expiration or termination of this Lease or of Tenant’s possession, Tenant shall surrender all keys to the Premises or any other part of the Building and shall make known to Landlord the combination of locks on all safes, cabinets and vaults that may be located in the Premises.

b. Holding Over . If Tenant remains in possession of the Premises after the expiration or earlier termination of this Lease with the express written consent of Landlord, Tenant’s occupancy shall be a month-to-month tenancy at a rent agreed upon by Landlord and Tenant, but in no

event less than the greater of (i) one hundred fifty percent (150%) of the Monthly Rent and Additional Rent payable under this Lease during the last full month prior to the date of the expiration of this Lease or (ii) the then fair market rental (as reasonably determined by Landlord) for the Premises. Except as provided in the preceding sentence, the month-to-month tenancy shall be on the terms and conditions of this Lease, except that any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in the Building contained in this Lease shall be deemed to have terminated and shall be inapplicable thereto. Landlord’s acceptance of rent after such holding over with Landlord’s written consent shall not result in any other tenancy or in a renewal of the original term of this Lease. If Tenant remains in possession of the Premises after the expiration or earlier termination of this Lease without Landlord’s consent, Tenant’s continued possession shall be on the basis of a tenancy at sufferance and Tenant shall pay as Monthly Rent during the holdover period an amount equal to the greater of (i) one hundred fifty percent (150%) of the fair market rental (as reasonably determined by Landlord) for the Premises or (ii) one hundred seventy-five percent (175%) of the Monthly Rent and Additional Rent payable under this Lease for the last full month prior to the date of such expiration or termination.

c. Indemnification . Tenant shall indemnify, defend and hold Landlord harmless from and against all Claims incurred by or asserted against Landlord and arising directly or indirectly from Tenant’s failure to timely surrender the Premises upon the expiration or earlier termination of this Lease, including but not limited to (i) any rent payable by or any loss, cost, or damages, including lost profits, claimed by any prospective tenant of the Premises or any portion thereof, and (ii) Landlord’s damages as a result of such prospective tenant rescinding or refusing to enter into the prospective lease of the Premises or any portion thereof by reason of such failure to timely surrender the Premises.

21. Subordination and Attornment.

This Lease is expressly made subject and subordinate to any mortgage, deed of trust, ground lease, underlying lease or like encumbrance affecting any part of the Real Property or any interest of Landlord therein which is now existing or hereafter executed or recorded, any present or future modification, amendment or supplement to any of the foregoing, and to any advances made thereunder (any of the foregoing being a “ Superior Interest ”) without the necessity of any further documentation evidencing such subordination. Notwithstanding the foregoing, Tenant shall, within fifteen (15) days after Landlord’s request, execute and deliver to Landlord a commercially reasonable document evidencing the subordination of this Lease to a particular Superior Interest. If the interest of Landlord in the Real Property or the Building is transferred to any person (“ Purchaser ”) pursuant to or in lieu of foreclosure or other proceedings for enforcement of any Superior Interest, Tenant shall immediately attorn to the Purchaser, and this Lease shall continue in full force and effect as a direct lease between the Purchaser and Tenant on the terms and conditions set forth herein, provided that Purchaser acquires and accepts the Real Property or the Building subject to this Lease. Upon Purchaser’s request, including any such request made by reason of the termination of this Lease as a result of such foreclosure or other proceedings, Tenant shall enter in to a new lease with Purchaser on the terms and conditions of this Lease applicable to the remainder of the term hereof and otherwise in form and substance reasonably acceptable to Tenant. Notwithstanding the subordination of this Lease to Superior Interests as set forth above, the holder of any Superior Interest may at any time (including as part of foreclosure or other proceedings for enforcement of such Superior Interest), upon written notice to Tenant, elect to have this Lease be prior and superior to such Superior Interest. Upon Tenant’s written request, Landlord agrees to use reasonable efforts to obtain a non-disturbance agreement from any existing Superior Interest using such Superior Interest’s standard form non-disturbance agreement and shall also use reasonable efforts to obtain such a non-disturbance

agreement in the event this Lease is subordinated to any deed of trust or mortgage hereafter placed against or affecting any or all of the Building or the Premises; provided that all costs associated with obtaining such non-disturbance agreement shall be paid by Tenant.

22. Financing Condition .

If any lender or ground lessor that intends to acquire an interest in, or holds a mortgage, ground lease or deed of trust encumbering any portion of the Real Property should require either the execution by Tenant of an agreement requiring Tenant to send such lender written notice of any default by Landlord under this Lease (the “ Lender Notice ”), giving such lender forty-five (45) days following Tenant’s delivery of the Lender’s Notice to the address for lender most recently provided to Tenant in writing, the right to cure such default, and preventing Tenant from terminating this Lease (to the extent such termination right would otherwise be available) unless such default remains uncured for such forty-five (45) day period, then Tenant agrees that it shall, within fifteen (15) days after Landlord’s request, execute and deliver such agreement and modify this Lease as reasonably required by such lender or ground lessor and in a commercially reasonable form; provided, however, that no such modification shall affect the length of the term, increase the rent payable by Tenant under Paragraphs 5 and 7, otherwise increase Tenant’s obligations under this Lease, or decrease Tenant’s rights under this Lease.

23. Entry by Landlord .

Landlord may, at any and all reasonable times but on no less than twenty-four (24) hours’ prior notice except in cases of emergency or when necessary to implement mechanical adjustments to the Building systems, enter the Premises to (a) inspect the same and to determine whether Tenant is in compliance with its obligations hereunder, (b) supply janitorial and any other service Landlord is required to provide hereunder, (c) show the Premises to prospective lenders or purchasers or, within the last six (6) months of the term of this Lease, tenants, (d) post notices of nonresponsibility, and (e) make such repairs and maintenance to the Premises or any other portion of the Real Property as is Landlord’s obligation under this Lease. In connection with any such maintenance or repair, Landlord may erect in the Premises or elsewhere in the Real Property scaffolding and other structures reasonably required for the work to be performed. Provided Landlord uses reasonable efforts to minimize interference with Tenant’s use and occupancy of the Premises and access to and from the Premises, which reasonable efforts shall not require Landlord to incur additional expense, in no event shall such entry or work entitle Tenant to an abatement of rent, constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability, including, but not limited to, consequential damages or loss of business or profits by Tenant. Landlord shall at all times retain a key with which to unlock all of the doors in the Premises, except Tenant’s vaults and safes. If an emergency necessitates immediate access to the Premises, Landlord may use whatever force is necessary to enter the Premises and any such entry to the Premises shall not constitute a forcible or unlawful entry into the Premises, a detainer of the Premises, or an eviction of Tenant from the Premises, or any portion thereof.

24. Insolvency or Bankruptcy .

The occurrence of any of the following shall constitute an Event of Default under Paragraph 25 below:

a. Tenant ceases doing business as a going concern, makes an assignment for the benefit of creditors, is adjudicated an insolvent, files a petition (or files an answer admitting the material allegations of such petition) seeking for Tenant any reorganization, arrangement, composition,

readjustment, liquidation, dissolution or similar arrangement under any state or federal bankruptcy or other law, or Tenant consents to or acquiesces in the appointment, pursuant to any state or federal bankruptcy or other law, of a trustee, receiver or liquidator for the Premises, for Tenant or for all or any substantial part of Tenant’s assets; or

b. Tenant fails within sixty (60) days after the commencement of any proceedings against Tenant seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any state or federal bankruptcy or other Legal Requirement, to have such proceedings dismissed, or Tenant fails, within sixty (60) days after an appointment pursuant to any state or federal bankruptcy or other Legal Requirement without Tenant’s consent or acquiescence, of any trustee, receiver or liquidator for the Premises, for Tenant or for all or any substantial part of Tenant’s assets, to have such appointment vacated; or

c. Tenant in unable, or admits in writing its inability, to pay its debts as they mature; or

d. Tenant gives notice to any governmental body of its insolvency or pending insolvency, or of its suspension or pending suspension of operations.

In no event shall this Lease be assigned or assignable by reason of any voluntary or involuntary bankruptcy, insolvency or reorganization proceedings, nor shall any rights or privileges hereunder be an asset of Tenant, the trustee, debtor-in-possession, or the debtor’s estate in any bankruptcy, insolvency or reorganization proceedings.

25. Default and Remedies .

a. Events of Default . The occurrence of any of the following shall constitute an “ Event of Default ” by Tenant:

1. Tenant fails to pay when due Monthly Rent and such failure is not cured within three (3) days; provided that the first one (1) time (and only the first one (1) time) in any twelve (12) consecutive month period during the term of this Lease that Tenant fails to pay Monthly Rent within such three (3) day period shall constitute an Event of Default only if such failure is not cured within two (2) days after receipt by Tenant of notice from Landlord that such Monthly Rent was not timely paid;

2. Tenant fails to pay when due Additional Rent or any other rent when due hereunder and such failure is not cured within five (5) days after receipt by Tenant of notice from Landlord that any such amount is due and payable; or

3. Intentionally omitted; or

4. Tenant fails to deliver any estoppel certificate pursuant to Paragraph 29 below, subordination agreement pursuant to Paragraph 21 above, or document required pursuant to Paragraph 22 above, within the applicable period set forth therein; or

5. Tenant violates the bankruptcy and insolvency provisions of Paragraph 24 above; or

6. Intentionally omitted; or

7. Tenant assigns this Lease or subleases any portion of the Premises in violation of Paragraph 13 above; or

8. Intentionally omitted; or

9. Tenant fails to comply with any other provision of this Lease within ten (10) days following receipt by Tenant of notice of such failure from Landlord.

b. Remedies .

Upon the occurrence of an Event of Default Landlord shall have the following remedies, which shall not be exclusive but shall be cumulative and shall be in addition to any other remedies now or hereafter allowed by law:

1. Landlord may terminate Tenant’s right to possession of the Premises at any time by written notice to Tenant. Tenant expressly acknowledges that in the absence of such written notice from Landlord, no other act of Landlord, including, but not limited to, its re-entry into the Premises, its efforts to relet the Premises, its reletting of the Premises for Tenant’s account, its storage of Tenant’s personal property and trade fixtures, its acceptance of keys to the Premises from Tenant, its appointment of a receiver, or its exercise of any other rights and remedies under this Paragraph 25 or otherwise at law, shall constitute an acceptance of Tenant’s surrender of the Premises or constitute a termination of this Lease or of Tenant’s right to possession of the Premises.

Upon such termination in writing of Tenant’s right to possession of the Premises, this Lease shall terminate and Landlord shall be entitled to recover damages from Tenant as provided in California Civil Code Section 1951.2 or any other applicable existing or future Legal Requirement providing for recovery of damages for such breach, including but not limited to the following:

(i) The reasonable cost of recovering the Premises; plus

(ii) The reasonable cost of removing Tenant’s Alterations, trade fixtures and improvements; plus

(iii) All unpaid rent due or earned hereunder prior to the date of termination, less the proceeds of any reletting or any rental received from subtenants prior to the date of termination applied as provided in Paragraph 25.b.2. below, together with interest at the Interest Rate, on such sums from the date such rent is due and payable until the date of the award of damages; plus

(iv) The amount by which the rent which would be payable by Tenant hereunder, including Additional Rent under Paragraph 7 above, as reasonably estimated by Landlord, from the date of termination until the date of the award of damages, exceeds the amount of such rental loss as Tenant proves could have been reasonably avoided, together with interest at the Interest Rate on such sums from the date such rent is due and payable until the date of the award of damages; plus

(v) The amount by which the rent which would be payable by Tenant hereunder, including Additional Rent under Paragraph 7 above, as reasonably estimated by Landlord, for the remainder of the then term, after the date of the award of damages exceeds the amount such rental loss as Tenant proves could have been reasonably avoided, discounted at the discount rate published by the Federal Reserve Bank of San Francisco for member banks at the time of the award plus one percent (1%); plus

(vi) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law, including without limitation any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.

2. Landlord has the remedy described in California Civil Code Section 1951.4 (a landlord may continue the lease in effect after the tenant’s breach and abandonment and recover rent as it becomes due, if the tenant has the right to sublet and assign subject only to reasonable limitations), and may continue this Lease in full force and effect and may enforce all of its rights and remedies under this Lease, including, but not limited to, the right to recover rent as it becomes due. After the occurrence of an Event of Default, Landlord may enter the Premises without terminating this Lease and sublet all or any part of the Premises for Tenant’s account to any person, for such term (which may be a period beyond the remaining term of this Lease), at such rents and on such other terms and conditions as Landlord deems advisable. In the event of any such subletting, rents received by Landlord from such subletting shall be applied (i) first, to the payment of the costs of maintaining, preserving, altering and preparing the Premises for subletting, the other costs of subletting, including but not limited to brokers’ commissions, attorneys’ fees and expenses of removal of Tenant’s personal property, trade fixtures and Alterations; (ii) second, to the payment of rent then due and payable hereunder; (iii) third, to the payment of future rent as the same may become due and payable hereunder; (iv) fourth, the balance, if any, shall be paid to Tenant upon (but not before) expiration of the term of this Lease. If the rents received by Landlord from such subletting, after application as provided above, are insufficient in any month to pay the rent due and payable hereunder for such month, Tenant shall pay such deficiency to Landlord monthly upon demand. Notwithstanding any such subletting for Tenant’s account without termination, Landlord may at any time thereafter, by written notice to Tenant, elect to terminate this Lease by virtue of a previous Event of Default.

During the continuance of an Event of Default, for so long as Landlord does not terminate Tenant’s right to possession of the Premises and subject to Paragraph 13, entitled Assignment and Subletting, and the options granted to Landlord thereunder, Landlord shall not unreasonably withhold its consent to an assignment or sublease of Tenant’s interest in the Premises or in this Lease.

3. During the continuance of an Event of Default, Landlord may enter the Premises without terminating this Lease and remove all Tenant’s personal property, Alterations and trade fixtures from the Premises and store them at Tenant’s risk and expense. If Landlord removes such property from the Premises and stores it at Tenant’s risk and expense, and if Tenant fails to pay the cost of such removal and storage after written demand therefor and/or to pay any rent then due, then after the property has been stored for a period of thirty (30) days or more Landlord may sell such property at public or private sale, in the manner and at such times and places as Landlord deems commercially reasonable following reasonable notice to Tenant of the time and place of such sale. The proceeds of any such sale shall be applied first to the payment of the expenses for removal and storage of the property, the preparation for and the conducting of such sale, and for attorneys’ fees and other legal expenses incurred by Landlord in connection therewith, and the balance shall be applied as provided in Paragraph 25.b.2. above.

Tenant hereby waives all claims for damages that may be caused by Landlord’s reentering and taking possession of the Premises or removing and storing Tenant’s personal property pursuant to this Paragraph 25, and Tenant shall indemnify, defend and hold Landlord harmless from and against any and all Claims resulting from such act. No reentry by Landlord shall constitute or be construed as a forcible entry by Landlord.

4. Landlord may require Tenant to remove any and all Alterations from the Premises or, if Tenant fails to do so within ten (10) days after Landlord’s request, Landlord may do so at Tenant’s expense.

5. Landlord may cure the Event of Default at Tenant’s expense, it being understood that such performance shall not waive or cure the subject Event of Default. If Landlord pays any sum or incurs any expense in curing the Event of Default, Tenant shall reimburse Landlord upon demand for the amount of such payment or expense with interest at the Interest Rate from the date the sum is paid or the expense is incurred until Landlord is reimbursed by Tenant. Any amount due Landlord under this subsection shall constitute additional rent hereunder.

c. Waiver of Redemption . Tenant hereby waives, for itself and all persons claiming by and under Tenant, all rights and privileges which it might have under any present or future Legal Requirement to redeem the Premises or to continue this Lease after being dispossessed or ejected from the Premises.

26. Damage or Destruction.

If all or any part of the Premises or any material portion of the balance of the Real Property is damaged by fire or other casualty, Landlord, as soon as reasonably practicable following the fire or other casualty, shall notify Tenant the timing, in Landlord’s reasonable opinion, for repair of the damage. If the damage can, in Landlord’s reasonable opinion, be repaired within sixty (60) days of the damage, then Landlord shall repair the damage and this Lease shall remain in full force and effect. If the repairs cannot, in Landlord’s reasonable opinion, be made within the sixty (60)-day period, Landlord, at its option exercised by written notice to Tenant within the sixty (60)-day period, shall either (a) repair the damage, in which event this Lease shall continue in full force and effect, or (b) terminate this Lease as of the date specified by Landlord in the notice, which date shall be not less than thirty (30) days nor more than sixty (60) days after the date such notice is given, and this Lease shall terminate on the date specified in Landlord’s notice. Notwithstanding anything to the contrary herein, if Landlord’s notice to Tenant estimates that the damage cannot, in Landlord’s reasonable opinion, be made within the period that ends two hundred seventy (270) days after the date of damage and if the damage did not result from the negligence or willful misconduct of Tenant or any other Tenant Party, then Tenant shall have the option to be exercised by written notice to Landlord, delivered within ten (10) days of Landlord’s notice to Tenant, to terminate this Lease as of the date specified by Tenant in its notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given, and this Lease shall terminate on the date specified in Tenant’s notice.

If the fire or other casualty damages the Premises or the common areas of the Real Property necessary for Tenant’s use and occupancy of the Premises, Tenant ceases to use any portion of the Premises as a result of such damage, and the damage does not result from the negligence or willful misconduct of Tenant or any other Tenant Parties, then during the period the Premises or portion thereof are rendered unusable by such damage and repair, Tenant’s Monthly Rent and Additional Rent under Paragraphs 5 and 7 above shall be proportionately reduced based upon the extent to which the damage

and repair prevents Tenant from conducting, and Tenant does not conduct, its business at the Premises and the extent to which any damage to the common areas of the Real Property materially interferes with Tenant’s use and occupancy of the Premises. Landlord shall not be obligated to repair or replace any of Tenant’s movable furniture, equipment, trade fixtures, and other personal property, nor any Alterations installed in the Premises by Tenant, and no damage to any of the foregoing shall entitle Tenant to any abatement. Tenant shall have the right, except as provided below, to elect not to repair or replace such items, but all Alterations installed in the Premises by Tenant that Tenant is otherwise obligated to surrender as provided in Paragraph 20 hereof at the expiration or earlier termination of the Lease shall be repaired and replaced by Tenant at Tenant’s sole cost and expense. All such repair and replacement of Alterations shall be constructed in accordance with Paragraph 9 above regarding Alterations, except that Landlord’s consent shall not be required for any Alterations to which Landlord previously consented to the extent constructed in accordance with such prior consent.

A total destruction of the Building shall automatically terminate this Lease. In no event shall Tenant be entitled to any compensation or damages from Landlord for loss of use of the whole or any part of the Premises or for any inconvenience occasioned by any such destruction, rebuilding or restoration of the Premises, the Building or access thereto, except for the rent abatement expressly provided above. Tenant hereby waives California Civil Code Sections 1932(2) and 1933(4), providing for termination of hiring upon destruction of the thing hired and Sections 1941 and 1942, providing for repairs to and of premises.

27. Eminent Domain .

a. If all or any part of the Premises is taken by any public or quasi-public authority under the power of eminent domain, or any agreement in lieu thereof (a “ taking ”), this Lease shall terminate as to the portion of the Premises taken effective as of the date of taking. If only a portion of the Premises or any material portion of the balance of the Real Property materially necessary for Tenant’s use and occupancy of the Premises is taken, Landlord or Tenant may terminate this Lease as to the remainder of the Premises upon written notice to the other party within ninety (90) days after the taking. Landlord shall be entitled to all compensation, damages, income, rent awards and interest thereon whatsoever which may be paid or made in connection with any taking and Tenant shall have no claim against Landlord or any governmental authority for the value of any unexpired term of this Lease or of any of the improvements or Alterations, to the extent Tenant is otherwise obligated to surrender same as provided in Paragraph 20 hereof, in the Premises; provided, however, that the foregoing shall not prohibit Tenant from prosecuting a separate claim against the taking authority for an amount separately designated for Tenant’s relocation expenses or the interruption of or damage to Tenant’s business or as compensation for Tenant’s personal property, trade fixtures, Alterations that Tenant is not otherwise obligated to surrender as provided in Paragraph 20 hereof or other improvements paid for by Tenant so long as any award to Tenant will not reduce the award to Landlord.

In the event of a partial taking of the Premises which does not result in a termination of this Lease, the Monthly Rent and Additional Rent under Paragraphs 5 and 7 hereunder shall be equitably reduced. If all or any material part of the Real Property other than the Premises is taken, Landlord may terminate this Lease upon written notice to Tenant given within ninety (90) days after the date of taking.

b. Notwithstanding the foregoing, if all or any portion of the Premises is taken for a period of time of one (1) year or less ending prior to the end of the term of this Lease, this Lease shall remain in full force and effect and Tenant shall continue to pay all rent and to perform all of

its obligations under this Lease; provided, however, that Tenant shall be entitled to all compensation, damages, income, rent awards and interest thereon that is paid or made in connection with such temporary taking of the Premises (or portion thereof), except that any such compensation in excess of the rent or other amounts payable to Landlord hereunder shall be promptly paid over to Landlord as received. Landlord and Tenant each hereby waive the provisions of California Code of Civil Procedure Section 1265.130 and any other applicable existing or future Legal Requirement providing for, or allowing either party to petition the courts of the state in which the Real Property is located for, a termination of this Lease upon a partial taking of the Premises and/or the Building.

28. Landlord’s and Tenant’s Liability; Sale of Building .

The term “Landlord,” as used in this Lease, shall mean only the owner or owners of the Real Property at the time in question. Notwithstanding any other provision of this Lease, the liability of Landlord for its obligations under this Lease is limited solely to Landlord’s interest in the Real Property as the same may from time to time be encumbered, and no personal liability shall at any time be asserted or enforceable against any other assets of Landlord or against the constituent shareholders, partners, members, or other owners of Landlord, or the directors, officers, employees and agents of Landlord or such constituent shareholder, partner, member or other owner, on account of any of Landlord’s obligations or actions under this Lease. In addition, in the event of any conveyance of title to the Real Property, then, upon assumption by the grantee or transferee of all liability with respect to Landlord’s obligations to be performed under this Lease arising on and after such conveyance, the grantor or transferor shall be relieved of all liability with respect to Landlord’s obligations to be performed under this Lease after the date of such conveyance. In no event shall Landlord be deemed to be in default under this Lease unless Landlord fails to perform its obligations under this Lease, Tenant delivers to Landlord written notice specifying the nature of Landlord’s alleged default, and Landlord fails to cure such default within thirty (30) days following receipt of such notice (or, if the default cannot reasonably be cured within such period, to commence action within such thirty (30)-day period and proceed diligently thereafter to cure such default, in no event more than one hundred eighty (180) days in the aggregate). Upon any conveyance of fee title to the Real Property, the grantee or transferee shall be deemed to have assumed Landlord’s obligations to be performed under this Lease from and after the date of such conveyance, subject to the limitations on liability set forth above in this Paragraph 28. If Tenant provides Landlord with any security for Tenant’s performance of its obligations hereunder, Landlord shall transfer such security to the grantee or transferee of Landlord’s interest in the Real Property, and upon such transfer Landlord shall be released from any further responsibility or liability for such security. Any claim, defense or other right of Tenant arising in connection with this Lease shall be barred unless Tenant files an action or interposes a defense based thereon within three hundred sixty-five (365) days after the date of the alleged event on which Tenant is basing its claim, defense or right. Notwithstanding any other provision of this Lease, but not in limitation of the provisions of Paragraph 14 above, Landlord shall not be liable for any consequential damages or interruption or loss of business, income or profits, or claims of constructive eviction, nor shall Landlord be liable for loss of or damage to artwork, currency, jewelry, bullion, unique or valuable documents, securities or other valuables, or for other property not in the nature of ordinary fixtures, furnishings and equipment used in general administrative and executive office activities and functions. Wherever in this Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or limits any right of Tenant to assert any claim against Landlord or to seek recourse against any property of Landlord or (c) agrees to indemnify Landlord against any matters, the relevant release, waiver, limitation or indemnity shall run in favor of and apply to Landlord, the constituent shareholders, partners, members, or other owners of Landlord, and the directors, officers, employees and agents of Landlord and each such constituent shareholder, partner, member or other owner.

No personal liability shall at any time be asserted or enforceable against the constituent shareholders, partners, members, or other owners of Landlord, or the directors, officers, employees and agents of Landlord and each such constituent shareholder, partner, member or other owner on account of any of Landlord’s obligations or actions under this Lease. No personal liability shall at any time be asserted or enforceable against the constituent shareholders, partners, members, or other owners of Tenant, or the directors, officers, employees and agents of Tenant and each such constituent shareholder, partner, member or other owner on account of any of Tenant’s obligations or actions under this Lease

29. Estoppel Certificates .

At any time and from time to time, upon not less than ten (10) Business Days’ prior notice from a party to this Lease, Landlord or Tenant, as the case may be, shall execute, acknowledge and deliver to the requesting party a statement certifying the commencement date of this Lease, stating that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and the date and nature of each such modification), that Landlord is not in default under this Lease (or, if Landlord is in default, specifying the nature of such default), that Tenant is not in default under this Lease (or, if Tenant is in default, specifying the nature of such default), the current amounts of and the dates to which the Monthly Rent and Additional Rent has been paid, and setting forth such other factual matters as may be reasonably requested by the requesting party. Any such statement may be conclusively relied upon by a prospective purchaser of the Real Property or by a lender obtaining a lien on the Real Property as security, or by a purchaser or financier of Tenant’s business or entity.

30. Right of Landlord to Perform .

Intentionally omitted.

31. Late Charge .

Tenant acknowledges that late payment of any installment of Monthly Rent or Additional Rent or any other amount required under this Lease will cause Landlord to incur costs not contemplated by this Lease and that the exact amount of such costs would be extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Real Property and the loss of the use of the delinquent funds. Therefore, if any installment of Monthly Rent or Additional Rent or any other amount due from Tenant is not received when due, Tenant shall pay to Landlord on demand, on account of the delinquent payment, an additional sum equal to the greater of (i) five percent (5%) of the overdue amount, or (ii) One Hundred Dollars ($100.00), which additional sum represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, nor prevent Landlord from exercising its right to collect interest as provided above, rent, or any other damages, or from exercising any of the other rights and remedies available to Landlord.

32. Attorneys’ Fees; Waiver of Jury Trial .

In the event of any action or proceeding between Landlord and Tenant (including an action or proceeding between Landlord and the trustee or debtor in possession while Tenant is a debtor in a proceeding under any bankruptcy law) to enforce any provision of this Lease, the losing party shall pay to the prevailing party all costs and expenses, including, without limitation, reasonable attorneys’ fees and

expenses, incurred in such action and in any appeal in connection therewith by such prevailing party. The “prevailing party” will be determined by the court before whom the action was brought based upon an assessment of which party’s major arguments or positions taken in the suit or proceeding could fairly be said to have prevailed over the other party’s major arguments or positions on major disputed issues in the court’s decision. Notwithstanding the foregoing, however, Landlord shall be deemed the prevailing party in any unlawful detainer or other action or proceeding instituted by Landlord based upon any default or alleged default of Tenant hereunder if (i) judgment is entered in favor of Landlord, or (ii) prior to trial or judgment Tenant pays all or any portion of the rent claimed by Landlord, vacates the Premises, or otherwise cures the default claimed by Landlord.

If Landlord becomes involved in any litigation or dispute, threatened or actual, by or against anyone not a party to this Lease, but arising by reason of or related to any act or omission of Tenant or any Tenant Party, Tenant agrees to pay Landlord’s reasonable attorneys’ fees and other costs incurred in connection with the litigation or dispute, regardless of whether a lawsuit is actually filed.

IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL. Landlord and Tenant agree that this paragraph constitutes a written consent to waiver of trial by jury within the meaning of California Code of Civil Procedure Section 631(a)(2), and Tenant does hereby authorize and empower Landlord to file this paragraph and/or this Lease, as required, with the clerk or judge of any court of competent jurisdiction as a written consent to waiver of jury trial.

33. Waiver .

No provisions of this Lease shall be deemed waived by Landlord or Tenant unless such waiver is in a writing signed by the waiving party. The waiver by a party of any breach of any provision of this Lease shall not be deemed a waiver of any subsequent breach of the same or any other provision of this Lease. No delay or omission in the exercise of any right or remedy of Landlord or Tenant upon any default by the other party shall impair such right or remedy or be construed as a waiver. Landlord’s acceptance of any payments of rent due under this Lease shall not be deemed a waiver of any default by Tenant under this Lease (including Tenant’s recurrent failure to timely pay rent) other than Tenant’s nonpayment of the accepted sums, and no endorsement or statement on any check or accompanying any check or payment shall be deemed an accord and satisfaction. Neither Landlord’s nor Tenant’s consent to or approval of any act by the other party requiring Landlord’s or Tenant’s consent or approval, as may be applicable, shall be deemed to waive or render unnecessary Landlord’s or Tenant’s consent to or approval of any subsequent act by the other party.

34. Notices .

All notices and demands which may or are required to be given by either party to the other hereunder shall be in writing. All notices and demands by Landlord to Tenant shall be delivered personally or sent by United States mail, postage prepaid, or by any reputable overnight or same-day courier, addressed to Tenant at 188 Spear Street, Suite 1200, San Francisco, California 94105, or to such other place as Tenant may from time to time designate by notice to Landlord hereunder. All notices and demands by Tenant to Landlord shall be sent by United States mail, postage prepaid, or by any reputable overnight or same-day courier, addressed to Landlord in care of Pacific Eagle Holdings, 353 Sacramento

Street, Suite 1788, San Francisco, California 94111, Attn: Legal Department, with a copy to the management office of the Building, or to such other place as Landlord may from time to time designate by notice to Tenant hereunder. Notices delivered personally or sent same-day courier will be effective immediately upon delivery to the addressee at the designated address; notices sent by overnight courier will be effective one (1) Business Day after acceptance by the service for delivery; notices sent by mail will be effective two (2) Business Days after mailing. In the event Tenant requests multiple notices hereunder, Tenant will be bound by such notice from the earlier of the effective times of the multiple notices.

35. Notice of Surrender .

Intentionally omitted.

36. Defined Terms and Marginal Headings .

When required by the context of this Lease, the singular includes the plural. If more than one person or entity signs this Lease as Tenant, the obligations hereunder imposed upon Tenant shall be joint and several, and the act of, written notice to or from, refund to, or signature of, any Tenant signatory to this Lease (including, without limitation, modifications of this Lease made by fewer than all such Tenant signatories) shall bind every other Tenant signatory as though every other Tenant signatory had so acted, or received or given the written notice or refund, or signed. The headings and titles to the paragraphs of this Lease are for convenience only and are not to be used to interpret or construe this Lease. Wherever the term “including” or “includes” is used in this Lease it shall be construed as if followed by the phrase “without limitation.” Whenever in this Lease a right, option or privilege of Tenant is conditioned upon Tenant (or any affiliate thereof or successor thereto) being in “occupancy” of a specified portion or percentage of the Premises, for such purposes “occupancy” shall mean Tenant’s (or such affiliate’s or successor’s) physical occupancy of the space for the conduct of such party’s business, and shall not include any space that is subject to a sublease or that has been vacated by such party, other than a vacation of the space as reasonably necessary in connection with the performance of approved Alterations, pursuant to a valid assignment of this Lease or a valid sublet of all or a portion of the Premises provided that such vacation does not exceed thirty (30) days, or by reason of a fire or other casualty or a taking. The language in all parts of this Lease shall in all cases be construed as a whole and in accordance with its fair meaning and not construed for or against any party simply because one party was the drafter thereof.

37. Time and Applicable Law .

Time is of the essence of this Lease and of each and all of its provisions. This Lease shall be governed by and construed in accordance with the laws of the State of California, and the venue of any action or proceeding under this Lease shall be the City and County of San Francisco, California.

38. Successors .

Subject to the provisions of Paragraphs 13 and 28 above, the covenants and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, executors, administrators and assigns.

39. Entire Agreement; Modifications .

This Lease (including any exhibit, rider or attachment hereto) constitutes the entire agreement between Landlord and Tenant with respect to Tenant’s lease of the Premises. No provision of this Lease may be amended or otherwise modified except by an agreement in writing signed by the parties hereto. Neither Landlord nor Landlord’s agents have made any representations or warranties with respect to the Premises, the Building, the Real Property or this Lease except as expressly set forth herein, including without limitation any representations or warranties as to the suitability or fitness of the Premises for the conduct of Tenant’s business or for any other purpose, nor has Landlord or its agents agreed to undertake any alterations or construct any improvements to the Premises except those, if any, expressly provided in this Lease, and no rights, easements or licenses shall be acquired by Tenant by implication or otherwise unless expressly set forth herein. Neither this Lease nor any memorandum hereof shall be recorded by Tenant.

40. Light and Air .

Tenant agrees that no diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any liability of Landlord to Tenant, or in any other way affect this Lease.

41. Name of Building .

Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises without the written consent of Landlord. Landlord reserves the right to change the name of the Building at any time in its sole discretion by written notice to Tenant and Landlord shall not be liable to Tenant for any loss, cost or expense on account of any such change of name.

42. Severability .

If any provision of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

43. Authority .

If Tenant is a corporation, partnership, trust, association or other entity, Tenant hereby covenants and warrants that (a) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation, (b) Tenant has and is duly qualified to do business in the state in which the Real Property is located, (c) Tenant has full corporate, partnership, trust, association or other appropriate power and authority to enter into this Lease and to perform all Tenant’s obligations hereunder, and (d) each person (and all of the persons if more than one signs) signing this Lease on behalf of Tenant is duly and validly authorized to do so. Landlord hereby covenants and warrants that (a) Landlord is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation, (b) Landlord has and is duly qualified to do business in the state in which the Real Property is located, (c) Landlord has full corporate, partnership, trust, association or other appropriate power and authority to enter into this Lease and to perform all Landlord’s obligations hereunder, and (d) each person (and all of the persons if more than one signs) signing this Lease on behalf of Landlord is duly and validly authorized to do so.

44. No Offer .

Submission of this instrument for examination and signature by Tenant does not constitute an offer to lease or a reservation of or option for lease, and is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.

45. Real Estate Brokers .

Tenant represents and warrants that it has negotiated this Lease directly with the real estate broker(s) identified in Paragraph 2 and has not authorized or employed, or acted by implication to authorize or to employ, any other real estate broker or salesman to act for Tenant in connection with this Lease. Landlord shall pay commissions to the real estate broker(s) identified in Paragraph 2 pursuant to separate agreement. Landlord and Tenant shall each indemnify, defend and hold the other party harmless from and against any and all Claims by any real estate broker or salesman other than the real estate broker(s) identified in Paragraph 2 for a commission, finder’s fee or other compensation as a result of Landlord and Tenant entering into this Lease.

46. Consents and Approvals .

Wherever the consent, approval, judgment or determination of Landlord is required or permitted under this Lease, Landlord shall not unreasonably withhold, condition or delay its consent unless the relevant provision provides that Landlord may exercise its sole discretion in granting or withholding such consent or approval or in making such judgment or determination without reference to any extrinsic standard of reasonableness. If it is determined that Landlord failed to give its consent or approval where it was required to do so under this Lease, Tenant’s sole remedy will be an order of specific performance or mandatory injunction of the Landlord’s agreement to give its consent or approval, together with actual damages incurred by Tenant, which shall not include consequential or special damages or loss of business or profits by Tenant. The review and/or approval by Landlord of any item shall not impose upon Landlord any liability for accuracy or sufficiency of any such item or the quality or suitability of such item for its intended use. Any such review or approval is for the sole purpose of protecting Landlord’s interest in the Real Property, and neither Tenant nor any Tenant Party nor any person or entity claiming by, through or under Tenant, nor any other third party shall have any rights hereunder by virtue of such review and/or approval by Landlord.

47. Reserved Rights .

Landlord retains and shall have the rights set forth below, exercisable without notice and without liability to Tenant for damage or injury to property, person or business and without effecting an eviction, constructive or actual, or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for rent abatement, subject to the terms and conditions of this Lease and only so long as Tenant’s rights under this Lease are not materially diminished nor Tenant’s obligations under this Lease materially increased:

a. To grant to anyone the exclusive right to conduct any business or render any service in or to the Building and its tenants, provided that such exclusive right shall not operate to require Tenant to use or patronize such business or service or to exclude Tenant from its use of the Premises expressly permitted herein.

b. To perform, or cause or permit to be performed, at any time and from time to time, including during Business Hours, construction in the common areas and facilities or other leased areas in the Real Property.

c. To reduce, increase, enclose or otherwise change at any time and from time to time the size, number, location, lay-out and nature of the common areas and facilities and other tenancies and premises in the Real Property and to create additional rentable areas through use or enclosure of common areas.

48. Financial Statements .

Upon submission of this Lease to Landlord and at any time thereafter when Tenant’s financial statements are not readily and publicly available to Landlord, within thirty (30) days after Landlord’s request therefor, which request shall not be made more than once per calendar year during the term of this Lease, Tenant shall furnish to Landlord copies of true and accurate financial statements reflecting Tenant’s then current financial situation (including without limitation balance sheets, statements of profit and loss, and changes in financial condition), Tenant’s most recent audited or certified annual financial statements, and Tenant’s federal income tax returns pertaining to Tenant’s business, and in addition shall cause to be furnished to Landlord similar financial statements and tax returns for any guarantor(s) of this Lease. Tenant agrees to deliver to any lender, prospective lender, purchaser or prospective purchaser designated by Landlord such financial statements of Tenant as may be reasonably requested by such lender or purchaser.

49. Substitution of Premises .

Intentionally omitted.

50. Nondisclosure of Lease Terms .

Tenant agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord, and that disclosure of the terms hereof could adversely affect the ability of Landlord to negotiate with other tenants. Tenant hereby agrees that Tenant and its partners, officers, directors and employees shall not, and Tenant shall use its best efforts to ensure that Tenant’s agents, real estate brokers and sales persons, and attorneys do not, disclose the terms of this Lease to any other person without Landlord’s prior written consent, except to any accountants of Tenant in connection with the preparation of Tenant’s financial statements or tax returns, to an assignee of this Lease or sublessee of the Premises, or to a financier of Tenant’s business, or to an entity or person to whom disclosure is required by applicable law or in connection with any action brought to enforce this Lease.

51. Hazardous Substance Disclosure .

California law requires landlords to disclose to tenants the existence of certain hazardous substances. Accordingly, the existence of gasoline and other automotive fluids, maintenance fluids, copying fluids and other office supplies and equipment, certain construction and finish materials, tobacco smoke, and cosmetics and other personal items, and asbestos-containing materials (“ ACM ”) must be disclosed. Gasoline and other automotive fluids are found in the garage area of the Building. Cleaning, lubricating and hydraulic fluids used in the operation and maintenance of the Building are found in the utility areas of the Building not generally accessible to Building occupants or the public. Many Building occupants use copy machines and printers with associated fluids and toners, and pens, markers, inks, and

office equipment that may contain hazardous substances. Certain adhesives, paints and other construction materials and finishes used in portions of the Building may contain hazardous substances. Although smoking is prohibited in the public areas of the Building, these areas may, from time to time, be exposed to tobacco smoke. Building occupants and other persons entering the Building from time-to-time may use or carry prescription and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some of which may contain hazardous substances. Landlord has made no special investigation of the Premises with respect to any hazardous substances.

52. Signage . Tenant may, at Tenant’s expense, install a custom sign identifying Tenant’s business at the entrance to the Premises and other custom signage within the Premises, provided that the design, size, color and location of such signage shall be subject to Landlord’s prior reasonable approval. Tenant shall be entitled, at no cost to Tenant, to have the name of Tenant’s company listed on the Tenant directory in the lobby of each multi-tenant floor (if any) on which any portion of the Premises is located. If, subsequent to the time Tenant’s name is initially listed on the directories, Tenant requests a change in Tenant’s name as printed thereon, Tenant shall pay Landlord’s standard charge as in effect from time to time for any such change. Landlord and Landlord’s architect shall work with Tenant to incorporate (and Tenant shall have the right to install and maintain) reasonable identity and branding for Tenant in the lobby of the Building consistent with other large users in the Building.

53. Quiet Enjoyment . If, and so long as, Tenant pays the Monthly Rent, Additional Rent and other rent hereunder and keeps, observes and performs each and every term, covenant and condition of this Lease on the part or on behalf of Tenant to be kept, observed and performed, Tenant shall peaceably and quietly enjoy the Premises throughout the term without hindrance by Landlord or any person lawfully claiming through or under Landlord, subject to the provisions of this Lease.

54. Telecommunications Equipment .

a. Limitation of Responsibility . Tenant acknowledges and agrees that all telephone and telecommunications services desired by Tenant shall be ordered and utilized at the sole cost and expense of Tenant. Unless Landlord otherwise requests or consents in writing, all of Tenant’s telecommunications equipment shall be and remain solely in the Tenant’s Premises and, in accordance with reasonable rules and regulations adopted by Landlord from time to time, the telephone closet(s) on the floor(s) on which the Premises is located, except that Tenant may utilize the Building’s risers, shafts conduits and similar areas as reasonably necessary for its wiring and cabling and other telecommunications equipment, subject to Landlord’s approval in accordance with Paragraph 9 above and subject to all other provisions of Paragraph 9 above applicable to Alterations. Landlord shall have no responsibility for the maintenance of Tenant’s telecommunications equipment, including wiring and cabling, nor for any wiring, cabling or other infrastructure to which Tenant’s telecommunications equipment may be connected. Without limitation of the provisions of Paragraph 17.e. above, Tenant agrees that to the extent any such service is interrupted, curtailed or discontinued, Landlord shall have no obligation or liability with respect thereto and it shall be the sole obligation of Tenant at its expense to obtain substitute service.

b. Necessary Service Interruptions . Without limitation of the provisions of Paragraph 17.e. above, Landlord shall have the right to interrupt or turn off telecommunications facilities in the event of emergency or, upon at least twenty-four (24) hours prior notice, as necessary in connection with repairs to the Building or installation of telecommunications equipment for other tenants of the Building. Landlord shall use its good faith efforts to minimize noise and disruption to Tenant’s business and access to the Premises by reason of the matters described in this Paragraph 54.b., and, without

limitation, Landlord shall perform any extraordinarily noisy or disruptive work after Business Hours or on weekends to the extent such procedures would be generally followed by managers of other first class high rise office buildings in the San Francisco financial district (except to the extent an emergency and/or Legal Requirements require otherwise, as determined by Landlord in good faith).

c. Removal of Equipment, Wiring and Other Facilities . Any and all telecommunications equipment installed in the Premises or elsewhere in the Building by or on behalf of Tenant, including wiring, cabling, or other facilities for telecommunications transmittal, shall be subject to Landlord’s approval in accordance with Paragraph 9 above, and shall be subject to all other provisions of Paragraph 9 above applicable to Alterations. All such equipment shall be removed prior to the expiration or earlier termination of the Lease term by Tenant at its sole cost. Landlord shall have the right, however, upon written notice to Tenant given no later than thirty (30) days prior to the expiration or earlier termination of the Lease term, to require Tenant to abandon and leave in place, without additional payment to Tenant or credit against rent, any and all telecommunications wiring, cabling and related infrastructure, or selected portions thereof, whether located in the Premises or elsewhere in the Building.

d. New Provider Installations . In the event that Tenant wishes at any time to utilize the services of a telephone or telecommunications provider, no such provider shall be permitted to install its lines or other equipment within the Building without first securing the prior written approval of the Landlord, which approval shall not be unreasonably withheld. Landlord’s approval shall not be deemed any kind of warranty or representation by Landlord, including without limitation, any warranty or representation as to the suitability, competence, or financial strength of the provider. Without limitation of the foregoing standard, unless all of the following conditions are satisfied to Landlord’s satisfaction, it shall be reasonable for Landlord to refuse to give its approval: (i) Landlord shall incur no expense whatsoever with respect to any aspect of the provider’s provision of its services, including without limitation, the costs of installation, materials and services; (ii) prior to commencement of any work in or about the Building by the provider, the provider shall supply Landlord with such written indemnities, insurance, financial statements, and such other items as Landlord reasonably determines to be necessary to protect its financial interests and the interests of the Building relating to the proposed activities of the provider; (iii) the provider agrees in writing to abide by such rules and regulations, building and other codes, job site rules and such other requirements as are reasonably determined by Landlord to be necessary to protect the interests of the Building, the tenants in the Building and Landlord; (iv) Landlord reasonably determines that there is sufficient space in the Building for the placement of all of the provider’s equipment and materials; (v) Landlord receives from the provider such compensation as is reasonably determined by Landlord to compensate it for space used in the Building for the storage and maintenance of the provider’s equipment if such space is not located in the Premises; and (vi) all of the foregoing matters are documented in a written agreement between Landlord and the provider, the form and content of which is reasonably satisfactory to Landlord.

55. Parking .

a. Commencing as of the Remainder Delivery Date, Landlord shall provide Tenant with valet-type parking for eighteen (18) automobiles in the garage of the Building; provided that, from and after the Suite 1100 Delivery Date until the Remainder Delivery Date, Tenant shall have the right to use parking for four (4) automobiles in the garage of the Building. Tenant shall pay for all parking at Landlord’s regular rate, currently $410.00 per automobile per month, or charge from time to time in effect for parking in the Building. Tenant shall provide Landlord with written notice of the names of each party to whom Tenant from time to time distributes Tenant’s parking rights hereunder (all of whom must be employees, partners, contractors, agents, subtenants, members and/or shareholders, as applicable, of

Tenant), and shall cause each such party to execute Landlord’s standard contract and waiver form for garage users. If the parking charge is not paid when due, and such failure continues for five (5) days after written notice thereof from Landlord to Tenant, Landlord may terminate Tenant’s rights under this Paragraph 55 as to the number of spaces as to which the parking charge has not been paid in full. Failure of Tenant to pay any parking charges when due shall not constitute an Event of Default under this Lease unless such failure continues beyond any applicable notice and cure period set forth in Paragraph 25 above. Tenant may transfer all or any of the parking rights set forth in this Paragraph 55 to any permitted assignee or subtenant of this Lease, but not to any other parties, and in no event shall the parking rights of Tenant hereunder be assigned separate and apart from this Lease. In the event of any assignment or sublease of parking space rights that is permitted hereunder or otherwise approved by Landlord (provided, however, that such approval may be granted or withheld by Landlord in its sole and absolute discretion), Landlord shall be entitled to receive fifty percent (50%) of any profit received by Tenant in connection with such assignment or sublease of the parking space rights. Further, if at any time during the term hereof, Tenant releases to Landlord any parking space provided for in this paragraph, then Tenant’s right under this paragraph to use such released parking space shall terminate for the balance of the term of this Lease.

b. At Landlord’s election from time to time, Landlord may alternate the parking made available hereunder between valet-type parking and self-parking, on an unassigned, non-exclusive and unlabeled basis. In addition, at Landlord’s election from time to time, Landlord may change the parking hereunder to self-parking on an assigned basis (subject to Landlord’s right from time to time thereafter to return to valet-type parking or unassigned self-parking). In any case where self-parking shall be in effect, the parking spaces to be made available to Tenant hereunder may contain a reasonable mix of spaces for compact cars. Landlord shall take reasonable actions to ensure the availability of the parking spaces leased by Tenant, but Landlord does not guarantee the availability of those spaces at all times against the actions of other tenants of the Building and users of the parking facility. Without limiting the foregoing, in no event shall this Lease be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage, nor shall there be any abatement of rent hereunder (other than the parking charge paid hereunder for any parking space no longer made available), by reason of any reduction in Tenant’s parking rights hereunder by reason of Force Majeure. Access to the parking spaces to be made available to Tenant shall, at Landlord’s option, be by card, pass, bumper sticker, decal or other appropriate identification issued by Landlord, and Tenant’s right to use the parking facility is conditioned on Tenant’s abiding by and shall otherwise be subject to such reasonable rules and regulations as may be promulgated by Landlord from time to time for the parking facility.

56. Option to Renew .

a. Option to Renew . Tenant shall have the option to renew this Lease for one (1) additional term of five (5) years (the “ Renewal Option ”), commencing upon the expiration of the initial term of this Lease. The renewal option must be exercised, if at all, by written notice (“ Election Notice ”) given by Tenant to Landlord not less than twelve (12) months nor more than fifteen (15) months prior to expiration of the initial term of this Lease. Notwithstanding the foregoing, at Landlord’s election, the renewal option shall be null and void and Tenant shall have no right to renew this Lease pursuant thereto if, on the date Tenant exercises the option or on the date immediately preceding the commencement of the renewal period, (i) the original Tenant named under this Lease or any Permitted Transferee thereof is not in actual physical possession and occupancy of fifty percent (50%) or more of the Premises; or (ii) an Event of Default shall have occurred and be continuing hereunder.

b. Terms and Conditions . If Tenant exercises the renewal option, then all of the terms and conditions set forth in this Lease as applicable to the Premises during the initial term shall apply during the renewal term, except that (i) Tenant shall have no further right to renew this Lease, (ii) Tenant shall take the Premises in their then “as-is” state and condition, (iii) the Monthly Rent payable by Tenant for the Premises shall be the then-Fair Market Rent for the Premises based upon the terms of this Lease, as renewed; (iv) the Base Year for the Premises shall be the calendar year in which the renewal term commences, and (v) the Base Tax Year shall be the fiscal tax year in which the renewal term commences. For purposes of this Lease, the term “ Fair Market Rent ” shall include the periodic rental increases, if any, that would be included for space leased for the period the space will be covered by the Lease and mean the rental rate for comparable space under primary lease (and not sublease) to renewal and new tenants (giving more weight to renewal tenancies), taking into consideration the quality and prestige of the Building and such amenities as existing improvements, view, floor on which the Premises are situated and the like, situated in comparable first-class, reputable, established high-rise office buildings in comparable locations in the San Francisco financial district, in comparable physical and economic condition, taking into consideration then prevailing ordinary rental market practices with respect to free rent periods, tenant improvement allowances and other tenant concessions (if any) (e.g., not offering extraordinary rental, promotional deals and other concessions to tenants which deviate from what is the then-prevailing ordinary practice in an effort to alleviate cash flow problems, difficulties in meeting loan obligations or other financial distress, or in response to a greater than average vacancy rate).

c. Landlord shall notify Tenant in writing (“ Renewal Rate Notice ”) of its determination of the Fair Market Rent for the renewal term within thirty (30) days after Landlord’s receipt of an Election Notice. Within fifteen (15) days of Tenant’s receipt of Landlord’s Renewal Rate Notice, Tenant shall notify Landlord as to one of the following: (a) Tenant’s acceptance of Landlord’s determination of the Fair Market Rent as set forth in the Renewal Rate Notice; (b) Tenant’s interest to engage in good faith negotiations about the Fair Market Rent; or (c) that Tenant cancels its Election Notice, in which event the Renewal Option shall be of no further force or effect. If during the fifteen (15) day notice period, Tenant notifies Landlord that Tenant is interested in engaging in good faith negotiations about the Fair Market Rent, Tenant and Landlord shall have thirty (30) days following receipt of Tenant’s notice to negotiate in good faith and agree as to the Fair Market Rent for the Premises. If Landlord and Tenant cannot agree on the Fair Market Rent by the end of the thirty (30) day good faith negotiation period, then within five (5) days thereafter Landlord and Tenant shall mutually select a licensed real estate broker with at least five (5) years’ active experience in the leasing of office space in the general vicinity of the Building who has not worked with either Landlord or Tenant in the past three (3) years. Landlord shall submit Landlord’s determination of Fair Market Rent (which may be different than the determination set forth in the Renewal Rate Notice) and Tenant shall submit Tenant’s determination of Fair Market Rent to such broker, at such time or times and in such manner as Landlord and Tenant shall agree (or as directed by the broker if Landlord and Tenant do not promptly agree). If the two determinations are within five percent (5%) of each other, then such determinations shall be averaged and such average shall constitute the Fair Market Rent. If the two determinations are not within five percent (5%) of each other, then the broker shall select either Landlord’s or Tenant’s determination as the Fair Market Rent, and such determination shall be binding on Landlord and Tenant. Landlord and Tenant shall split evenly the broker’s costs and fees.

57. Right of First Offer . Provided there is no Event of Default that shall have occurred and be continuing hereunder, and subject to the renewal or extension of any existing tenant (contractual or otherwise), Tenant shall have a one (1) time right of first offer (“ Right of First Offer ”) on the 9 ^th and 10 ^th floors of the Building (the “ ROFO Space ”), should such ROFO Space become vacant and available for lease during the term of this Lease. In the event that the ROFO Space becomes available for

lease during the term of this Lease, Landlord shall notify Tenant of such availability and the terms and conditions on which Landlord would lease the ROFO Space, including Landlord’s determination of the Fair Market Rent for the ROFO Space (a “ First Offer Proposal ”). Within ten (10) Business Days of Tenant’s receipt of a First Offer Proposal, Tenant shall notify Landlord as to one of the following (“ Tenant’s ROFO Notice ”): (a) Tenant’s acceptance of all or any portion (Tenant must lease full floors only) of the ROFO Space on the financial terms offered in the First Offer Proposal; (b) Tenant’s acceptance of all or any portion (Tenant must lease full floors only) of the ROFO Space and interest in engaging in good faith negotiations about the Fair Market Rent reflected in the First Offer Proposal; or (c) that Tenant declines the First Offer Proposal, in cancels its Election Notice, in which event the Right of First Offer shall be of no further force or effect. If during the ten (10) Business Day notice period, Tenant notifies Landlord that Tenant is interested in engaging in good faith negotiations about the Fair Market Rent reflected in the First Offer Proposal, Tenant and Landlord shall have thirty (30) days following receipt of Tenant’s ROFO Notice to negotiate in good faith and agree as to the Fair Market Rent for the ROFO Space. If Landlord and Tenant cannot agree on the Fair Market Rent for the ROFO Space by the end of the thirty (30) day good faith negotiation period, then within five (5) days thereafter Landlord and Tenant shall mutually select a licensed real estate broker with at least five (5) years’ active experience in the leasing of office space in the general vicinity of the Building who has not worked with either Landlord or Tenant in the past three (3) years. Landlord shall submit Landlord’s determination of Fair Market Rent for the ROFO Space (which may be different than the determination set forth in the First Offer Proposal) and Tenant shall submit Tenant’s determination of Fair Market Rent for the ROFO Space to such broker, at such time or times and in such manner as Landlord and Tenant shall agree (or as directed by the broker if Landlord and Tenant do not promptly agree). If the two determinations are within five percent (5%) of each other, then such determinations shall be averaged and such average shall constitute the Fair Market Rent for the ROFO Space. If the two determinations are not within five percent (5%) of each other, then the broker shall select either Landlord’s or Tenant’s determination as the Fair Market Rent for the ROFO Space, and such determination shall be binding on Landlord and Tenant. Landlord and Tenant shall split evenly the broker’s costs and fees. In the event that Tenant does not give Tenant’s ROFO Notice to Landlord within the time period set forth above, Tenant shall have no further right to lease the ROFO Space and Landlord shall be free to lease the ROFO Space to any other person or entity on any terms and conditions as Landlord in its sole discretion deems appropriate; provided, however that prior to leasing such ROFO Space to any party on terms that provide for an effective rental rate that is three percent (3%) or more below the effective rental rate set forth in the original First Offer Proposal or the terms are materially different from the terms set forth in the original First Offer Proposal, Landlord shall deliver a revised First Offer Proposal to Tenant in accordance with the terms of this Paragraph 57. If exercised and there is less than three (3) years of Lease Term remaining, Tenant’s Lease shall be extended for a term of three (3) years on the entire Premises at Fair Market Value. This Right of First Offer is personal to Tenant and may be exercised only if Tenant or any Permitted Transferee thereof is in actual physical possession and occupancy of fifty percent (50%) or more of the Premises.

THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set forth at the top of page 1 hereof.


Landlord: P ACIFIC M ISSION C ORPORATION , a Delaware corporation		Tenant: N EW R ELIC , I NC ., a Delaware corporation

By:	/s/ Joyce Yonce	By:	/s/ Mark J. Sachleben
Name:	Joyce Yonce	Name:	Mark J. Sachleben
Title:	Assistant Secretary	Title:	Chief Financial Officer

EXHIBIT A

OUTLINE OF PREMISES

PACIFIC MISSION CORPORATION

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Exhibit A-1

LOGO

Exhibit A-2

LOGO

Exhibit A-3

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Exhibit A-4

EXHIBIT B

RULES AND REGULATIONS

PACIFIC MISSION CORPORATION

1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building or any part of the Premises visible from the exterior of the Premises without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole discretion. Landlord shall have the right to remove, at Tenant’s expense and without notice to Tenant, any such sign, placard, picture, advertisement, name or notice that has not been approved by Landlord.

All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord.

If Landlord notifies Tenant in writing that Landlord objects to any curtains, blinds, shades or screens attached to or hung in or used in connection with any window or door of the Premises, such use of such curtains, blinds, shades or screens shall be removed immediately by Tenant. No awning shall be permitted on any part of the Premises.

2. No ice, drinking water, towel, barbering or bootblacking, shoeshining or repair services, or other similar services shall be provided to the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord.

3. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names therefrom.

4. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by any of the Tenant Parties or used by Tenant for any purpose other than for ingress to and egress from its Premises. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants. No tenant and no employees or invitees of any tenant shall go upon the roof of the Building.

5. Tenant shall not alter any lock or install any new or additional locks or any bolts on any interior or exterior door of the Premises without the prior written consent of Landlord.

6. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it.

7. Tenant shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord’s consent, not to be unreasonably withheld, conditioned or delayed.

Exhibit B-1

8. No furniture, freight or equipment of any kind shall be brought into the Building without the consent of Landlord and all moving of the same into or out of the Building shall be done at such time and in such manner as Landlord shall designate. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building and also the times and manner of moving the same in and out of the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on a platform of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property from any cause, and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. The elevator designated for freight by Landlord shall be available for use by all tenants in the Building during the hours and pursuant to such procedures as Landlord may determine from time to time. The persons employed to move Tenant’s equipment, material, furniture or other property in or out of the Building must be acceptable to Landlord. The moving company must be a locally recognized professional mover, whose primary business is the performing of relocation services, and must be bonded and fully insured. In no event shall Tenant employ any person or company whose presence may give rise to a labor or other disturbance in the Real Property. A certificate or other verification of such insurance must be received and approved by Landlord prior to the start of any moving operations. Insurance must be sufficient in Landlord’s sole opinion, to cover all personal liability, theft or damage to the Real Property, including, but not limited to, floor coverings, doors, walls, elevators, stairs, foliage and landscaping. Special care must be taken to prevent damage to foliage and landscaping during adverse weather. All moving operations shall be conducted at such times and in such a manner as Landlord shall direct, and all moving shall take place during non-business hours unless Landlord agrees in writing otherwise.

9. Tenant shall not employ any person or persons other than the janitor of Landlord for the purpose of cleaning the Premises, unless otherwise agreed to by Landlord. Except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the Building or the Premises. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness.

10. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. In no event shall Tenant keep, use, or permit to be used in the Premises or the Building any guns, firearm, explosive devices or ammunition.

11. No cooking shall be done or permitted by Tenant in the Premises, nor shall the Premises be used for the storage of merchandise, for washing clothes, for lodging, or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, however, Tenant may maintain and use microwave ovens and equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that Tenant shall (i) prevent the emission of any food or cooking odor from leaving the Premises, (ii) be solely responsible for cleaning the areas where such equipment is located and removing food-related waste from the Premises and the Building, or shall pay Landlord’s standard rate for such service as an addition to cleaning services ordinarily provided, (iii) maintain and use such areas solely for Tenant’s employees and business invitees, not as public facilities, and (iv) keep the Premises free of vermin and other pest infestation and shall exterminate, as needed, in a manner and through contractors reasonably approved by Landlord, preventing any emission of odors, due to extermination, from leaving the Premises. Notwithstanding clause (ii) above, Landlord shall, without special charge, empty and

Exhibit B-2

remove the contents of one (1) 15-gallon (or smaller) waste container from the food preparation area so long as such container is fully lined with, and the contents can be removed in, a waterproof plastic liner or bag, supplied by Tenant, which will prevent any leakage of food related waste or odors; provided, however, that if at any time Landlord must pay a premium or special charge to Landlord’s cleaning or scavenger contractors for the handling of food-related or so-called “wet” refuse, Landlord’s obligation to provide such removal, without special charge, shall cease.

12. Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline, or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by Landlord.

13. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced into the Premises and the Building. No boring or cutting for wires will be allowed without the prior consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior approval of Landlord.

14. Upon the expiration or earlier termination of the Lease, Tenant shall deliver to Landlord the keys of offices, rooms and toilet rooms which have been furnished by Landlord to Tenant and any copies of such keys which Tenant has made. In the event Tenant has lost any keys furnished by Landlord, Tenant shall pay Landlord for such keys.

15. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises, except to the extent and in the manner approved in advance by Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by the tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused.

16. No furniture, packages, supplies, equipment or merchandise will be received in the Building or carried up or down in the elevators, except between such hours and in such elevators as shall be designated by Landlord, which elevator usage shall be subject to the Building’s customary charge therefor as established from time to time by Landlord.

17. On Saturdays, Sundays and legal holidays, and on other days between the hours of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls, corridors, elevators or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the Building in charge and has a pass or is properly identified. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building.

18. Tenant shall be responsible for insuring that the doors of the Premises are closed and securely locked before leaving the Building and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before Tenant or Tenant’s employees leave the Building, and that all electricity, gas or air shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. Landlord shall not be responsible to Tenant for loss of property on the Premises, however occurring, or for any damage to the property of Tenant caused by the employees or independent contractors of Landlord or by any other person.

Exhibit B-3

19. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

20. The requirements of any tenant will be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee will admit any person (tenant or otherwise) to any office without specific instructions from Landlord.

21. No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the prior written consent of Landlord.

22. Subject to Tenant’s right of access to the Premises in accordance with Building security procedures, Landlord reserves the right to close and keep locked all entrance and exit doors of the Building on Saturdays, Sundays and legal holidays and on other days between the hours of 6:00 P.M. and 8:00 A.M., and during such further hours as Landlord may deem advisable for the adequate protection of the Building and the property of its tenants.

Exhibit B-4

EXHIBIT C

FORM OF LETTER OF CREDIT

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER

DATE:

ISSUING BANK:

SILICON VALLEY BANK

3003 TASMAN DRIVE

2ND FLOOR, MAIL SORT HF210

SANTA CLARA, CALIFORNIA 95054

BENEFICIARY:

APPLICANT:

NEW RELIC INC.

188 SPEAR STREET, SUITE 1200

SAN FRANCISCO, CA 94105


AMOUNT:		US$ ( AND /100 U.S. DOLLARS)

EXPIRATION DATE:		[ONE YEAR FROM L/C ISSUANCE]

LOCATION:		SANTA CLARA, CALIFORNIA

DEAR SIR/MADAM:

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

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

2.	BENEFICIARY’S DATED AND SIGNED STATEMENT, STATING ANY OF THE FOLLOWING:

(A) “WE HEREBY CERTIFY THAT BENEFICIARY IS ENTITLED TO DRAW UNDER SILICON VALLEY BANK LETTER OF CREDIT NO. SVBSF PURSUANT TO THE TERMS OF THE LEASE BETWEEN LESSOR AND LESSEE.”

(B)

“BENEFICIARY HAS RECEIVED A NOTICE FROM SILICON VALLEY BANK THAT ITS IRREVOCABLE LETTER OF CREDIT NUMBER SVBSF WILL NOT BE EXTENDED AND APPLICANT HAS FAILED TO PROVIDE A REPLACEMENT LETTER OF CREDIT SATISFACTORY TO BENEFICIARY WITHIN THIRTY (30) DAYS PRIOR TO THE CURRENT EXPIRATION DATE.”

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ALL THE DETAILS SET FORTH HEREIN IN THIS LETTER OF CREDIT DRAFT ARE APPROVED BY APPLICANT. IF THERE IS ANY DISCREPANCY BETWEEN THE DETAILS OF THIS LETTER OF CREDIT DRAFT AND THE LETTER OF CREDIT APPLICATION, BETWEEN APPLICANT AND SILICON VALLEY BANK, THE DETAILS HEREOF SHALL PREVAIL.

APPLICANT’S SIGNATURE(S)

DATE

PARTIAL DRAWS AND MULTIPLE PRESENTATIONS ARE ALLOWED.

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

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST 60 DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE SEND YOU A NOTICE BY REGISTERED MAIL OR OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND [INSERT FINAL EXPIRY DATE]

THIS LETTER OF CREDIT IS TRANSFERABLE ONE OR MORE TIMES, BUT IN EACH INSTANCE ONLY TO A SINGLE BENEFICIARY AS TRANSFEREE AND ONLY UP TO THE THEN AVAILABLE AMOUNT, ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN APPLICABLE LAW AND REGULATION, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U. S. DEPARTMENT OF TREASURY AND U. S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT AND ORIGINAL AMENDMENT(S), IF ANY, MUST BE SURRENDERED TO US AT OUR ADDRESS INDICATED IN THIS LETTER OF CREDIT TOGETHER WITH OUR TRANSFER FORM ATTACHED HERETO AS EXHIBIT “B” DULY EXECUTED. THE CORRECTNESS OF THE SIGNATURE AND TITLE OF THE PERSON SIGNING THE TRANSFER FORM MUST BE VERIFIED BY BENEFICIARY’S BANK. APPLICANT SHALL PAY OUR TRANSFER FEE OF ¹ ⁄ ₄ OF 1% OF THE TRANSFER AMOUNT (MINIMUM US$250.00) UNDER THIS LETTER OF CREDIT. EACH TRANSFER SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE LETTER OF CREDIT AND WE SHALL FORWARD THE ORIGINAL OF THE LETTER OF CREDIT SO ENDORSED TO THE TRANSFEREE.

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

DOCUMENTS MUST BE PRESENTED IN PERSON TO US AT OR FORWARDED TO US BY OVERNIGHT DELIVERY SERVICE TO: SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA CA 95054, ATTN: INTERNATIONAL DIVISION.

WE HEREBY AGREE WITH THE BENEFICIARY THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO US ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT.

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

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APPLICANT’S SIGNATURE(S)

DATE

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

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APPLICANT’S SIGNATURE(S)				DATE

EXHIBIT “A”




DATE:		REF. NO.

AT SIGHT OF THIS DRAFT

PAY TO THE ORDER OF		US$

USDOLLARS



DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, STANDBY LETTER OF CREDIT NUMBER NO. DATED

TO: SILICON VALLEY BANK
3003 TASMAN DRIVE
SANTA CLARA, CA 95054	(BENEFICIARY’S NAME)

	Authorized Signature

GUIDELINES TO PREPARE THE DRAFT

1.	DATE: ISSUANCE DATE OF DRAFT.

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

3.	PAY TO THE ORDER OF: NAME OF BENEFICIARY AS INDICATED IN THE L/C (MAKE SURE BENEFICIARY ENDORSES IT ON THE REVERSE SIDE).

4.	US$: AMOUNT OF DRAWING IN FIGURES.

5.	USDOLLARS: AMOUNT OF DRAWING IN WORDS.

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

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

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

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


IF YOU HAVE QUESTIONS RELATED TO THIS STANDBY LETTER OF CREDIT PLEASE CONTACT US AT .

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APPLICANT’S SIGNATURE(S)				DATE

EXHIBIT “B”

TRANSFER FORM

DATE:

TO: SILICON VALLEY BANK

3003 TASMAN DRIVE

SANTA CLARA, CA 95054

ATTN: GLOBAL FINANCIAL SERVICES

STANDBY LETTERS OF CREDIT

RE:	SILICON VALLEY BANK IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF009357

GENTLEMEN:

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



(NAME OF TRANSFEREE)

(ADDRESS)

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

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

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

SINCERELY,

(BENEFICIARY’S NAME)

(SIGNATURE OF BENEFICIARY)

(PRINTED NAME AND TITLE)

SIGNATURE AUTHENTICATED

THE NAME(S) TITLE(S), AND SIGNATURE(S) CONFORM TO THAT/THOSE ON FILE WITH US FOR THE COMPANY AND THE SIGNATURE(S) IS/ARE AUTHORIZED TO EXECUTE THIS INSTRUMENT.

(NAME OF BANK)

(ADDRESS OF BANK)

(CITY, STATE, ZIP CODE)

(AUTHORIZED SIGNATURE)

(PRINTED NAME AND TITLE)

(TELEPHONE NUMBER)

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APPLICANT’S SIGNATURE(S)				DATE

Exhibit 10.2

LOGO

May 11, 2015

Patrick Moran

188 Spear Street, Suite 1200

San Francisco, CA 94105

Re: Separation Agreement

Dear Patrick:

This letter agreement (the “ Agreement ”) confirms the agreement between you and New Relic, Inc. (the “ Company ”) concerning the terms of your voluntary resignation and separation from the Company and offers you the severance benefit we discussed in exchange for a release of claims.

1. Separation Date . Your resignation date and your employment termination date will be July 1, 2015 (the “ Separation Date ”). By signing below, you will also resign from your position of Chief Marketing Officer of the Company and from any other officer positions with the Company and all of its affiliated entities as of the Separation Date. You will be expected to perform your current duties, transition your work load, and provide other transition assistance as requested by the Company from the date of this letter until the Separation Date. The Company will continue to pay you your regular base salary and you will continue to participate in the employee benefit plans in which you are currently enrolled (subject to the terms and conditions of those benefit plans) through the Separation Date, subject to Sections 4 and 5 below.

2. Accrued Compensation . On the Separation Date, the Company will pay you all accrued salary, and all accrued and unused vacation, earned through the Separation Date, subject to standard payroll deductions and withholdings. In addition, the Company will pay you any earned incentive bonus for the fiscal quarter ending on June 30, 2015, in the amount and at the time such payment would normally be paid to you under the terms of your bonus program. The payments in this paragraph are not contingent on signing this Agreement.

3. Health Insurance. To the extent provided by the federal COBRA law or, if applicable, state insurance laws (collectively, “ COBRA ”), and by the Company’s current group health insurance policies, you will be eligible to continue your group health insurance benefits at your own expense after the Separation Date. Later, you may be able to convert to an individual policy through the provider of the Company’s health insurance, if you wish. You will be provided with a separate notice describing your rights and obligations under COBRA laws on or after the Separation Date. Your COBRA rights are not contingent on signing this Agreement.

4. Equity Awards. Vesting of your outstanding stock options and any other equity awards, if any (“ Equity Awards ”), will cease on the Separation Date. Except as provided in Section 5 below, your Equity Awards will continue to be governed by the terms of the applicable Equity Awards documents and are not contingent on signing this Agreement.

May 11, 2015

Patrick Moran

Page 2

5. Severance Benefit . Although the Company is not otherwise obligated to do so, if you timely return this fully signed and dated Agreement to the Company, and if you allow it to become effective, and if you comply fully with your obligations hereunder, and , if you sign the Separation Date Release attached hereto as Exhibit A on or within twenty-one (21) days after the Separation Date, and allow that release to become effective, and provided you resign from all positions you then-hold with the Company and any subsidiaries, the Company will amend your outstanding stock options, effective as of the Separation Date, such that you may exercise each of the vested stock options following your Separation Date until the earlier of (i) a Change in Control of the Company (as defined in the Company’s 2014 Equity Incentive Plan, as it may be amended from time to time), and (ii) January 15, 2016 (the “ Option Amendment ”). BY SIGNING THIS LETTER AGREEMENT, YOU ACKNOWLEDGE AND AGREE THAT ANY VESTED STOCK OPTIONS THAT WERE INCENTIVE STOCK OPTIONS UNDER APPLICABLE TAX LAW AS OF THE DATE OF GRANT WILL CONVERT TO NONSTATUTORY STOCK OPTIONS AS A RESULT OF THE OPTION AMENDMENT. You further acknowledge and agree that you will be required to make adequate provision for applicable income and employment tax withholdings in connection with the exercise of such nonstatutory stock options on and after that date.

6. No Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you have not earned, will not earn and will not receive from the Company any additional compensation, severance, or benefits on or after the Separation Date, with the exception of any vested right you may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account). By way of example, you acknowledge that you will not continue to vest in or earn any additional bonus, equity, incentive compensation, or commissions after the Separation Date.

7. Expense Reimbursements. You agree that, within thirty (30) days of the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice.

8. Return of Company Property . By no later than your Separation Date, you shall return to the Company all Company documents (and all copies thereof) and other Company property in your possession or control, including, but not limited to, Company files, notes, financial and operational information, customer lists and contact information, product and services information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, tables, handheld devices, and servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company and all reproductions thereof in whole or in part and in any medium. You agree that you will make a diligent search to locate any such documents, property and information within the timeframe

May 11, 2015

Patrick Moran

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referenced above. In addition, if you have used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any confidential or proprietary data, materials or information of the Company, then within five (5) business days after your Separation Date, you must provide the Company with a computer-useable copy of such information and then permanently delete and expunge such confidential or proprietary information from those systems without retaining any reproductions (in whole or in part); and you agree to provide the Company access to your system, as requested, to verify that the necessary copying and deletion is done. Your timely compliance with the provisions of this paragraph is a precondition to your receipt of the Option Amendment provided hereunder.

9. Proprietary Information Obligations. You acknowledge and reaffirm your obligations under your signed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit B for your reference.

10. Nondisparagement. You and the Company agree not to disparage one another in any manner reasonably likely to be harmful to each other or each of our business, business reputations, or personal reputations. You will also similarly not disparage the Company’s officers, directors, employees, shareholders or agents, you and the Company may respond accurately and fully to any request for information if required by legal process. Nothing in this Agreement shall preclude you from describing your accomplishments and responsibilities while employed at the Company to a prospective employer or for purposes of professional development.

11. No Admissions. The promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by either party to the other party, and neither party makes any such admission.

12. Cooperation and Assistance. You agree that you will not voluntarily provide assistance, information or advice, directly or indirectly (including through agents or attorneys), to any person or entity in connection with any claim or cause of action of any kind brought against the Company, nor shall you induce or encourage any person or entity to bring such claims. However, it will not violate this Agreement if you testify truthfully when required to do so by a valid subpoena or under similar compulsion of law. Further, you agree to voluntarily cooperate with the Company, if you have knowledge of facts relevant to any threatened or pending claim, investigation, audit or litigation against or by the Company, by making yourself reasonably available without further compensation for interviews with the Company or its legal counsel, preparing for and providing truthful and accurate deposition and trial testimony.

13. Release of Claims.

(a) General Release. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, insurers, affiliates, and assigns (collectively, “ Released Parties ”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date you sign this Agreement (collectively, “ Released Claims ”).

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(b) Scope of Release. The Released Claims include, but are not limited to: (i) all claims arising out of or in any way related to your employment with the Company, or the termination of that employment; (ii) all claims related to compensation or benefits from the Company, including salary, bonuses, commissions, vacation, paid time off, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ ADEA ”), the California Labor Code (as amended), and the California Fair Employment and Housing Act (as amended).

(c) Excluded Claims. Notwithstanding the foregoing, the following are not included in the Released Claims (“ Excluded Claims ”): (i) any rights or claims for indemnification you may have pursuant to any written indemnification agreement with the Company to which you are a party or under applicable law, or for coverage under any directors’ and officers’ insurance policy maintained by the Company applicable to you; (ii) any rights which cannot be waived as a matter of law; (iii) any rights you have to file or pursue a claim for workers’ compensation or unemployment insurance; and (iv) any claims for breach of this Agreement. In addition, nothing in this Agreement prevents you from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, the California Department of Fair Employment and Housing, or any other government agency, except that you acknowledge and agree that you hereby waive your right to any monetary benefits in connection with any such claim, charge or proceeding. You represent and warrant that, other than the Excluded Claims, you are not aware of any claims you have or might have against any of the Released Parties that are not included in the Released Claims.

(d) ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA, and that the consideration given for the waiver and release in this Section is in addition to anything of value to which you are already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (i) your waiver and release do not apply to any rights or claims that may arise after the date that you sign this Agreement; (ii) you should consult with an attorney prior to signing this Agreement (although you may choose voluntarily not to do so); (iii) you have twenty-one (21) days to consider this Agreement (although you may choose voluntarily to sign it earlier); (iv) you have seven (7) days following the date you sign this Agreement to revoke it (by providing written notice of your revocation to me); and (v) this Agreement will not be effective until the later of 1) your Separation Date, or 2) the date upon which the revocation period has expired, which will be the eighth day after the date that this Agreement is signed by you provided that you do not revoke it (“ Effective Date ”).

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14. Waiver of Unknown Claims. In giving the releases set forth in this Agreement, which include claims which may be unknown to you at present, you acknowledge that you have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” You hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to your release of claims herein, including but not limited to the release of unknown and unsuspected claims.

15. Representations. You hereby represent that you have been paid all compensation owed and for all hours worked, you have received all the leave and leave benefits and protections for which you are eligible pursuant to the federal Family and Medical Leave Act, the California Family Rights Act, or otherwise, and you have not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim.

16. Miscellaneous. This Agreement, including Exhibit A and Exhibit B , constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to the subject matter hereof. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other agreements, promises, warranties or representations concerning its subject matter. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic image signatures shall be equivalent to original signatures.

If this Agreement is acceptable to you, please sign and date below within twenty-one (21) days, and send me the fully signed Agreement. The Company’s offer contained herein will automatically expire if we do not receive the fully signed Agreement within this timeframe.

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Sincerely,

N EW R ELIC , I NC .

By:		/s/ Lewis Cirne
		Lewis Cirne
		Chief Executive Officer

I HAVE READ , UNDERSTAND AND AGREE FULLY TO THE FOREGOING A GREEMENT :


/s/ Patrick Moran
Patrick Moran

5/11/15
Date

A TTACHMENTS :

E XHIBIT A: S EPARATION D ATE R ELEASE

E XHIBIT B: P ROPRIETARY I NFORMATION AND I NVENTIONS A GREEMENT

May 11, 2015

Patrick Moran

Page 7

E XHIBIT A

S EPARATION D ATE R ELEASE

(To be signed and returned on or within twenty-one (21) days after the Separation Date.)

In consideration for the Option Amendment provided to me by New Relic, Inc. (the “ Company ”) pursuant to the terms of the separation agreement between me and the Company dated May 11, 2015 (the “ Agreement ”), I agree to the terms below.

In exchange for the Option Amendment to which I would not otherwise be entitled, as defined in and to be provided to me by the Company under the terms of the Agreement, I hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, insurers, affiliates, and assigns (collectively, “ Released Parties ”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date I sign this Separation Date Release (the “ Release ”). This general release includes, but is not limited to: (i) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (ii) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation, paid time off, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity or profits interests in the Company (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ ADEA ”), the California Labor Code (as amended), and the California Fair Employment and Housing Act (as amended).

I am not releasing the following (the “ Excluded Claims ”): (i) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party or under applicable law; (ii) any rights which cannot be waived as a matter of law; (iii) any rights I have to file or pursue a claim for workers’ compensation or unemployment insurance; or (iv) any claims arising from the breach of this Release. In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, the California Department of Fair Employment and Housing, or any other government agency, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included the general release of claims herein.

May 11, 2015

Patrick Moran

Page 8

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, and that the consideration given for the waiver and release in this Agreement is in addition to anything of value to which I am already entitled. I further acknowledge that I have been advised, as required by the ADEA, that: (i) my waiver and release does not apply to any rights or claims that may arise after the date that I sign this Release; (ii) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (iii) I have twenty-one (21) days to consider this Release (although I may choose voluntarily to sign it earlier); (iv) I have seven (7) days following the date I sign this Release to revoke it (by providing written notice of my revocation to the Company); and (v) this Release will not be effective until the later of 1) my Separation Date, or 2) the date upon which the revocation period has expired, which will be the eighth day after the date that this Release is signed by me provided that I do not revoke it.

In giving the general release herein, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code, which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any other jurisdiction of with respect to my release of claims contained herein, including but not limited to the release of unknown and unsuspected claims.

I hereby represent that I have been paid all compensation owed and for all time worked, I have received all the leave and leave benefits and protections for which I am eligible pursuant to the federal Family and Medical Leave Act, the California Family Rights Act, or otherwise, and I have not suffered any on-the-job injury or illness for which I have not already filed a workers’ compensation claim. I represent that I have no lawsuits, claims or actions pending in my name, or on behalf of any other person or entity, against the Company or any other person or entity subject to the release granted in this Agreement.


By:		/s/ Patrick Moran
		Patrick Moran

Date: 7/1/15

E XHIBIT B

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

(omitted)

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lewis Cirne, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of New Relic, Inc.;

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

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

4.	The registrant’s other certifying officer 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)) for the registrant and have:

(a)

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

(b)

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

(c)

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

5.	The registrant’s other certifying officer 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 PERIODIC REPORT UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark Sachleben, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of New Relic, Inc.;

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

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

4.	The registrant’s other certifying officer 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)) for the registrant and have:

(a)

(b)

(c)

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

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Lewis Cirne, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of New Relic, Inc. for the fiscal quarter ended June 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of New Relic, Inc.

I, Mark Sachleben, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of New Relic, Inc. for the fiscal quarter ended June 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of New Relic, Inc.